“We have just two months of cash runway,” the top management of Kalaari Capital-backed edtech upskilling startup AlmaBetter told its employees in September and announced pay cuts across the board. 

As per the plan, employees earning above INR 50,000 per month had to take a salary cut of 50% while those making less than INR 50,000 per month had to take a cut of 25%, multiple sources told Inc42.

The startup said that the deducted salary would be paid later either in cash or the employees may get vested ESOPs, they added.

AlmaBetter CEO Shivam Dutta confirmed the pay cuts to Inc42, saying it was a part of the ‘regular salary review process’. However, he denied that the startup has only two month of cash runway.  

“This is part of our regular salary review process to match the salaries to market standards. As part of this process, we had a mix of salary deductions as well as salary increments. ESOPs were also provided to bring more ownership within employees,” Dutta said.

One of the sources cited above said that the pay cuts were necessary to avoid layoffs.

However, the startup undertook a layoff exercise in the very next month. It sacked around 35 employees and, in an email, cited a “financial crunch” as the reason behind it. Inc42 has reviewed the email sent to the employees.

Dutta, however, said that only 22 employees, or about 8% of the total workforce, were laid off.

As per the sources, the layoffs impacted the programme, editing, marketing, and student operations teams, while the entire corporate communications team was sacked. Meanwhile, Dutta claimed that the layoffs were primarily driven by AI-enabled automation on the student operations front.

Commenting on the layoffs, one of the sources said, “This could have been handled in a better way. They could have informed us prior. We understand they don’t have money to pay us, but they could have been professional about this.” 

The startup offered basic pay of two months to compensate for job losses. However, there was a catch. The severance would be paid on March 31, 2024, almost five months after the layoffs, as per an email sent by the startup. Inc42 has reviewed this email also.

“What will the employees do with the severance pay in March? They need the money now to pay their current bills,” one of the sources said.

Rejecting the claims, Dutta said, “Severance has already been paid out to those who have successfully got asset clearance. The last day of submission of assets and the payout of severance has been kept as March 31, 2024.”

Journey Of Pandemic-Era Child AlmaBetter 

Founded by IIT Kharagpur and IIT Delhi graduates Shivam Dutta, Vikash Srivastava, Ravi Kumar Gupta, Arshyan Ahsan, and Alok Anand, AlmaBetter is among the new-age upskilling startups founded at the peak of the Covid-19 pandemic. 

At the outset, the edtech offered upskilling courses under domains such as data science and software development to college students and working professionals. Later, it forayed into providing post-graduate programmes/courses in computer science.

In November last year, the startup raised $2.7 Mn in its seed round from Kalaari Capital. The round also saw participation from 15 angel investors, including Vidit Aatrey and Sanjeev Kumar of Meesho, Rajesh Yabaji of Blackbuck, and Varun Alagh of Mamaearth. 

However, within a few months, the startup found itself grappling with a cash crunch due to its high cash burn (more on this later). Following this, AlmaBetter resorted to layoffs to extend its runway. 

In March this year, Inc42 learnt that the startup laid off around 20 employees, mostly from the growth team. Back then, when Inc42 reached out to AlmaBetter, Dutta said, “… As a part of regular performance evaluation across teams, a few employees were let go due to their underperformance or failure to fully embrace the company’s ethos and values.” 

In a bid to shore up its revenue, the startup launched its post-graduate courses in data science, artificial intelligence (AI) and software development in July. 

What Led To The Latest Crisis?

While AlmaBetter has yet to disclose its financial statements for FY23 with the Ministry of Corporate Affairs, its FY22 numbers highlight the growing concerns within the startup. In FY22, AlmaBetter posted a net loss of INR 4.2 Cr on an operating revenue of INR 2.2 Cr. The startup’s expenses stood at INR 7.8 Cr during the year, which means its expenses were almost 3.5X its operating revenue.

Besides, one of the sources said that the startup’s revenue model was also flawed. “For some courses guaranteeing 100% placements, AlmaBetter would receive fees only after the placement of its students was done. What this meant was that the company was not making any money from its students enrolled under those programmes for almost a year,” the source said. 

Despite issues plaguing the startup, it has been spending heavily on marketing and promotions to create brand awareness and generate new business, we have been told. 

According to a source, AlmaBetter spent heavily on marketing a product just to scrap it later. Similarly, the startup spent a lot of money on floating a new undergraduate course a few months ago. However, has now pulled the plug on it, Inc42 has learnt.

While Dutta claimed that the undergraduate courses are still being offered on a B2B basis, no such courses are currently listed on the startup’s website. Instead, we found that the startup is increasing the fees for its certification courses from January 1, 2024, citing inflation and operational expenses.

Amid all these, AlmaBetter’s efforts to raise fresh funding have failed so far as investors are willing to invest only at its seed round’s valuation or a valuation below what the founders are seeking, the sources claimed.

While the startup’s efforts to raise a bridge round have failed so far, existing investor Kalaari Capital is willing to commit a fresh fund if AlmaBetter can onboard a new investor, they said.

However, Dutta, without giving any additional clarification, called the funding-related comments “false information”.

Meanwhile, AlmaBetter is in discussions with other edtech startups for a potential acquisition, as per the sources. However, Dutta dismissed this, too.

“They are doing everything to keep the company afloat,” one of the sources said, explaining the edtech platform’s current condition. 

Meanwhile, Dutta said that AlmaBetter is in the “best shape as compared to other edtech players” and is on the verge of turning profitable by the next quarter. Without disclosing absolute numbers, he said, “FY23 saw 4X YoY growth and FY24 is expected to have 3X YoY growth”.

[Edited by Rai Vinaykumar]