How To Burn Money And Learn Lessons
When I was in school, the terror of exams hit me only the previous night. As was the case with me always, I sought the services of my grandmother – my saviour, support and solace. ‘Patti, wake me up at 4 a.m. tomorrow so I can study’. She always dismissed me saying ‘Why do Soorya Namaskaaram after losing your eyesight’. The equivalent English phrase, I believe is ‘Why close the door after the horse has bolted’.
That she eventually woke me up and that I did put in last-minute effort and that I scraped through the exams are not the subject matters of today’s story.
A recent news article had got my attention. Unacademy, the edtech unicorn, has reportedly realized it was not making money yet had been burning them in bus loads and had decided to do something about it. The CEO has written to his staff, after firing a thousand of them, that it was time everyone in the company embraced a culture of frugality. Apparently, frugality was never a core value of the company till now but the fumes of burnt billions and the impossibility of raising more money have made them realize. And they are putting in place a whole lot of changes.
No more meals and complimentary snacks in any of their offices. (If you want a career in Unacademy, you better bring your own tiffin carrier!)
No more business class travel for anyone. (If you wish to travel from Bangalore to Bombay, sit in economy, just like the idiots who invested in the company!)
No more dedicated drivers for senior staff. (Of course, you can continue to keep driving the company to the ground!)
The management will take a pay cut. (Never mind if many of them didn’t deserve a job in the first place!)
Unacademy isn’t the first start-up to do this. They are not going to be the last. Expect more to follow. They will be forced to follow. Not the least because they would realize their follies but because ‘investment winter’ has set it and blind venture funds and squint-eyed investors have woken up and realized their investments are in jeopardy. They have been pouring serious money expecting serious returns only to see their investment in serious condition and the businesses getting into ICU.
With no hope in hell, they are turning off the investment taps and are tightening the screws. Cut cost, slash losses, show profits they say. Unicorns are doing the only thing they can – cut unnecessary costs and unwieldy flab which they shouldn’t have accumulated in the first place.
Shouldn’t they have been conscious of the costs from the beginning? Of course. Shouldn’t they have conserved their capital and spent it judiciously? You bet.
Cost consciousness is not a strategy or a tactic during a downturn. It should be the crux of corporate culture. It is what made bootstrapped companies like Zoho and Gofrugal succeed without investors and investment. The new start-ups are paying a heavy price to learn this simple truth. The price, ironically and unfortunately, is the capital they had received to build their business.
With all their nonsensical spending coming home to roost, spendthrift start-ups are having their inflated egos brought to ground level. Extravagant promoters are being forced to shift from free money to frugality. The investment winter is making reckless businesses go into hibernation. From which, many are not going to wake up.
Would Unacademy be one of them? For the sake of this country, let’s hope the company, along with others, scrape through their toughest exam yet!
