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Exclusive | Lido Learning's collapse: A story of lost trust, sleep and hard-earned money

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Exclusive | Lido Learning's collapse: A story of lost trust, sleep and hard-earned money

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CNBC-TV18 Exclusive on Lido Learning's collapse: After a month of agony, parents appeal to the education ministry and ex-employees file police complaints as pleas on social media have failed to elicit a response from authorities or Lido Learning's investors.

Exclusive | Lido Learning's collapse: A story of lost trust, sleep and hard-earned money
"I feel foolish. I feel embarrassed. How did I make this mistake?" That's a familiar refrain of parents who are blaming themselves for having enrolled their children for online classes with Lido Learning, which has shutdown. Left in a lurch with tutor-less classes and unprocessed refunds, hundreds of parents are appealing for help.
On February 7, Sahil Sheth — the founder of the three-year old edtech startup — told employees in a virtual meeting that the company would cease operations for lack of funds.
"Consider today as the last working day," the company informed its employees and asked for 90 days to settle the dues, including unpaid salaries for January. Tutors too received an email with a familial plea for patience and loyalty.
"What about my child, who asks me on a daily basis, will you get me into another online class? How can I trust any other edtech startup after this scam," said Yatin Malik, who signed up his 7-year-old son with Lido Learning a week before its collapse.
Not satisfied with the level of teaching, he canceled the plan after two sessions within the stipulated 15-day trial period and placed a request for refund, which remains unprocessed with the company offering no acknowledgement. The parent told CNBC-TV18 that he is now blocked on the online portal and is unable to access his account to check the status of the refund.
For the two-year course, which cost Rs 54,000 for 280 classes, the bank has deducted two EMIs of Rs 4,500 and Malik expects this to continue for another year without any hope of a refund following the startup's closure. "It's my hard-earned money. Not even in my worst nightmare did I expect to end up in this situation," he said.
Over the last month, Malik's angst-ridden social media posts caught the attention of other aggrieved parents, who have now formed a collective with more than a hundred members on a WhatsApp group. Legal action against Lido Learning is being considered.
"Imagine! This would have affected not hundreds, but thousands of parents! I have heard about instances where a single mother signed up her child with Lido Learning in the hope of a better future," said Malik.
After failing to elicit a response from Lido Learning, one parent has written to Dharmendra Pradhan — the Union Minister of Education, stating that it is 'criminal for edtech companies to victimise parents in the name of their child's career and future'.
"I am finally writing to you because it is a matter which is related to the education department. I have tweeted several times to all the portals, but none of the agencies has taken an immediate or any sort of action..." said the letter, a copy of which has been shared with CNBC-TV18.
The parent has also filed a complaint with the Consumer Forum, adding to an existing list of nearly 70-80 complaints against Lido Learning. Harried parents are now rushing to banks and contacting Lido Learning's third-party lending partners to block the EMIs in a bid to cut losses.
The parents collective told CNBC-TV18 that they intend to make their agitation formal and take Lido Learning to court as pleas on social media have failed to get the attention of authorities or Lido Learning's investors. CNBC-TV18's detailed questionnaire sent to founder Sahil Sheth remains unanswered.
"I enrolled my child with Lido Learning as it was a funded startup with Ronnie Screwvala and Anupam Mittal as investors. But, even they are not responding to our social media posts," said a parent, who wishes not to be named.
CNBC-TV18 has learned that Lido Learning has previously tried to silence parents, who took to social media as a way of voicing their concerns over refunds. Aabid Hussain Wani told CNBC-TV18 that he pulled down his post after receiving a ‘threatening call’ from the startup’s social media team albeit with the assurance of a timely refund.
A resident of Baramulla in Jammu and Kashmir, Wani had enrolled his nephew for a course with Lido Learning for Rs 25,000. Not the only parent or guardian awaiting refund since Sept-Oct last year, he asks, “Where should we go now?"
Was Lido Learning’s collapse imminent?
Employees, tutors and parents were shocked to learn that Lido Learning shut its business due to a funding crunch. That too within six months of the Ronnie Screwvala's Unilazer Ventures-led funding round of $10 million, which had pushed the startup's total fundraise to nearly $30 million since inception in mid-2019.
