Industry executives say the latest wave of layoffs differs from earlier funding because companies are now fundamentally redesigning workflows
Indian startups are increasingly embracing AI-driven automation and tighter cost controls to build leaner organisations, signalling a structural shift in hiring and workforce strategies across the ecosystem.
Recent layoffs at audio platform Pocket FM and grocery delivery start-up Apna Mart, both of which cut around 10 per cent of their workforce, underscore how start-ups are moving away from aggressive expansion toward productivity-focused operations. The trend comes as founders face mounting investor pressure to improve profitability while simultaneously adopting AI tools that can automate routine work and reduce dependence on large teams.
Workflow Redesign
Industry executives say the latest wave of layoffs differs from earlier funding winter corrections because companies are now fundamentally redesigning workflows around AI-enabled efficiency.
“The current trend in start-up hiring looks more like a short-term correction driven by productivity gains rather than a permanent reduction in jobs,” said Kapil Joshi, CEO of IT Staffing at Quess Corp
“AI and automation are helping companies operate with leaner and more efficient teams, especially in routine, repetitive and entry-level functions.”
According to Joshi, the share of entry-level hiring dropped sharply from 28 per cent in 2024 to 15 per cent in 2025 as start-ups and enterprises reduced campus recruitment and prioritised lateral talent capable of delivering immediate business impact.
Hiring Less
The sharpest disruption is being seen across customer support, manual testing, basic coding, data processing, reporting and back-office operations, areas where AI tools are rapidly automating repetitive workflows.
“Startup layoffs in 2026 are being driven by a mix of continued profitability pressure and the growing impact of AI-led productivity,” said Sanketh Chengappa, Director and Business Head, professional staffing, Adecco India. “AI is increasingly becoming an enabler of restructuring by helping companies improve efficiency and operate with smaller but more specialised teams.”
In sectors such as BFSI, automation has already reduced manual work by nearly 30 per cent, while conversational AI handles close to 60 per cent of Tier-1 customer queries, according to industry estimates shared by staffing executives.
In-demand Areas
At the same time, startups continue to hire aggressively for specialised technology roles linked to future growth. Demand remains strong for AI engineers, cloud architects, cybersecurity specialists, product managers and data scientists as companies pivot toward capability-led hiring.
“What we are seeing is a transition from volume hiring to capability-led hiring,” Joshi said. “Companies today are prioritising professionals who can contribute immediately in high-impact areas such as AI, cloud, cybersecurity and data engineering.”
Hiring for generative AI roles grew 178 per cent year-on-year, while demand for AIOps and MLOps talent has tripled since 2023, according to Quess Corp estimates. Emerging technology roles accounted for over 46 per cent of incremental job creation between 2024 and 2025.
Profitable Growth
Neeti Sharma, CEO of TeamLease Digital, said startups are increasingly balancing financial discipline with technology-led workforce redesign.
“A large part of layoffs at various startups are now due to their shift in focus from just growth to profitable growth,” Sharma said. “AI tools are allowing these startups to do more with smaller teams.”
Sharma added that the current transition is likely to reshape the nature of employment rather than eliminate opportunities altogether. “The nature of jobs is changing faster than the volume of jobs disappearing,” she said. “Companies will continue hiring, but the focus will increasingly move toward multi-skilled, AI-enabled talent that can drive higher productivity and business outcomes.”
Published on May 7, 2026