Why Did ReshaMandi, The Tech Startup Fire Over 80% of Its Workforce?

ReshaMandi, the Bengaluru-based B2B marketplace known for its silk yarn products, has faced a major setback, laying off 80% of its workforce due to its failure to secure Series B funding. This significant downsizing has been ongoing since last year, with the company shrinking from 500 employees in January 2023 to approximately 100 by the end of the year. Unfortunately, around 300 employees are still awaiting their final dues and salaries.

The company’s rapid expansion across various verticals, especially before and after raising funds in October 2021, has been cited as a key reason for its financial troubles. According to a report by Inc42, ReshaMandi’s aggressive “growth-at-all-costs” strategy led to inflated revenues in FY22 and FY23. Allegations of financial mismanagement have surfaced, with employees voicing their concerns on social media and in discussions with the media, possibly alerting investors like Temasek to the underlying issues.

Founded in 2020, ReshaMandi managed to raise over $40 million in equity funding from investors including Creation Investments, Omnivore, and Venture Catalysts. Additionally, it secured approximately Rs 300 crore (about $25 million) in debt from venture debt investors and lenders. Despite this, the company is now embroiled in court cases from creditors and vendors, some of whom are considering filing for insolvency.

The financial challenges led to layoffs starting in June 2023. Employees were given the option to work without salaries for three months, but pending payments remain unresolved. ReshaMandi, which operates a full-stack digital ecosystem from farm to fashion in the agritech space, raised a total of around $70 million in equity and debt funding. However, its recent attempt to raise $5 million at a $25 million valuation was unsuccessful.

LegalPay, a tech-based interim financier, highlights that resolving insolvency under the Insolvency and Bankruptcy Code (IBC) typically takes 632 days, much longer than the stipulated 270 days. While self-initiating insolvency has its advantages, such as timely action and creditor settlements, it also poses risks, including potential loss of control and asset value.

Despite its previous success and significant funding, ReshaMandi’s financial missteps have led to a dramatic downslide, resulting in substantial layoffs and mounting legal challenges. The company’s future remains uncertain as it navigates these turbulent waters.