Not a Good Time to Be a Tech Entrepreneur

If you are thinking of quitting your job and starting a company, think again.

Major Indian IT companies have put a freeze on hiring new employees. Many of them have a huge bench size, where the companies believe that they require a lot more training of the existing employees, before they can hire new ones. According to a recent report, private engineering institutes have started to report a 50-70% drop in placements this year. 

The case seems to be simple of high supply and less demand, where colleges admit a lot of students, when there is not enough demand for jobs in the market. 

Think of this – while the companies are investing in training their existing employees and also laying off a lot of them, it is kind of obvious that it would be harder to get a new job. The people who quit might think they would be able to raise a lot of funds, given the state of the market since 2021, which was booming then.

Influential founding, not funding

“I know this is not very exciting advice, but stick to your job,” said Varun Mayya, one of the influential voices in the field of AI, in his latest video. 

At the same time, AIM reached out to industry experts for views on this, but all of them declined to comment on the topic.

A lot of big-tech employees are quitting their jobs to build their own startup. A lot of these are AI startups. Some employees are quitting Google and shifting to startups like OpenAI. But to not get influenced by these AI researchers and experts, this might not be an ideal time for you to quit your job.

Even then, we hear in the news that a lot of startups are raising funds and a lot of startups getting founded as well. The important thing to note in all of this is that a lot of these are from former founders of either big tech or serial entrepreneurs, and known among the ecosystem. 

For example, recently co-founders of ShareChat started their own robotics startup called General Autonomy, and raised $3 million in funding. Interestingly, the firm that led the investment was India Quotient, which has invested in multiple rounds in ShareChat.

That is because a lot of the investors are ready to fund startups that are created by founders and experts they already know. Another example from the AI landscape can be Mistral.AI, which is founded by former Meta AI and DeepMind employers. Or Inflection AI, which was founded by the former DeepMind founder.

Moreover, if you are looking to raise funds by building a GPT wrapper startup, OpenAI might release just another update, and kill your startup within a second. Then the only option is either adapting, getting a job, or starting a new startup, all over again.

The state of startups is not that good

According to data from Tracxn, startups in India raised 50% less compared to last year. In the third quarter of 2023, Indian startups secured $1.5 billion in funding, marking a 54% decline from the $3.4 billion they garnered a year earlier. Additionally, the total number of deals plummeted by a substantial 71%, dropping from 592 in Q3 2022 to 166 in Q3 2023.

These figures reflect a significant downturn when contrasted with the robust funding periods of Q4 2021 and Q1 2022, during which Indian startups amassed $10.9 billion and $11.8 billion, respectively.

The same is the case with North American startups, in the third quarter of 2023, investors put $31.4 billion into startups, which is a drop of 3% compared to the last quarter. Undoubtedly, there is a direct impact of what happens in the North American market and the Indian Market.

In 2023, the Indian startup scene faced turmoil due to alleged financial irregularities. GoMechanic‘s co-founder, Amit Bhasin, admitted to serious errors in financial reporting in January. Now, GoMechanic, with new founders, is raising another round of funding for the second phase of the startup. 

In June, Info Edge, backed by Sanjeev Bikhchandani, launched a forensic audit into 4B Networks, prompting questions about the timing of informing stakeholders. Capitalmind’s CEO, Deepak Shenoy, suggests a delicate situation for Info Edge to comment on before completing the audit. 

Oftentimes, it also seems like getting funded quickly might be a sign of a good startup, but it ends up in failure because investors are just ready to pour funds, when they do not understand the market. The blame then comes on the founder. As Bhasin from GoMechanic said “It’s only when the magician dies, you get to see a trickster.” 

The generative AI wave is benefiting everyone – that is what probably all of us think. The ease of work and the massive amount of alleged funds that companies and startups alike have been investing and raising to adopt the technology. But there is another side to this story, the layoffs, the hiring freeze in various companies, and the fall in funding of startups. 

One might think it might be a good time to start a business when there are less jobs, but think again. One more time. If you have a steady job, consider yourself lucky. Meanwhile, the ideal thing to do would be to upskill yourself with generative AI within the company you work at.