Over three funding rounds, the startup had gathered a noteworthy group of angel investors — Paytm’s Vijay Shekhar Sharma, Cult.Fit’s Mukesh Bansal, Shaadi.com’s Anupam Mittal and Mensa Brands’ Ananth Narayanan. That's besides notable venture investors such as Alibaba-backed BACE Ventures, Picus Capital and 9Unicorns.
CNBC-TV18's investigation has revealed that the startup was surviving from funding round to funding round. Over the last couple of quarters, Lido Learning was struggling to meet parents' refund requests, failing to deposit employees' provident fund (EPF) deductions, stalling full-and-final settlement for former employees, ignoring tutors’ minimum guaranteed pay and delaying payments to vendors.
“The lesson from Lido Learning is that all startups should be able to fund their operations at least in the medium term. Being overly reliant on the next round of funding is a risky strategy. That’s what happened at Lido,” an investor told CNBC-TV18 on the condition of anonymity.
“It puts all the stakeholders — employees, vendors, parents and investors — at risk,” he said.
Following in the footsteps of several aggrieved parents, Harpreet Singh, a former employee has filed a police complaint against Lido Learning's founder Sahil Sheth. "From September 2021, the company has not credited the amount in my PF account...." reads his complaint.
He told CNBC-TV18 that such a step had to be taken with no hope of the startup settling the dues within 90 days.
"This is not the first time. Lido Learning had the habit of moving out without paying vendors for office space, computers or tablets given to students," a vendor told CNBC-TV18. Just before the last funding round, the edtech startup had vacated its Noida office — a co-working space — without paying rent for at least three months. The vendor even put up a banner to force Lido Learning to clear its dues.
"Only the GST dues were cleared. We had to write-off the outstanding rent of Rs 30 lakh, not wanting to lose money in litigation," said the vendor.
“Several people would arrive at the office, asking for refunds and there are also several complaints filed in the name of the company at the local police station,” he added.
In addition to these financial obligations, Lido Learning added another overhead in mid-2021. For tutors, it started offering minimum guaranteed pay of Rs 15,000 per month. “Tutors get paid per class taught. Fewer classes in a month meant lower income. Although well-intentioned, MGP was not a wise move with uncertainties around the reopening of schools before the second wave of the pandemic,” a tutor told CNBC-TV18.
At last count, Lido Learning had 700-800 tutors, many of whom are in wait-and-watch mode, not wanting to abandon their students while awaiting pending salaries. “We have been sleepless over the last few weeks. Some tutors have slipped into depression,” she said.
When Lido Learning hit the iceberg
Even though Lido Learning had outstanding dues to clear, ex-employees told CNBC-TV18 that most of the funds raised in the Unilazer Ventures-led round were used up for the company’s first-ever TV advertising campaign during the Indian Premier League (IPL) in the months of September and October last year.
At the time of the fundraise, the company said it is targeting a $100 million run-rate by end of FY23. It had announced plans to launch operations in the UK, Australia, New Zealand and South East Asia in early 2022. That's in addition to its existing presence in the Middle-East, US and Canada.
Lido Learning offered live classes for kindergarten to Class 12 students, covering Mathematics, Science, Coding and English, with each cohort not consisting of more than six participants. "I joined Lido Learning for its superior product," an ex-business development associate, with prior experience at other edtech startups, told CNBC-TV18.
"Jo Dikhta Hai, Woh Bikhta Hai! (What’s seen is what sells!) That's what the IPL campaign sought to achieve," he said.
To spearhead the next leg of growth for the company, it hired OYO's Jagnoor Singh as the Global Chief Business Officer. Having joined in October, Singh spent three turbulent months at the startup before leaving with some senior executives to take up a similar role at rival edtech firm — Unacademy.
Why? "Jagnoor Singh had begun to hold regular review meetings. He must have found out what was happening at Lido. Otherwise, why would he have left so quickly?" asked the ex-employee quoted above.
Another former marketing associate confirmed to CNBC-TV18 that sometime in early October, the company undertook an internal shakeout after the top management received a whistleblower email, which highlighted fraudulent check-ins on behalf of parents for demo classes.
