FP StaffJan 16, 2023 20:23:29 IST
Bangalore-based Mohalla Tech Pvt Ltd which owns ShareChat and its short video app Moj is expected to lay off around 500 people. Moj had made a substantial userbase after TikTok was banned in India, but faced stiff competition from Instagram and YouTube. ShareChat is valued at $5 billion and has more than 2,200 employees. Of these 2,200 people, about 500 will be terminated soon.
The layoffs come as investors continue to pressure tech businesses and startups to curtail expenses due to high valuations in an unstable stock market. ShareChat was backed by tech giants like Google and Temasek. The decision to lay off comes as the company “needs to prepare itself to sustain several external macro factors that impact the cost and availability of capital.”
“We’ve had to take some of the most difficult and painful decisions in our history as a company and had to let go of around 20 per cent of our incredibly talented employees who have been with us in this start-up journey,” a company spokesperson said today, adding that “as capital becomes expensive, companies need to prioritise their bets and invest in the highest-impact projects only.”
This is the second round of layoffs for Mohalla Tech, after it’s closure of the online fantasy game platform Jeet11 in December 2022, which resulted in about 100 people being let go. The business said that over the past six months, it has aggressively optimised expenses across the board and stepped up monetisation initiatives.
“The decision to reduce employee costs was taken after much deliberation and in light of the growing market consensus that investment sentiments will remain very cautious throughout this year,” the spokesperson said.
The severance payout from Mohalla Tech will include the entire salary for the notice period, two weeks’ compensation for each year of employment, full variable pay until December 2022, and continued health insurance through June 2023.
Furthermore, terminated employees will be allowed to retain work assets like their laptops, Employee Stock Option Plans or ESOPs will continue to vest as scheduled till April 30, 2023, which employees can retain.
The ShareChat app makes a significant contribution to Mohalla Tech’s earnings through adverts, which rose 30 per cent year over year in FY22. The entire expenditures for Mohalla Tech increased by around 119 per cent to 3,407.5 crore from 1,557.5 crore in the fiscal year 2021. All of this was brought on by rising costs from marketing, staff benefits, and IT costs.