In a candid email to his employees signalling a potential funding crunch, Gaurav Munjal, co-founder and chief executive officer of Unacademy, has said that the edtech startup must focus on profitability at all costs and the staff must learn to work under constraints going ahead.
"We are looking at a time where funding will dry up for at least 12-18 months. Some people are predicting that this might last 24 months," wrote Munjal in the mail.
"We must survive the winter. We have a different iconic goal this time - that of profitability. The goal is to generate FCF (free cash flow)," he added.
Munjal's email comes amid the liquidity squeeze already felt in the startup ecosystem that has prompted some startups including Unacademy to lay off their staff in the past weeks to cut costs. Last month, Unacademy, operated by Sorting Hat Technologies Pvt. Ltd, laid off nearly 600 employees comprising nearly 10% of its workforce, VCCircle had reported. The previous month, it had let go over 100 employees from its PrepLadder team amid “restructuring” of the organization.
Munjal explained that some of the steps taken by the edtech startup to achieve profitability include reduction of brand marketing budget and removal of incentives to educators that are not linked to revenue.
Besides, its businesses like Relevel (hiring tests platform) and Graphy (course platform for course creators, coaches and teachers) must become "extremely mindful of burn", he said.
He also said that its employees should travel only when absolutely needed.
Munjal highlighted that Unacademy's every test preparation category must be profitable in the next three months and its centres should be profitable in the current financial year itself.
In the email, he also harked back to the time in 2018-19 when it was finding tough to raise money but had 30 months of runway. "And then after 18 rejections, we raised our Series D round," he reminisced. He also underlined that he doesn't remember a time when Unacademy was ever resource constrained. "But now we must change our ways," he noted.
Unacademy is currently valued at $3.44 billion and counts global venture capital (VC) firms, including Sequoia Capital, Tiger Global Management and SoftBank, among others, as its backers.
Munjal had announced the company’s plans to go public in March during the launch of experience offline store in New Delhi called ‘Unacademy Store’
Munjal had then added that the company’s core business was on track to achieve profitability. According to the spokesperson, the company is "focused on becoming profitable by the end of Q4 CY2022 (fourth quarter of calendar year 2022) in our core business, while investing for growth in our group companies”.
In another note that went viral last week, Silicon Valley investor, Y Combinator advised its portfolio founders to “plan for the worst” and "understand that the poor public market performance of tech companies significantly impacts VC (venture capital) investing".