News of the Lido closing came as a shock to many who believed in the startup, which offered live online lessons to students in grades K-9 in math, science, English and coding in small groups of six.
Illustration: Chaitanya Dinesh Surpur
Days after it was reported that edtech startup Lido Learning was closing because it ran out of money, Forbes India learned that the Mumbai-based edtech startup is in talks with potential buyers. Byju’s, Vedantu, Unacademy and Reliance are in the running to buy the three-year-old business, a person familiar with the matter said. Forbes India. Vedantu, he says, is the favourite. When contacted for comment, Vedantu denied any such development.
News of the Lido’s closure came as a shock to many who believed in the startup, which offered live online lessons to students in grades K-9 in math, science, English and coding in small groups of six, charging between Rs 25,000 and Rs 90,000 after discounts – was healthy.
During a virtual town hall in early February, attended by the entire organization – 1,000 to 1,200 employees – Sahil Sheth, founder and CEO, announced that the company was closing its doors because funds had dried up. The employees were told to look for other jobs and that their wages would be paid within 90 days. âWe were all muted so we couldn’t ask questions. We did not expect this. No one knew things were so bad,â says a former employee. Salaries, he says, have not been paid since January.
âIt was going well. I do not know what happened. It’s sad,â says one seed investor, who has led investments in several edtech startups, on condition of anonymity.
Just five months ago, Lido, owned by Quality Tutorials Pvt Ltd, raised $10 million (about Rs. 73.4 crore) from high-profile investors including Alibaba-backed Bace Capital, Ronnie’s Unilazer Ventures Screwvala and Picus Capital from Germany, in September 2021. The startup also has high-profile angels like Paytm founder Vijay Shekhar Sharma, Shaadi.com’s Anupam Mitttal, former Myntra CEO and now Mensa founder Ananth Narayanan , Mukesh Bansal of Curefit and Vikrampati Singhani, MD, JK Tires, among its investors. Lido at the time said it planned to use the new capital to expand further in India and enter international markets including the UK, Australia, New Zealand and South Asia. South East. Screwvala noted at the time that Lido was the “first player in the small group education space” having differentiated itself from other edtech players who primarily offer self-directed learning or large group classes. The Lido’s strategy of immersive learning and rewarding positive outcomes, he said, the “best positioned” to shore up the $15 billion neighborhood tuition market.
Revenue fell from Rs 3.8 crore in FY20 to Rs 11.3 crore in FY21 but losses increased by 34% from Rs 43.5 crore in FY21. FY20 to Rs 58.7 crore in FY21, according to Venture Intelligence and company regulatory filings.
So what was wrong?
âThe problem is simple. [Things] didn’t go as planned, but hopefully the company will find a home. The management could have anticipated the problems and managed them better. They were very opaque,â ââone of Lido’s investors told Forbes India on condition of anonymity. Other investors Forbes India contacted did not respond at the time of publication. A detailed questionnaire sent to Sheth also went unanswered at the time of publication.
“It was a combination of many things,” says a former senior executive.
First, two investment agreements failed. In early to mid-2020, China’s ByteDance, the owner of TikTok, was in talks with Lido for a massive fundraising round of Rs800 crore, according to the person quoted above. But things took an unfortunate turn in May 2020. The government turned hostile towards China following a border skirmish in Ladakh in which several Indian soldiers were killed. He responded by banning 59 Chinese apps, including TikTok, from operating in India on national security grounds, accusing the Chinese of stealing data through the apps, in June 2020. Several other Chinese-owned apps were banned from India in the following weeks. “It was around this time that the ByteDance deal was supposed to happen, but it fell through because of what was going on,” the senior employee explains.
Cure.fit, owned by Mukesh Bansal, was also supposed to inject around Rs 80 crore into Lido Learning at the time. But the pandemic and resulting lockdowns meant that Cure.fit faced its own challenges and scaled back operations. âThey ended up investing only Rs2-3 crore instead. It was a double whammy for the Lido,â says the person quoted above.
Second, Lido has been slow to adapt to the onslaught of Covid. “The whole model was based on salespeople meeting potential customers in their homes and converting those leads into paying customers,” says another former employee on condition of anonymity. It came to a screeching halt when the lockdowns were announced. “Management has not been proactive in anticipating problems and working around them.”
