📖 Lido's Fall: Warning for Edtechs?
Lido Learning collapsed despite an edtech boom. Here's why.
The last 2 years got us believing that edtech is the future of education. With brands pouring in millions of dollars and parents parting with a big chunk of their pay-cheques, this future looked like a bright one.
However, this image has now started cracking. The sudden shutdown of Lido Learning earlier this month has put the future of thousands of employees, teachers and students at stake.
Chapter 1: What is Lido Learning?
Lido Learning was a promising edtech startup founded in 2019 by Sahil Sheth, which catered to children from kindergarten to Class 12. And it wasn't just running its operations in India but also in the Middle East, Canada, the US and other countries.Â
It even has star investors like Anupam Mittal and Ronnie Screwvala. In fact, Screwvala's Unilazer Ventures invested $10 million in the company last September.
The company also found mention in LinkedIn's Top Startups List last year.
So, then what went wrong?Â
Chapter 2: Lido Learning's Problems
Employees and customers both had been unhappy with Lido's behaviour in the last few months.
Salaries were not being paid on time, provident fund amount was being deducted from salaries but not being deposited into employees' PF accounts.
Naturally, employees were unhappy with the company and this was reflected in their behaviour. This made customers unhappy. Many of them began asking for refunds but the company was unable to process them.
The root cause of the problem: lack of funds.
When the pandemic first hit the country, the company's revenue halved.Â
And while things returned to normal in 2021, an increase in students forced Lido to add more employees. So, expenses increased by 1.4x.Â
Lido just couldn't catch a break.
Wait, didn't Lido just raise $10 million?
Well, that's peanuts in the edtech industry. So far, the company has raised $24 million in all, whereas Byju's raised $1.3 billion in 2021 alone.
But why does edtech bleed so much money?
You see, this industry is still very new. So, many are still reluctant to hand over their child's education to a screen. This has made acquiring customers a huge task.Â
A lot of money has to be spent on marketing, advertising and paying people to generate leads. We know how spammy it can get, but to justify the mammoth valuations the companies tend to indulge in this behaviour.Â
That's why several edtech startups, though successful, are not profitable.
Lido also belongs to this category. It saw losses of around Rs. 102 crores in 2020-2021. In comparison, it had raised funds worth Rs. 111 crores until September 2021.
So, why not raise more funds like the other edtechs?
Lido did try to do so. But most investors decided to give their money to edtech biggies like Byju's, Vedantu, and Lead School (India's latest edtech unicorn). These startups and a few others collectively raised $4.7 billion in 2021.
It even began fundraising talks with Chinese investors, who could have infused $80-$90 million in the company.
But thanks to the change in India's FDI rules, these investors would have to seek government approval before investing in Indian startups. So, they exited the deal.
Lido was thus left high and dry. It tried to keep itself afloat by cutting corners but on February 5, Sheth finally decided to pull the plug on his dream. He told employees that the company would be shutting down and he would sell its assets to pay off employees.
But the customers' problems still exist. Many of them took loans to finance the Rs. 40,000 - Rs. 90,000 courses and though Lido has shut down, their loan providers continue to deduct EMIs.
Who is to blame for all this?
Chapter 3: The Blame Game
Many customers have put the blame on investors, saying they should have paid more attention to the company.
However, investors like Screwvala are blaming the management, claiming that investors were kept in the dark by the company.
Well, Sheth could have managed the company's finances better or informed investors that the company was drowning. Meanwhile, investors should also have kept better tabs on the company.
If they had, the company could have been sold off to a rival, saving everybody a lot of pain.
But perhaps Sheth, who had already sold one edtech platform (Infinite Student) to Byju's, was not ready to give up another brainchild.
This incident should serve as a warning for edtechs.
In fact, all startups.
Lessons learnt:
Founders should be realistic about their company's prospects
Always pay employees on time
While scaling a startup fast is important, pay a little attention to sustainability too. Ripping the band-aid quickly might not always be the right solution.
On a positive note, several startups like Coachguru and Yellow.ai are offering jobs to Lido's employees. But they cannot possibly solve the customers' problems.Â
Do you think the government should intervene and regulate edtech startups to ensure better education for children?
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