Udaan cuts jobs despite $340M funding!

Hey there,

For the past 2 years, Udaan has been struggling with declining orders, heavy losses, and founder exits.

Last week, it got a $340 million funding lifeline from top VCs. But it also laid off 100+ people at the same time.

But, why?

1. Restructuring for Efficiency: Udaan's restructuring, particularly the merging of its essentials and discretionary business units to streamline operations. This led to job cuts due to overlapping roles, impacting over 100 employees.

2. Financial Pressure: Despite the influx of new funding, Udaan's revenue has dropped to approximately ₹5.6K crore, similar to the levels of FY21.

This decline in revenue, along with significant losses, indicates financial pressure that requires cost-cutting actions, including layoffs.

3. IPO Preparation: Udaan is looking for an IPO in the next 12-18 months. And, to attract investors, it needs to show financial stability and operational efficiency.

So, the layoffs are part of an "efficiency enhancement drive," preparing Udaan for the public market.

4. Operational Decentralization: Udaan is transitioning from nationwide operations to cluster-based ones in FMCG to enhance market penetration and customer experience.

This shift necessitates different skills and structures, resulting in layoffs of employees with redundant roles.

5. Reflecting Broader Market Trends: Udaan's layoffs align with trends in the Indian startup ecosystem, where companies are prioritizing financial sustainability and operational efficiency over rapid expansion.

Udaan's recent moves, including layoffs and fundraising, indicate a strategic shift. The company is focusing on sustainable growth and improving its public image before the IPO.

It's a significant change from its previous expansion strategy, driven by easy access to funds.

✍️ Jargon of the day

Runway: 

A startup's runway is the amount of time it can operate with its current cash before needing more money.

It's like a countdown; the longer the runway, the more time the startup has to either start earning more or get new funding.

A short runway means the startup needs to quickly find more money or it might have to stop operating. Essentially, it's a measure of a startup's financial health and future stability.

Loved this edition? Or have some thoughts to share? We'd love to hear from you

Cheers,
Karthik