Third, Lido made a series of bad hiring decisions. Shortly after the initial lockdown was announced in March 2020, Lido announced pay cuts for its employees. The top two layers of employees received a 50% reduction, says the senior employee quoted earlier. âDespite the reduction in my salary, they were hiring people in the highest positions. They werenât even people with relevant experience or references who could help steer the company in the right direction. mostly family and friends [of the top management]âexplains the employee.
âFor example,â he continues, âthese guys at Harvard-Stanford emphasized marketing through social media instead of using more primitive means of advertising like Byju and other technology companies do. information. For every post we publish, we get 30 comments from disgruntled customers about refunds not coming in. Not only was there no return on investment (ROI), but this decision compounded the things from a brand perspective,â he says. âThese hires would then disappear after a few months and go back to their universities. But the damage was already done.â
This, which leads to the fourth point, has opened a Pandora’s box. Today, social media platforms including Twitter, LinkedIn and Facebook are littered with customer complaints about uncancelled subscriptions despite repeated requests made during the 15-day trial period with EMIs cut off. despite promises of refunds and overall poor communication from the Lido. âDuring our training period, we were specifically told to highlight the Lido’s refund policy. We would tell our leads as we were told, but when it came to reimbursement, the policy rarely worked,â says a former business development associate (BDA), who quit because she felt like â mislead customers.
Much like Byju’s, where Lido’s founder Sheth worked for two years as vice president, after selling his first company to the edtech biggie in 2012, Lido was handing out free tablets to students who decided to enroll. . They were told to sign up for a 15-day ‘trial period’ after which, if they didn’t like the lessons, they could cancel their subscription within the 15-day period. Bank details were collected during registration. Subscription fees were either 25,000 rupees for six months, 42,000 rupees for one year or 90,000 rupees for two years after discounts.
“Many students really liked the teaching and the product, but others didn’t like it for some reason. As I was the point of contact, they asked me for refunds. I was told to direct them to the relevant department, but they hadn’t heard from them, so they called me several times. When I told my manager about it, he said: “Block the numbers”. job is just selling the product.’ Many of my leads were children of farmers who couldn’t afford the monthly charges,” says the BDA quoted above. Techfino Capital, Early Salary, and Shopse, among others, were among third-party loan providers.
Another employee echoed the sentiment: âInterdepartmental communication was poorâ¦almost non-existent. As a result, the parents suffered. Many BDAs had sold Lido’s offerings to family and friends in order to meet their sales targets – “we were told to get our personal contacts if we didn’t meet the targets”, says another BDA – and are now using their personal funds to repay IMEs.
On the other hand, another employee says there is a “half truth” about the problem of customers not receiving their refunds. The condition for reimbursement was that the tablet be returned to the Lido, but in the absence of a commitment when the tablet was returned, the employee recounts, customers would say: “What is the proof that you gave me a Tablet ? Customers are also smart: they go from a two-week free trial at Lido to two weeks at Byju and two weeks at Vedantu until the program is covered. Â»
Finally, as Covid wears down and physical schools and classes reopen, the âoffline bounty unfolds,â says the seed investor quoted above. âWe see this phenomenon playing out globally with companies like Zoom and Peleton not being as attractive anymore. I won’t say edtech winter is here, but edtech fall is definitely here,â he says. Like Lido, there will be more casualties in the edtech space. Ordinary startups without differentiated offerings will die out while the most differentiated ones will be acquired by the biggest edtech players – Byju’s, Unacademy, Vedantu, Eruditis, etc. aggressive with mergers and acquisitions. he says.
While details on how much Lido favorite Vendantu will bid for the edtech startup are unknown, people familiar with how Lido works say its technology platform is top-notch. âI would even go so far as to say that its platform is among the best in Asia,â says the senior employee quoted at the start. “It’s immersive, intuitive – a 4-5 year old child, for example, can easily navigate the app, which draws students into a virtual classroom.” He says, âByju’s, Vedantu, Unacademy, Eruditis, etc., don’t have that kind of experience. So, despite the responsibilities of the Lido, they will pay a premium for this.
A spokesperson for Unacademy, however, described it as a “rumor” and said it was “absolutely untrue”.
(Forbes India is contacting other potential buyers in the fray. The story will be updated once they respond)
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