"Fake check-in was rampant at Lido Learning. The intention was to push up the count. Higher the count, higher the incentives," he said, clarifying that only a few senior managers and employees were involved in the malpractice.
In an intensely-competitive market, despite a sound product, it seemed Lido Learning’s pre-sales and after-sales game was not upto the mark. "From LinkedIn to Twitter, Lido Learning's reputation is tarnished everywhere, mostly due to unfulfilled promises. So, who would want to pay for its classes?" questioned a former mid-level executive.
“Even in the best of times, Lido Learning’s conversion rates remained in the range of 20-30 percent,” he added.
Several ex-employees told CNBC-TV18 that the company’s senior managers set unrealistic targets, the non-fulfillment of which led to a deduction in multiple days’ salary each month.
Those who couldn’t keep up were put under the company’s performance improvement program (PIP) on a weekly basis or made to resign with immediate effect, as per a former member of Lido’s HR team. “I can understand the intensity of selling, but that led to poor work culture,” she said.
Lido Learnings failure highlights some of the key issues that the Indian Edtech Consortium (IEC) is seeking to resolve — misselling, misleading and miscommunication. At least 17 leading edtech companies formed IEC to adopt a self-regulatory code of conduct and grievance redressal mechanism after the government’s threat to introduce regulations for the sector.
A parent told CNBC-TV18 that Lido Learning’s executive pressured him to make the course payment during the first sales video call without explaining that refund requests must be placed within the 15-day trial period whereas the settlement could take up to 45-60 days.
The attempt to set it right
A Duke University alumni, Sahil Sheth is an experienced hand in the eLearning space. After selling his previous edtech startup — Infinite Student — to BYJU’s in 2015, Sheth held the position of Vice President at India’s most-valuable edtech company for a couple of years before leaving to start Lido Learning.
After the sales malpractices were unearthed, Sahil Sheth called for a meeting in October and at least 500 marketing and sales executives were asked to leave the company, an ex-employee told CNBC-TV18. “Sales operations were outsourced to a third-party,” he said.
To make up for the shortfall, HR team members were asked to fill in, which led to a slew of resignations from recruiters. “We were unhappy with the transition to sales,” an ex-recruiter with Lido Learning told CNBC-TV18. By December, the shakeout was complete.
In January, the company slashed product prices by as much as 70-80 percent, which led to a strong month of sales. “There were at least 15 lakh renewals in January,” a tutor was told by a senior manager.
Several employees, who remained with Lido Learning, told CNBC-TV18 that January was the best month in a long time, which lifted their confidence after a distressing three-month-period.
“We were told that the company is looking to close a funding round worth $30 million on January 27,” said an ex-employee. The prospective ‘foreign venture capital investor’ pulled out, leading to the collapse despite the company’s last-ditch efforts to set the house in order. It was the last nail in the coffin for Lido Learning.
“When the funding doesn’t come through, the burn-till-you-raise strategy that Lido and some other startups deploy becomes a risky one,” said an investor. An estimated 1,000 employees and 700 tutors are said to have lost their jobs since October last year.
Ronnie Screwvala — the most-recent investor — has told Mint that he was shocked to learn about Lido Learning’s collapse.
“Unfortunately, the founders gave very little information about the situation and the reality to all investors. The important thing is that parents and students should not be harmed at all, and to that end, I understand that there are other K-12 (kindergarten to twelfth grade) edtech companies looking to adopt and adopt students. What happened is unacceptable,” said Screwvala.
Given the fact that the company has folded up, Lido Learning’s investors don’t have a lot of options left either. “It depends on liquidation preference or senior debt tranches that they have. In a garage sale or a fire sale, if they are able to sell their assets, I think some of the investors will be able to get some of their money back. Overall, most investors will have to write-off their investment,” an investor told CNBC-TV18.
It’s been a month since Sahil Sheth announced the closure of Lido Learning. It now seems that it won’t be just Lido Learning’s investors who will have to write-off their investment, even parents, employees, vendors and tutors may have to live with the reality that their money is never coming back.
Note: Repeated requests to Lido Learning’s founder Sahil Sheth for interviews went answered. Sheth did not reply to CNBC-TV18’s questionnaire. We will update the story upon receiving his response.
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