Edtech unicorn Vedantu on Wednesday laid off 424 employees — around 7% of the company's workforce — as it expects slower growth in the coming quarters due to reopening of schools and offline tutorials.
The edtech startup currently has 5,900 employees on its rolls.
Vedantu chief executive Vamsi Krishna, in an email to employees, cautioned about tightening of capital availability for the next few quarters. "Currently, the external environment is tough. War in Europe, impending recession fears, and Fed rate interest 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.
It's important to build a longer capital runway for Vedantu given the uncertainties of the outside world, he said.
The Vedantu CEO further said that with Covid-19 tailwinds receding, schools and offline models opening up, the hyper-growth of 9x Vedantu experienced during the last 2 years will also get moderated. For long term sustenance of the mission, the company would need to adapt too, he added.
While talking about layoffs, Krishna said this has been one of the toughest decisions the edtech firm had to take over the past many years. "It is days like these that are heartbreaking and I hope to never see them again," he said. "This has been an extremely difficult call to make."
To cut down costs, Vedantu aims to create a runway for at least 30 months without compromising on its core values, focus on reduction in customer acquisition cost via innovation and align all projects and teams to the core focus areas of the company and rationalise those which are not in sync.
"The result is, that a few teams and projects will have to be deprioritised and in the process, a few of our Vedans will be let go as well," the CEO says.
Those who have been sacked will get extended health benefits for self and family till August 5, 2022. The company will also offer voluntary outplacement service support to such employees.
The startup, cofounded by Krishna, Anand Prakash and Pulkit Jain, entered the unicorn club in September last year when it raised $100 million in a Series E funding round led by Singapore-based impact investing fund ABC World Asia. Existing investors, including Coatue, Tiger Global, GGV Capital, Westbridge, and others also participated in the round — which valued the company at $1 billion.
Vedantu competes with larger rivals Byju's and Unacademy in the live online tutoring space for kindergarten to 12th grade (K-12). Vedantu — which also has a presence in the test prep segment including engineering, medical examinations and others — claims that over 35 million users access its content through app and web for free every month.
The company claims it catered to over 200,000 paying students last year, a 300% growth over the previous year. This growth was accompanied by a revenue increase of 4.5x over the previous year, making it the second-largest company in K-12 in terms of revenue and number of students.