The Indian Startup Salary Slump: Why Founders Are Taking Home Less

The Indian startup ecosystem has always been a land of ambition, resilience, and high rewards. Young entrepreneurs with big ideas and bigger risk appetites have built billion-dollar companies from scratch, often enjoying significant financial success along the way. However, the tides seem to be turning.

In the financial year 2023-24 (FY24), the salaries of startup founders in India have taken a significant hit, dropping by a staggering 25.4%. Once known for their hefty pay packages, founders are now grappling with a 'funding winter' that has tightened investment flows and led to cost-cutting across the industry. But what exactly is causing this slump? And is it just the beginning of a larger crisis? Let's find out with TICE.

The Harsh Reality: A 25% Pay Cut for Founders

The numbers speak for themselves. According to the latest data, the average salary of 54 founders from 30 top Indian tech startups fell from Rs 7.3 crore in FY23 to Rs 5.44 crore in FY24. In total, these founders collectively earned Rs 291.5 crore—down significantly from the previous year.

At first glance, the impact might seem limited to founders alone. But this dip in salaries reflects a much deeper issue within the startup ecosystem. The funding winter, triggered primarily by global economic uncertainties, has forced startups to rethink their financial strategies, leading to salary reductions, layoffs, and business restructuring.

What is the 'Funding Winter'?

The term ‘funding winter’ refers to a prolonged period where venture capital investments slow down, making it difficult for startups to raise fresh funds. For Indian startups, this dry spell started around 2022 and has worsened over the years. Several global factors have contributed to this downturn, including the Russia-Ukraine war, inflation concerns, and rising interest rates.

The numbers highlight the severity of the issue. Indian startups raised a record-breaking $42 billion in funding in 2021. However, this plummeted to $25 billion in 2022 and further nosedived to just $10 billion in 2023. The trend has not shown any significant recovery in 2024, leaving startups struggling for capital.

Government Intervention: A Ray of Hope?

Recognizing the impact of the funding crisis, the Indian government took a major step by abolishing the controversial 'angel tax' in the Union Budget 2024. This tax was previously imposed on unlisted companies receiving funding above fair market value, discouraging angel investors from betting on startups. By scrapping it, the government aims to revive investor confidence and encourage fresh capital inflows into the startup ecosystem.

However, while this move has been welcomed by the industry, experts argue that it alone cannot solve the crisis. The larger issue of global economic uncertainty and risk-averse investors still looms large over the sector.

How Are Startups Coping?

With funding becoming scarce, many startups have been forced to take drastic cost-cutting measures. These include:

• Reducing marketing budgets: Many startups have slashed advertising and promotional expenses to conserve cash.

• Layoffs: Several well-known startups have let go of employees to bring down operational costs.

• Business restructuring: Some startups have pivoted their business models or shut down non-profitable divisions.

Despite these measures, some startups continue to struggle, while others have managed to stay profitable. Data shows that the 30 startups analyzed in the report collectively generated Rs 73,715 crore in revenue in FY24. Out of these, 11 startups recorded a total loss of Rs 4,876 crore, while the rest managed to post profits of Rs 7,960 crore.

Who Took the Biggest Salary Hit?

Among startup founders, Supam Maheshwari, the founder of FirstCry, emerged as the highest-paid founder in FY24. However, even his salary saw a drastic cut. Maheshwari, who took home Rs 200.7 crore in FY23, received only Rs 103.8 crore in FY24—almost a 50% drop. This underscores the widespread impact of the funding crunch, even on the most successful entrepreneurs.

The Road Ahead: A Temporary Setback or a Long-Term Shift?

The key question remains: Is this funding slowdown just a temporary slump, or are we witnessing a long-term shift in the Indian startup landscape? While some experts believe that the market will eventually recover, others argue that the days of excessive spending and inflated valuations may be over for good.

What is clear, however, is that Indian startups need to focus on sustainable growth rather than relying solely on external funding. The new reality demands a sharper focus on profitability, operational efficiency, and innovation-driven revenue models.

For now, the startup ecosystem stands at a crossroads. Founders, once the flagbearers of India's entrepreneurial dream, are now navigating an era of financial prudence. Whether this challenge turns into an opportunity or a prolonged crisis will depend on how the industry adapts in the coming years.