With an eye on IPO, Unacademy to offer stock options to employees instead of cash appraisals

Edtech unicorn Unacademy is shifting its employee appraisal system this year by offering performance-based stock options to employees instead of cash appraisals. This move is part of the company's cost-cutting measures in preparation for its upcoming initial public offering (IPO), Co-founder and CEO Gaurav Munjal informed his employees of the change via an internal email on Thursday. Business Today has reviewed a copy of this email sent to employees.

“We must continue to focus on profitability, because when Unacademy does an IPO, it should do it with at least four quarters of profitability. To achieve the same, we have decided to not do any cash appraisals this year. Instead, we will reward stock options to everyone based on their performance,” he wrote.

Unacademy had conducted a few rounds of layoffs as edtech firms, especially in the K12 space, experienced severe decline in growth as the pandemic-induced digital boom began to die down last year. Besides, start-ups across the spectrum are battling a general slowdown in funding as the inflow of easy money into the Indian market have slowed down significantly owing to a confluence of macro-economic reasons, including the rising interest rates.

“I know this is disheartening to hear after putting in a lot of hard work but I want you all to understand that this is a phase. We have built great products. We have been great at adapting to market conditions. We launched new businesses and did not degrow when everyone else did. And our EBITDA margins have improved a lot. So trust this process because I am very confident that we will come out of this phase as a much stronger organisation,” he further said.

Munjal said the firm’s cash burn is significantly down, revenues grew in 2022 when most other edtech firms saw decline, and claimed it’s only ‘a matter of time’ before Unacademy becomes number one edtech company in India.

He expressed optimism that some of its new businesses, specially offline tuition centres, will show a ‘a lot of growth’ this year.

Last month, the company had conducted a fresh round of layoffs at its upskilling platform Relevel, which is moving away from education business to focus on products around exam tests. Announcing the decision in an internal email, Munjal said the company will let go of 20 per cent (around 40 people) of Relevel’s team while the rest of them will be absorbed by other businesses of Unacademy Group. The core team of Relevel will focus on building NextLevel, which was launched in December 2022 as a product that would "disrupt LinkedIn" and make resumes irrelevant.  

Having reportedly fired 1,000 employees in April last year (including hundreds of contractual educators), the company dismissed 350 more employees (10 per cent of its workforce) in early November. Munjal attributed the layoffs to the funding slowdown. “Market challenges have forced us to re-evaluate our decisions. Funding has significantly slowed down and a large portion of our core business has moved offline,” he wrote in an internal memo. The layoffs “would be across the Unacademy Group from verticals where we have to take a difficult decision either to scale down or shut down”, he had said.