Unacademy founder Gaurav Munjal-backed learning and community platform for creative arts and sports, Frontrow, has laid off 150 employees over an email, citing a funding crunch, according to sources in the know.
Another 150 tendered their resignations following the layoffs, bringing the company’s total employee count down to about 100 from 450, in three days, sources said.
“On May 27, many employees received emails and they were told that their services were no longer required,” said an employee, requesting anonymity.
“Looking at that, many others tendered their resignations, also because in general there are so many startups laying off employees. Today, the workforce is down to about 100 from 450 on May 27,” the employee said.
Another employee said that the laid-off staffers were not given any prior information or were not even asked to serve a notice period.
At least four employees told Moneycontrol that the lower-than-average quality of Frontrow’s products dragged its revenue down, compelling the company to cut salaries and lay off employees, especially of those working in the sales department.
“They were losing their business because their service was absolutely useless,” said a former employee, requesting anonymity.
“But employees from the sales team were blamed for not being able to sell such a waste product. When customers asked for refunds, our managers used to blame us saying we were urging customers to ask for refunds. The company was in a bad shape,” the employee added.
Another former employee who resigned recently, said, “They didn't let me (work) for the full month, so that they don't have to pay the full money and ousted me 5-6 days before which they won't say and put a wrong report on me.”
Many employees resigned from the organisation because their salaries were lowered by about 50 percent, the employees told Moneycontrol. One of them said her salary was cut by Rs 11,000 for May.
Former employees after being fired without receiving full payment of their compensation, took it to social media to share their experience with Frontrow. Following this, Frontrow offered former employees money, lower than what it owed them, asking them to take such posts down from LinkedIn and Twitter, an employee said.
Frontrow has become the latest startup to fire hundreds of employees abruptly. According to data compiled by Moneycontrol, so far in 2022, startups have laid off over 5,400 employees amid a funding crunch.
The funding crunch has hit edtech companies the hardest, as edtech companies have laid off about 3,500 employees, accounting for about 67 percent of the total layoffs.
An email sent to Frontrow did not elicit an immediate response.
Frontrow offers an e-learning platform for comedy, sports, creative arts, and hobbies. The Bengaluru-based company was founded in 2020 by Shubhadit Sharma, Mikhil Raj, and Ishaan Preet Singh and counts Elevation Capital, Lightspeed India, Eight Roads Ventures, GSV Ventures among others, along with Unacademy's Munjal as its backers. Frontrow had raised $14 million as a part of its Series A round in September last year.
Last week, Munjal had told his employees at Unacademy to learn to work under constraints, warning a funding winter was around the corner.
In a letter to its portfolio founders on May 25, Sequoia Capital, one of the world’s largest VC firms, said the era of being rewarded for hypergrowth at any costs is quickly coming to an end, with investors shifting towards companies who can demonstrate current profitability.
The VC also advised founders to cut costs as capital is becoming expensive leading to investors de-prioritising and paying up less for growth.
Also read: Layoffs, shutdowns, funding crunch: The Great Indian Startup Party is over
In a similar letter last week, marquee Silicon Valley startup incubator Y Combinator warned its portfolio companies about the worsening macroeconomic situation and advised startup founders to take money from investors even on terms of their previous rounds, if available.
VC fund Orios Venture Partners advised its portfolio startups to become conservative in hiring, saying capital will be constrained for the startup ecosystem amid the bearish mood of investors.
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