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Tables turn as potential employees ask tough questions to start-ups

March 21, 2016 18:44 IST

One of the reasons behind the changing trend is that the applicants are spoiled for choice

Prashant Nair, a headhunter, was taken aback when a young applicant started asking him about the business and investment plan of the start-up he was hiring for.

Nair is the managing partner and country head of InHelm, a hiring firm. His clients are primarily start-ups. However, some multinationals also rely on him. Nair loves hiring for start-ups because the process, though stringent, is quick. But he has started facing tricky questions of late.

“People have started asking for the start-ups’ business plan and how the firm plans to break-even operationally. One applicant asked for details about the investors,” said Nair. “Previously, such tricky questions came while hiring C-suite employees. But now these details are being demanded by mid- and low-level employees,” said Nair. Things are changing quickly.

Start-up founders are also feeling that hiring is getting tricky. Sameer Parwani, founder & CEO, CouponDunia, said, “When we were fairly new in the business, candidates would ask us questions on our financial health and investors. But now we have established ourselves. However, candidates do ask us about our scaling up plans, future plans and the kind of investments we would be raising going forward.” CouponDunia has 200 employees at present and plans to add up to 50 people by the year-end.

Madhur Ramani, co-founder & managing partner, Stratum Consulting, a global HR advisory firm, said, “Last year has not been good for start-ups. These concerns are voiced more by people at the mid- and senior-level as they would have worked with start-ups and are thus informed. Last year, everyone was gung-ho about joining start-ups but now from an employee perspective, start-ups are not that attractive.”

Many start-ups which have shut down in the recent past have denied dues to their employees, let alone the employee stock ownership plan (ESOP).

One of the reasons behind the changing trend is that the applicants are spoilt for choice. “There are way too many well-funded start-ups now. There isn’t just one good idea, there are hundreds, hence the number of options is high,” said Nair. A Nasscom report released in October stated that with 4,000 new businesses, India was the third in the world in terms of number of start-ups.

Nair explained that the recent spate of layoffs don’t help the mood either. Over the past six months, most major start-ups have had to restructure their organisations. Housing fired almost 700 people in November, TinyOwl let 300 go and Quikr, after the merger with CommonFloor, retrenched almost 150 people.

“People are sceptical. They have begun to understand the concept of over-hiring. So they take a step back before agreeing to take up a job,” he added. He said the profile is important but they want to know how many people are dedicated to the same job function. “It gives them a clue if they can be considered excess to requirement when funding stops,” added Nair.

“When people are joining start-ups, they are taking a risk with their careers. If candidates are seeking all sorts of information from start-ups, it is a fair concern on their part,” added Ramani.

Just like founders, applicants also worry about the slowing funding climate. This time it isn’t just about valuation. Analysts believe that too many me-too start-ups got funded last year and now the chickens have come home to roost.

Investors are approaching the end of their investing cycle and now want exits. Most small funds have dried up, which means growth-level companies have to now learn to be self reliant to make it work.

“Potential employees read that there is a liquidity problem currently and don’t want to be stuck in a situation where they may get retrenched in the next three months because the investment plan failed,” explained Nair.

Patanjali Pahwa & Kalpana Pathak in Mumbai
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