The 0.1% Reality: Why India's Startup Story Is Not What It Seems

Dear Subscribers,

Last week, while I was researching this article, initially titled Startups And White Noise: Cutting Through The Clamour, news broke about a well-known finfluencer turned entrepreneur whose company was reportedly undergoing a round of layoffs. As expected, there were two sides to the story: a former employee aired grievances on Reddit, while the finfluencer shared his perspective on LinkedIn. Both made valid points, but it’s hard to ignore that given the finfluencers’s experience, he could have handled the situation more thoughtfully. The justification for over-hiring seems shortsighted, especially when it comes to managing costs and allocating capital. For a finfluencer—someone who has built a business on financial advice—one would expect them to lead by example. After all, every company needs to maintain a runway, and without it, bringing on new hires, particularly senior ones, is a risky move.

Numbers Don’t Lie

The founder title is often glamorised, but a closer look at the startup statistics reveals a stark reality. With over 100,000 startups in India as of this year, the country ranks as one of the world's largest startup ecosystems. And while India is home to more than 115 unicorns, placing it third globally behind the United States and China, unicorns make up a mere 0.1% of the total, underscoring how rare and challenging it is to reach a billion-dollar valuation. Most startups face a 90% failure rate within the first five years, primarily due to issues with product-market fit and funding obstacles.

Only a handful of startups manage to scale to a billion-dollar valuation, while most struggle to survive. Pivoting is undoubtedly crucial in the startup world, but a sound business model with clear short-, mid-, and long-term goals is even more essential.

And while founders make tough decisions, they must also recognise the impact on employees. Layoffs are more than just business adjustments; they can be life-altering. For employees, job losses often lead to financial strain and career setbacks, especially if they have EMIs or other obligations. Desperation can force them into unfavourable roles, disrupting their career trajectory and long-term growth.

The more senior the employee, the longer and more challenging it becomes to secure a new job that meets all their criteria.

While titles like "Founder" and "CEO" hold significant weight, employees must conduct thorough due diligence before committing to a startup. To help illustrate this, here are two case studies where startups mis-stepped, along with actionable steps on what employees and founders can do when faced with similar situations:

Case 1

A senior professional joined a five-year-old, pre-revenue, non-funded digital media startup in a revenue-focused role. Within three months, they observed four senior colleagues being let go, with the founder attributing these exits to performance issues. At this point, the employee began to suspect that the company’s reported numbers were heavily inflated, making it practically impossible to close deals based on the actual figures. Six months in, the employee was asked to accept a 50% pay cut, with a promise that their original salary would be reinstated once they successfully closed a deal. Needless to say that the employee resigned and besides their salary for the month, no severance package was offered. This employee chose to avoid pursuing legal action, focussing instead on next steps. ?

Key Takeaways for Employees

1.???? Conduct Due Diligence on Company Stability

Do thorough research on a startup’s financial health and leadership stability before joining. Look into its funding, leadership reputation, and recent attrition rates among senior management. Talking to current or former employees can provide additional insights. Do check company reviews on websites such as Glassdoor and Ambition Box, and walk into a job consciously.?

2.???? Evaluate Your Risk Tolerance

Startups come with a level of risk, and you need to be comfortable with a dynamic environment where shifts in strategy or staffing are common. Being clear on your risk tolerance helps in making career choices aligned with your financial and professional goals.?

3.???? Monitor Company Health Post-Joining

Even after joining, stay vigilant. If you observe unexpected exits, cuts in resources, or sudden pay reductions, it might be a red flag. Please have an exit strategy or financial contingency plan in place if the company’s stability becomes questionable.?

4.???? Document Agreements and Understand Compensation Structures

You should insist on clear terms of employment, especially for pay structures tied to performance. Any request for a pay cut should ideally come with an agreement on terms and a timeline for reinstatement.

?Advice for Founders

1.???? Transparency Builds Trust

In the long run, honesty about the company's health, even in difficult times, fosters loyalty and commitment from the team. Fudging numbers or over-promising can lead to distrust and low morale, impacting productivity and retention.

2.???? Set Realistic Expectations and Targets

Founders should ensure that targets are based on actual capabilities, not inflated projections. This avoids setting employees up for failure and promotes a culture grounded in achievable goals.

3.???? Handle Layoffs with Care

If performance issues lead to exits, ensure these are managed respectfully and with clear communication. Poor handling of layoffs can damage morale and brand reputation, affecting current employees’ engagement and future hiring prospects.

4.???? Prioritise Financial Resilience

Startups should focus on sustainable growth rather than rapid, unchecked scaling. Having a buffer or planning for potential downturns, rather than relying solely on new deals, can prevent situations where drastic measures (like pay cuts) become necessary.

