Vedantu lays off 424 employees as it expects a scarcity of capital

Citing headwinds, CEO Vamsi Krishna says capital will be scarce in upcoming quarters

Edtech unicorn Vedantu has laid off 424 employees — about 7 per cent of the company workforce, according to a blog post shared by the Bengaluru-based firm. This is a move that is being seen as a focus on profitability as well as consolidation and cost-cutting drive in the edtech space amid the pandemic, according to experts. The layoff happened days after the company fired 200 of its contractual and full-time employees. This is happening at a time when offline schools and colleges are opening up and learning is evolving into a more nuanced blended delivery model with a mix of online and offline.

“There is no easy way to say this but I am truly sorry. Out of 5900 Vedans (employees), 424 of our fellow teammates i.e about 7 per cent of our company, will be parting with us,” said Vamsi Krishna, CEO and co-founder of Vedantu, in a blog post. “This has been an extremely difficult call to make, and I want each Vedan to understand why V (Vedantu) had to take this call and what it means to you and the future of Vedantu.”

Currently, Krishna said the external environment is tough. He said 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.

“Given this environment, capital will be scarce for upcoming quarters,” said Krishna. “With Covid 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 the long term sustenance of the mission, V would need to adapt too.”

Last year in September, Vedantu, a pioneer in live online tutoring, became a unicorn after it raised $100 million in its Series E round, from investors such as ABC World Asia, Coatue and Tiger Global, taking its valuation to over $1 billion. The funds were primarily being used to strengthen product engineering functions as well as to expand into newer categories through both organic and inorganic routes. The capital was also expected to help it to compete with edtech players such as Byju’s, Unacademy, Simplilearn, UpGrad and Amazon Academy.

Benefits that the firm is offering to the laid-off employees include extended health benefits for self and family till 5th August 2022 and access to 15 doctor consultations and discounted pathology and pharmacy services through Practo till 29th April 2023. They will receive voluntary outplacement service support. This would include support on resume building, interviewing preparation support, training and opportunity identification

Vedantu is not the only edtech firm which has fired employees. Last month, edtech unicorn Unacademy laid off about 600 employees comprising nearly 10 per cent of its workforce. The SoftBank-backed firm which has a workforce of 6,000, has laid-off full-time employees, contractual workers and educators across the organisation. In March, Unacademy had laid off over 100 employees from its PrepLadder team amid “restructuring” of the organization.

This month, over 800 WhiteHat Jr employees resigned from the Byju’s-owned edtech start-up in the last two months after being asked to work from office. Mumbai-based WhiteHat Jr, which was acquired by edtech giant Byju’s for $300 million in 2020, had asked all its employees to work from the office within a month’s time.

In February edtech startup Lido Learning shut operations. This led its employees to seek help via social media platforms.

In the early stage of his career, Vamsi Krishna, an alumnus of IIT-Bombay, along with his IITian friends Pulkit Jain and Anand Prakash, founded his first educational venture called Lakshya, an offline test preparation organisation, in 2006. Lakshya was subsequently acquired by MTEducare in 2012. After the acquisition, they founded Vedantu, which emerged as India’s leading Live online tutoring firm.

“On building resilience, it's important to build a longer capital runway for Vedantu given the uncertainties of the outside world and tightening of capital availability expected for the next few quarters.”

For this Vedantu said it is creating a runway for at least 30 months without compromising on its core value of student centricity. It is focused on reducing customer acquisition costs via innovation and automation around operations. The firm did a comprehensive review of all the projects, to map them into core and non-core projects. Last month, Vedantu launched Augmented Interactive (Ai) Live, a technology it says will quality education accessible and affordable. Ai Live will reduce Vedantu’s course price point to Rs 5000 per year, from Rs 25,000 earlier. Last year, Vedantu had about 250,000 unique paying students. Krishna said the new innovation is expected to help the firm reach about 1 million unique paying students this year.

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