E-commerce company Snapdeal confirmed on Wednesday that it would cut jobs as part of its efforts to turn profitable, even as its founders admitted to “errors in execution” and pledged not to take a salary. In a letter to the company’s employees, co-founders Kunal Bahl and Rohit Bansal said that in keeping with a roadmap to “realign resources with continued focus on efficiency and profitability” and turn into a lean, focused and entrepreneurial company, a hard decision had been taken to say goodbye to a number of staff members. The letter did not mention a number. However, sources told CNBC-TV18 that 500-600 jobs would be cut and the retrenchment process would begin in a week’s time, possibly in tranches. Employees will have the option to leave voluntarily and avail of a severance package of three months’ salary.

The company last reported a strength of 8,000 employees and the jobs are likely to be cut across Snapdeal, Vulcan Express (logistics) and FreeCharge (payments). The letter went on to say that the industry and the company had been going through a tough time and that with all the capital coming into the market in the last two to three years, everyone had “started making mistakes”. “We started growing our business much before the right economic model and the market fit was figured out. We also started diversifying and starting new projects while we still hadn’t perfected the first or made it profitable. We started building our team and capabilities for a much larger size of business than what was required with the present scale,” the letter stated. The co-founders said that many of the company’s leaders had also offered to take a significant salary cut. The SoftBank, Foxconn and Alibaba Group-backed Snapdeal almost doubled its losses to Rs 2,960 crore during the financial year ending March 31, 2016. It had reported a loss of Rs 1,328 crore during the previous financial year.

The revenue of the e-commerce major, rose to Rs 1,457 crore from Rs 933 crore during the same period of the previous financial year. The letter mentioned that steps taken to boost efficiency had seen the company increase its EBITDA by 40 percent in the first nine months of FY17. In a recent interview with Reuters, Bahl had said he expected the company to turn profitable in the next two years.  Former Infosys Chief Financial Officer V Balakrishnan said Snapdeal’s plight was similar to that of many other companies in the startup space.

Speaking to CNBC-TV18, he said that investors had initially focused on pumping in more money to get market share and in the process, the management had forgotten fundamental principles like profit and cash flows. “It’s a good churn to happen but could have been avoided,” Balakrishnan said. “Companies in the tech space have converted capital into

We also started diversifying and starting new projects while we still hadn’t perfected the first or made it profitable. We started building our team and capabilities for a much larger size of business than what was required with the present scale,” the letter stated. The co-founders said that many of the company’s leaders had also offered to take a significant salary cut. The SoftBank, Foxconn and Alibaba Group-backed Snapdeal almost doubled its losses to Rs 2,960 crore during the financial year ending March 31, 2016. It had reported a loss of Rs 1,328 crore during the previous financial year.

The revenue of the e-commerce major, rose to Rs 1,457 crore from Rs 933 crore during the same period of the previous financial year. The letter mentioned that steps taken to boost efficiency had seen the company increase its EBITDA by 40 percent in the first nine months of FY17. In a recent interview with Reuters, Bahl had said he expected the company to turn profitable in the next two years.

Former Infosys Chief Financial Officer V Balakrishnan said Snapdeal’s plight was similar to that of many other companies in the startup space. Speaking to CNBC-TV18, he said that investors had initially focused on pumping in more money to get market share and in the process, the management had forgotten fundamental principles like profit and cash flows. “It’s a good churn to happen but could have been avoided,” Balakrishnan said. “Companies in the tech space have converted capital into a loss, which is an unsustainable model.” He said he expected a similar fate to befall other startups and the Snapdeal founders’ letter should serve as an eye-opener for peers not to be greedy.