Explained: Why Unacademy is cutting costs, dropping IPL sponsorship, stopping upgrades to Business Class

The party has begun to wind down for many startup companies and Unacademy wants to turn cash flow positive ahead of an IPO within two years.

Indian startups have handed pink slips to more than 12,000 people so far in 2022, the layoffs rush being led primarily by edtech firms such as Byju’s and Vedantu, apart from Unacademy. (Getty Images/Representational)

In a bid to achieve profitability ahead of a potential public listing at some point over the next two years, edtech startup Unacademy has announced a slew of cost-cutting measures, including the discontinuation of its sponsorship of the Indian Premier League (IPL) from next year. The firm has also informed employees about other belt-tightening measures, including pay cuts for founders and management, restrictions on business travel for employees and its tutors, and halting complimentary meals and snacks at its offices.

Why are Unacademy’s new measures significant?

The development comes amid a freeze on funding available to Indian startups, which has forced a number of storied startups like Unacademy to layoff staff and shut down entire business verticals. 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.

In all, Indian startups have handed pink slips to more than 12,000 people so far in 2022, the layoffs rush being led primarily by edtech firms such as Byju’s and Vedantu, apart from Unacademy.

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As demand for online education dropped 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. The startup has reportedly spent hundreds of crores in recruiting employees for its first centre in Kota, the country’s private coaching hub. Its major rival Byju’s had entered the offline coaching space with its billion-dollar acquisition of Aakash Educational Services.

Also Read in Explained | What Vedantu sacking employees again means for edtech startups in India

What details are known of Unacademy’s cost-cutting push?

Responding to a user on Twitter, Gaurav Munjal, Unacademy’s co-founder and chief executive officer, said: “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.”

In an internal note to employees, 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 Indian Express.

Also Read in Explained | Why Unacademy is foraying into offline education

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.”

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However, Munjal assured employees that the cost-cutting measures do not mean that the firm is financially in bad shape — it had more than Rs 2,800 crore in the bank as of Monday, he said. “But now the goal has changed. We have to do an IPO (initial public offering) in the next two years. And we have to turn cashflow positive. For that we must embrace frugality as a core value,” Munjal said. Unacademy declined to comment on the internal memo.

Soumyarendra Barik

Soumyarendra Barik is Special Correspondent with The Indian Express and reports on the intersection of technology, policy and society. With over five years of newsroom experience, he has reported on issues of gig workers’ rights, privacy, India’s prevalent digital divide and a range of other policy interventions that impact big tech companies. He once also tailed a food delivery worker for over 12 hours to quantify the amount of money they make, and the pain they go through while doing so. In his free time, he likes to nerd about watches, Formula 1 and football. ... Read More

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