The move comes even as the firm is eyeing a potential IPO sometime in the next two years and in the backdrop of the start-up sector seeing more than 12,000 lose their jobs in 2022 with edtech firms at the forefront of slashing payroll
Unacademy has announced it will drastically cut down on expenses to focus on profitability.
As per Indian Express, the edtech firm told employees to cut down on costs it would be discontinuing its high-profile Indian Premier League sponsorship from next year, and has already instituted pay cuts for its founders and management, implemented business travel restrictions for employees and tutors and halted complimentary meals and snacks at offices.
The renewed focus on profitability comes even as the firm has Rs 28,00 crore in the bank and is eyeing a potential IPO sometime in the next two years.
Demand for online education drops
As per Indian Express, with demand for online education dropping with the lifting of COVID-19 restrictions, Unacademy had in May this year announced a foray into the offline learning space by launching its own coaching centres, offering tuition for competitive examinations.
Unacademy reportedly spent hundreds of crores in recruiting employees for its first centre in Kota, the country’s private coaching hub, as per the report.
Its major rival Byju’s had entered the offline coaching space with its billion-dollar acquisition of Aakash Educational Services.
Start-ups feel the heat
The start-up sector has seen more than 12,000 workers lose their jobs in 2022 thus far with edtech firms such as Unacademy, Byju’s and ha leading the way.
Unacademy is said to have laid off anywhere between 700 and 1,000 people and had earlier shut down its K-12 (kindergarten to Class 12) business vertical, as per Indian Express.
In June, sources told IANS that nearly 150 employees (2.6 per cent) from Unacademy’s PrepLadder team were laid off.
That came two months after Unacademy in April laid off nearly 600 employees, contractual workers and educators, i.e. about 10 per cent of its 6,000-strong workforce across the group.
In June the Raveendran-led Byju’s laid off 2,500 employees across its group companies, Moneycontrol reported.
Moneycontrol reported that Byju’s had laid off full-time and contractual employees from Toppr, WhiteHat Jr, and its core team across sales and marketing, operations, content and design teams.
Toppr earlier laid off 1,100 staff or about 36 per cent of its workforce from the company.
Employees from Toppr had received a call on Monday, asking them to put in their papers or they would be terminated without any notice period.
“I am part of the Chemistry subject matter expert. My entire team has been laid off. Toppr has promised one month salary for those who resign and no salary for those who don’t,” a Toppr employee told PTI.
The development comes after Byju’s group firm Whitehat Jr had laid off 300 employees.
Vedantu had in May, within a fortnight of laying off 200 employees, fired another 424 employees citing tough external environment and fear of recession.
“Today I am writing about one of the toughest decisions we had to take in the past many years. It is days like these that are heartbreaking and I hope to never see them again,” Vedantu co-founder and CEO Vamsi Krishna said in a blog post.
“There is no easy way to say this — out of 5,900 Vedans, 424 of our fellow teammates i.e. approximately 7 per cent of our company, will be parting with us.”
He said that the current external environment is tough and the company is going back to its operating principal, where it will look to create runway for 30 months and lower customer acquisition cost.
“War in Europe, impending recession fears and Fed interest rate hikes have led to inflationary pressures with massive correction in stocks globally and in India as well. Given this environment, capital will be scarce for upcoming quarters,” Krishna said.
In February, Ronnie Screwvala-funded Lido Learning had shut shop, which reportedly led to loss of around 1,000 jobs.
Start-ups feel the pinch
Start-ups, especially the ones who benefited from a pandemic boom, are feeling the pressure as valuations, particularly at the late stage, have started to dip, IANS reported quoting a Crunchbase study.
Start-ups now say it is much more difficult to raise new funding in this gloomy environment.
That sentiment was echoed by a PricewaterhouseCoopers (PwC) report released Monday which showed funding for education technology in India declined by 50 per cent in the second quarter (April to June) of this calendar year.
Funding in the Indian start-up ecosystem also fell 40 percent — from $11.3 billion in the first quarter (January to March) to settle at $6.8 billion in the second quarter, as per the report.
As start-ups in India keep firing their staff to navigate through the ‘funding winter’, the country may see more than 60,000 job losses in 2022 alone, led by edtech and e-commerce platforms.
Industry experts say that at least 50,000 more start-up employees are likely to be thrown out this year alone in the name of “restructuring and cost management” while certain start-ups keep receiving millions in fundings.
Industry experts told The Print that the edtech sector was going through a bad phase, but hoped that the slump was temporary.
“One of the reasons the funding for edtech start-ups has gone down is because there was a lot of wastage by the companies. Now, they are cutting costs…however, the edtech industry’s growth will not go down. It is continuing to grow,” Lavin Mirchandani, CEO of ConnectEd technology, an edtech platform catering to school students, told The Print.
“The slump in funding looks like a temporary phenomenon, and the industry should overcome it in the next nine to 10 months.”
What Unacademy CEO said
Gaurav Munjal, Unacademy’s co-founder and chief executive officer, wrote on Twitter: “The last three years with IPL were amazing. Our Brand went to another level. I recommend all upcoming Brands to partner with IPL. Our focus has changed. Hence the decision to not do IPL next year.”
Munjal said in a note to employees note that Unacademy staff will not receive complimentary meals and snacks at the office.
There will be no business class travel for any employee including top founders and top management and dedicated drivers for top executives will also be removed.
As per Indian Express, Munjal said that the firm’s upper-level management (CXOs) and some other employees will no longer be provided with Business Class tickets for travel. Those who desire an upgrade “can pay from their own pocket”, Munjal said in the memo, a copy of which has been seen by the newspaper.
He also said that the firm’s CXOs will also lose some other privileges, such as dedicated drivers, adding: “We will be shutting down certain businesses that have failed to find PMF (product market fit) like Global Test Prep.”
”Until now we never had frugality as one of our core values…but now the goal has changed. We have to do an IPO in the next two years. And we have turned cash flow positive. For that we must embrace frugality as a core value. Even though we have more than Rs 2,800 crore in the bank, we are not efficient at all. There are a lot of unnecessary expenses that we do. We must cut all these expenses,” Munjal said.
He said that the cut may show that the company is in a bad state but it is not the case.
”We are in a great state. This is the final frontier that we have to conquer. Profitability. And once we do, it will change the game for us. We are well capitalised but still we want our business to be profitable,” Munjal said.
Unacademy has thus far declined to comment on the matter.
With inputs from agencies
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