Just six months after expanding its workforce, Bhavish Aggarwal’s artificial intelligence startup Krutrim has laid off nearly 100 employees. The layoffs, which mostly affected the linguistics division, signal a major strategic shift for India’s most ambitious AI startup.
The decision, first reported by The Economic Times, raises questions about the viability of Krutrim’s aggressive growth strategy and its ability to compete with global AI giants.
Focus on Multilingual AI Faces Major Cutbacks
Krutrim built its identity around a core vision—creating a full-stack AI platform rooted in Indian linguistic and cultural context. As part of this mission, the company hired a large team to work on its language models. These employees focused on training and evaluating Krutrim’s AI assistant, Kruti, across at least 10 Indian languages, including Tamil, Telugu, Odia, and Marathi.
But this vision took a hit last week when Krutrim abruptly laid off a majority of its linguistics team. Sources familiar with the matter said that the cuts affected about 100 people, most of whom had joined the company just six months ago. The company didn’t provide an official number, but insiders confirmed that the linguistics division bore the brunt of the downsizing.
Second Round of Layoffs in Two Months
This latest move marks Krutrim’s second round of layoffs in a short span. In June, the startup cut ties with over a dozen employees during what it called a “restructuring exercise.” While the June layoffs remained relatively quiet, the latest round grabbed attention due to its scale and strategic implications.
Krutrim attributed the decision to a realignment of business priorities. In a statement, the company said, “As part of a strategic realignment and our commitment to efficient capital deployment, we are building leaner, more agile teams.” It emphasized that the change aligns with evolving business needs and an ongoing focus on operational efficiency.
The move signals that Krutrim has started prioritizing cost control and faster execution over rapid expansion, a significant pivot for a company that once projected itself as India’s flagship AI venture.
From Hype to Reality: Krutrim’s Unicorn Journey
Krutrim’s journey began with high expectations and strong backing. Bhavish Aggarwal, who also founded Ola and Ola Electric, launched Krutrim with the goal of building India’s answer to OpenAI and Google DeepMind.
In January 2025, just months after its inception, Krutrim raised $50 million from Z47 (formerly Matrix Partners India), which pushed the company’s valuation beyond the coveted $1 billion mark. That milestone made Krutrim India’s fastest AI startup to become a unicorn.
Krutrim also announced bold investment plans. It committed Rs 2,000 crore through Krutrim AI Labs to develop its AI ecosystem. The company even proposed scaling this investment up to Rs 10,000 crore in 2026, underlining its long-term vision to dominate the Indian AI market.
Product Challenges and Weak Traction
Despite its strong start, Krutrim has struggled to gain momentum with its core offerings. The startup launched its large language model (LLM) and cloud products in early 2024, but adoption has remained sluggish. Several Indian startups that initially tried Krutrim’s solutions have since migrated to hyperscalers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.
Reports suggest that Krutrim’s platforms failed to meet the performance expectations of enterprise clients. Developers cited issues with latency, scalability, and language accuracy—critical features for AI-powered solutions. As a result, Krutrim has not yet been able to establish itself as a reliable alternative to more mature platforms.
The lack of user traction has had a cascading effect on the startup’s financial plans. Initially, Krutrim aimed to raise $500 million in its next round of funding. But facing tepid investor response and questions around commercial viability, the startup has slashed its fundraising target to $300 million.
Why Did the Linguistics Team Get Hit?
Krutrim’s decision to cut the linguistics team raises several strategic questions. The company had earlier made local language fluency a cornerstone of its brand identity. Kruti, the AI assistant, aimed to deliver conversational intelligence in Indian regional languages—a feature that none of the Western AI platforms offer natively.
Yet, Krutrim seems to have deprioritized this aspect. Industry experts believe that the linguistic localization strategy, while innovative, has not yielded tangible returns fast enough. Building and training language models for a diverse country like India takes significant time, data, and capital.
By laying off the linguistics team, Krutrim appears to be shifting toward a more generalized AI architecture that may rely on English-first models or partner language data providers instead of building everything in-house.
Strategic Realignment or Loss of Focus?
Krutrim claims that the layoffs reflect a necessary strategic realignment. In theory, that means the company wants to streamline operations, cut non-essential expenses, and concentrate on product-market fit. However, critics argue that the layoffs point to a loss of strategic clarity.
Bhavish Aggarwal initially positioned Krutrim as a made-in-India AI solution that addressed local needs. That pitch attracted funding and media buzz. But the recent layoffs suggest a backtrack from that mission.
Some insiders believe Krutrim may now seek quicker monetization channels—perhaps through enterprise solutions, developer tools, or generic AI services. If so, the company could end up competing directly with global leaders, rather than carving out a niche in Indian AI applications.
Investor Sentiment and Industry Outlook
The Indian startup ecosystem has seen a cooling of investor interest in 2025, especially in deep-tech sectors like AI. While there’s no doubt about the long-term potential of artificial intelligence, venture capitalists are demanding clearer roadmaps, faster execution, and evidence of revenue generation before writing large checks.
Krutrim’s revised fundraising target and recent cost-cutting moves reflect this new reality. Investors are no longer swayed by valuations or founder pedigrees alone—they want to see traction, resilience, and sustainable business models.
Krutrim’s competitors, including established cloud providers and new AI entrants, are also moving swiftly to capture the Indian market. If Krutrim fails to deliver differentiated value, it risks falling behind despite its early unicorn status.
What Lies Ahead for Krutrim?
The next six months will prove critical for Krutrim. The company must demonstrate that it can ship reliable products, build developer trust, and monetize its AI solutions. It must also navigate the fallout of the layoffs, which could impact employee morale and future hiring.
Bhavish Aggarwal remains a bold visionary, and his experience building Ola and Ola Electric gives him an edge. But the AI space demands a different kind of execution—one rooted in research, infrastructure, and long-term consistency.
If Krutrim can recover from this turbulent phase and deliver results, it could still lead India’s AI revolution. But if missteps continue, the company may serve as a cautionary tale about the perils of overpromising in a nascent but unforgiving market.
Conclusion
Krutrim’s decision to lay off nearly 100 employees just months after hiring them marks a significant shift in its strategy. While the company frames it as a realignment toward agility and efficiency, the move casts doubts on its initial promises and long-term vision. As Krutrim navigates funding challenges, product gaps, and increasing competition, it must now prove that it can live up to its unicorn status with real-world results—not just ambitions.
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