5.???? Have a Healthy Runway

A clear financial runway—enough capital to sustain operations for a set period without new income—is essential. Founders should not only have a sufficient runway but also be transparent with employees about it. Knowing that a company has funding to last 12–18 months, for example, reassures the team and helps them stay focused on growth rather than immediate survival.

A well-defined runway allows startups to make strategic choices without desperation, like unnecessary layoffs or drastic pay cuts.

Case 2

A senior editorial professional joined a funded startup as a content editor, but the expectations quickly shifted during her tenure. While she consistently met content demands within reasonable limits, the requests soon became impossible to fulfil, particularly without on-ground reporters. While not all content requires field reporters, the nature of her work certainly did. The lack of on-ground knowledge hindered the quality and accuracy of content delivery.

When management was confronted with these challenges, their response was typical: harassment, a restructuring of the employee’s reporting lines, and the hiring of a CEO of Content from a non-content background. Unsurprisingly, the employee resigned. Three months later, the company faced a massive restructuring following a clash between one of the founders and the investors.?

Key Takeaways for Employees

1.???? Clarify Expectations Early On?

Ensure you have a clear understanding of your role and the expectations associated with it. If these shift significantly, address it with management and document the changes to avoid misunderstandings later on.

2.???? Understand the Company’s Resources and Limitations

If the company lacks certain resources (e.g., on-ground reporters for content creation), recognise how this will impact your ability to meet expectations. Be proactive in discussing these limitations with leadership and seek realistic solutions.

3.???? Know When to Stand Your Ground

If management asks you to take on unrealistic demands or changes your role without support, it’s important to communicate the challenges clearly. If the situation doesn’t improve, be prepared to make decisions that are in the best interest of your career.

4.???? Plan for Career Flexibility

Understand that startup environments can be fluid. While there’s growth potential, the high volatility means employees should always have contingency plans and career options in mind.?

Advice for Founders

1.???? Set Realistic and Clear Expectations

Clearly communicate the scope and nature of roles within the company. If expectations change, ensure you provide the necessary resources or support to help employees succeed. Avoid setting up unrealistic targets without proper resources.

2.???? Support Employees with Resources

If roles require specific resources (such as on-ground reporters for content creation), make sure to provide them or communicate the challenges this poses. Resource constraints should not fall solely on employees to manage.

3.???? Value Employee Expertise

When hiring senior roles, ensure the candidates have the relevant expertise and experience. A CEO of Content without a background in content can alienate the team and reduce the quality of work.

4.???? Restructure Thoughtfully

If restructuring is necessary, ensure it's done with the well-being of employees in mind. Sudden shifts or dismissals without proper explanation or support can lead to higher turnover and reduced morale.

By adopting these strategies, both employees and management can navigate challenges more effectively and maintain a healthy work environment.

The K(Now) Tips

If you’re in a startup, or are joining one in the recent future, there are a few things all of you must do, to safe-guard your career.

1.???? Clarify Expectations and Set Boundaries

From the outset, ensure you have a clear understanding of your role, the company’s goals, and your direct responsibilities. If expectations change, have an open conversation with your manager about the feasibility and resources required to meet those demands. Setting clear boundaries around your role will also help avoid overburdening yourself.

2.???? Build Your Personal Brand and Network

In a volatile startup environment, it’s crucial to build a strong professional network both inside and outside the company. Attend industry events, connect with peers, and maintain relationships that can offer support or career opportunities should things take a turn.

3.???? Keep Track of Your Contributions

Document your achievements, feedback from colleagues and superiors, and any significant milestones. This will not only boost your self-confidence but will also be a useful resource when it’s time to assess your performance or seek new opportunities.

4.???? Monitor the Company’s Financial Health

Understanding the company’s runway, funding situation, and growth prospects is essential. If there are signs of financial instability or changes that could affect your role, take steps to protect yourself early—whether by securing a financial cushion or seeking other opportunities.

5.???? Be Ready to Pivot or Adapt

Startups are known for their ability to pivot, and so should employees be prepared for the possibility of adapting to new roles or directions. Having a flexible mindset will help you stay resilient in the face of sudden changes or challenges.

6.???? Know When to Move On

If the company culture or direction no longer aligns with your values or career goals, it may be time to consider moving on. Don’t wait for the situation to become untenable—trust your instincts and seek out opportunities that better fit your long-term vision.

Remember, if you've been asked to leave or have been driven to do so, your value is not defined by a startup's failure to meet its promises. The higher you rise in seniority, the more you'll likely question your decision, but know that you did your best with the resources you had at the time.

Give yourself the space to move forward—however that looks for you—and remember, the only reason to look back is to learn.

Life holds no losses—just wins and lessons.

Thank you for being part of The K(Now) community. Here’s to our continued journey of learning, growing, and thriving together.

With gratitude,

Nisha