Acqui-hiring can help startups survive the funding winter. But it’s still a taboo

As funding dries up, growth-stage startups can choose to be acqui-hired. But it’s riddled with challenges, and the Indian ecosystem is peculiarly averse to it

India has become the third largest startup ecosystem in the world, incorporating 14,000 startups in 2021-22, the last five years have seen more than 11,000 startups shut down

With the market downturn, funding for startups has declined by ~30%, and founders of struggling startups are looking for a better exit strategy

The concept of acqui-hire is gaining traction, but it’s burdened with unwillingness and challenges of finding the right fit

But the mutual benefits, both for founders looking to exit and more successful businesses for their hiring needs, merit more attention to the concept

Fundraising is not quite the child’s play it was for entrepreneurs even six months ago. The number of startups that received funding in the quarter ended June 2022 fell by a third from the previous three months. Industry estimates show that startups require around $10-15 billion over over Financial Express It’s raining caution for start-ups in a funding winter Read more the next six months, but in reality, only $2-4 billion is available.

With such a dearth of capital, no one wants to run their business to the ground and, with it, their trusted employees. So the best way out is to get acqui-hired— something that has been gaining traction among small and big companies alike.

Consider Rahul Kapuria, founder of Brandmakerr, a six-year-old commercial interior-solutions company. In 2021, he realised that the post-Covid world and his limited resources were wrecking his capital-intensive business. This, despite the company counting the likes of Amazon, Hamleys, Pizza Hut, and Decathalon, among its clients, and clocked a turnover of Rs 8.5 crore ($1.7 million) in the year ended March 2020. To scale this to Rs 100 crore ($12.5 million), he would need a lot more capital.

Kapuria needed a larger company to take him in to keep his business alive, and even thrive. He found this in Pepperfry, an online-furniture and home-decor marketplace, that offered him the role of vice president, a higher pay, and jobs for more than two-thirds of his 16-member team.

Acqui-hire means acquiring a company for the skill of its people. The product or the service, therefore, is secondary. Over a dozen fast-growing tech startups across sectors such as edtech, fintech, medtech, and e-commerce have been on an acqui-hiring spree not only to fill their product gap but also to strengthen their teams. In the year ended March 2021 alone, there were over 250 acquisitions acquisitions GrowthPal Why has Acqui-hiring risen in Popularity? Read more and acqui-hires in India. And according to those in the industry, this is expected to increase further, this year.

Like Brandmakerr, edtech unicorn PhysicsWallah acqui-hired doubt-solving edtech startup FreeCo, and Protiviti, a management consultancy, did the same with Loumus, a cloud-service company, last month. A few others that acqui-hired just this year are Unacademy, Nykaa, Kotak Securities, and Career Launcher.

“Acqui-hiring can provide a soft landing to individuals with the unique experience of building a business from the ground,” says Sujeet Kumar, co-founder of B2B platform Udaan. “These may be founders who are unable to achieve unit economics, raise funding or are faced with a wall of business-related issues like lack of a product-market fit, competition or attrition.”

On the other hand, this also helps businesses looking to expand their teams, especially in tech and engineering, where acqui-hires are most common.

AUTHOR

Aayush Agarwal

Aayush covers businesses that are primarily Internet for The Ken. In his previous stint at Goldman Sachs, he spent slightly more than a year analysing investment opportunities in the China Internet space. A science graduate, he completed his postgraduate from the Indian Institute of Management, Kozhikode. Write to him if, among other things, you wish to talk about e-businesses, journalism or just offbeat career choices.

View Full Profile

AUTHOR

Vanita Bhatnagar

Vanita is a lawyer by training and write stories at the intersection of business & public policy, law, regulations and building inclusive workplaces. She has over five years of experience writing, researching and even training others on various aspects of law.

View Full Profile

The only business subscription you need

Unrivaled analysis and powerful stories about businesses in India and Southeast Asia from award-winning journalists. Includes access to longform articles, premium newsletters across a range of topics depending on your interest and our top-ranked podcast. For those who want to be prepared for what comes next.

So much journalism in India is superficial.

Articles are generic, almost cookie-cutter in their approach. And they don’t provide enough context on the issues they cover. The Ken is different. I don’t always agree with everything they say but I appreciate their commitment to publishing deeply reported narratives and investigations. Their reporters find new ways to analyze tech among other industries. And that’s always worth a read.

Sid Talwar / Co-Founder and Partner / Lightbox Venture Capital

As entrepreneurs, we thrive on being in the know at all times.

A personal subscription to The Ken was a no brainer. But as startup founders, this isn't enough. Team members also need to be in the know, for everyone handles customer-facing responsibilities and an ecosystem change that impacts customers also impacts us

Kiran Jonnalagadda / Co-founder / HasGeek and Internet Freedom Foundation