Unacademy, one of the high-profile Indian startups, has urged its employees to learn how to work under constraint and focus on reaching profitability as the SoftBank and Tiger Global-backed online learning platform predicts a dry funding spell across the industry for as long as 18 months.
The Bengaluru-headquartered startup, which has raised over $800 million and was valued at $3.44 billion in its most recent financing round in August, “always raised more money than what was needed” to “continuously experiment and grow our platform without worrying about when we will run out of money,” wrote co-founder and chief executive Gaurav Munjal in an email to the staff on Wednesday.
“[…] But now we must change our ways,” he wrote in the email, contents of which were obtained and reviewed by TechCrunch.
“Winter is here.”
Munjal said he anticipates scarcity in funding for 12 to 18 months. “Some people are predicting that this might last 24 months. We must adapt. This is a test for all of us. We must learn to work under constraint. We must focus on profitability at all costs,” he wrote in the email, titled “A different Iconic Goal this time.”
“We must survive the winter,” he added.
Investors across the globe have sounded alarms in recent weeks, urging portfolio founders to plan for the “worst” amid a sharp reversal in tech stocks after a 13-year bull run. Y Combinator last week advised its startups to raise additional capital if they can to ensure they have a runway of about two years, TechCrunch first reported. Sequoia and Lightspeed have offered similar suggestions.
Scores of startups, many of which raised capital at peak 2021 valuations, are currently struggling to raise new rounds as investors increasingly become cautious and the good old due diligence makes a comeback. Several VCs who were in advanced stages of talks to back startups — across different stages — a few weeks ago are renegotiating prices.
Edtech startups across India — and many other markets — are grappling with additional challenges as schools and other institutions open again and reverse some of the fast and wide adoption online platforms witnessed during the pandemic.
Unacademy, Vedantu and Lido, three startups operating in the space in India, have each shrunk their workforces in recent months to eliminate redundancies and improve their financial performances. Byju’s, India’s largest edtech, was attempting to go public via the SPAC route as early as last month and seeking a valuation of over $40 billion but has since postponed the plans following the market teardown, according to a source familiar with the matter.
Munjal emphasized in the email that Unacademy’s new goal is to reach profitability and generate free cash flow. Unacademy in recent months has taken steps — such as shutting the K-12 offering and winding down some inorganic areas where it had expanded to following acquisitions — to cut costs and risk exposure.
He outlined several other steps the firm is undertaking:
We have significantly reduced our brand marketing budget
We will focus on organic growth channels instead
Every test prep category that we run must become profitable in the next 3 months
Unacademy centres should be profitable in FY’23
Businesses like Relevel and Graphy which are blitzscaling mode must become extremely mindful about burn and reduce it significantly
All incentives for educators that are not linked to revenue have been completely removed or are in the process of getting completely removed
Travel only if it is absolutely needed. Meetings that save travel cost and that can happen on Zoom should happen on Zoom
“We can only achieve this Iconic Goal if every single one of us is working towards it,” he added.