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.