One quick thing: PhonePe launches UPI Lite two months after Paytm.

In today’s newsletter:

• Inside Unacademy: a problem of plenty
• Freshworks clocks first-ever "operating profit" 
• How layoffs, cuts in cloud and ad spends helped Indian startups

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Did Unacademy bite off more than it could chew? Does it have a lot on its plate? Where will it go from here?

Over the last month, we have spoken to a dozen people, including Unacademy's founder and CEO Gaurav Munjal, in order to find answers to these questions.

Here's a deep dive into our findings, which highlight the challenges of the edtech startup.

Unacademy began its journey in 2015 as an online learning platform.

The two Covid years did wonders for the company. During these two years, the SoftBank-backed edtech was actively doing a lot of experiments in order to make forays and expand in newer areas.

• Post Covid, things changed quickly. Firstly, a majority of Unacademy's experiments failed, and then the demand for online learning tanked

This prompted the company to search for the basics and a bankable core business for the future, and while Unacademy appears to have found it in hybrid, the search was chaotic.

Unacademy officially let go of more than 1,500 employees since April last year, despite committing not to do so. The company underwent two rounds of layoffs, which were reportedly unstructured and caused a lot of confusion.

• An employee told us that he and a few of his colleagues received layoff communication from Unacademy's HR unexpectedly in December, when the company did not announce any layoffs

In addition to the arbitrary layoffs, employees have also complained about unclear communication with the management and the noticeable changes in work culture over the last 12 months, as the company has shifted towards a leaner business model.

Although Unacademy is increasingly focusing on the hybrid model, only time will tell whether this approach will be enough for the SoftBank-backed unicorn to withstand the storm and survive the turbulence.

Go deeper.

Freshworks has had a positive start to 2023. For the first time since becoming a public company listed on Nasdaq, the SaaS giant has reported a positive (Non-GAAP) operating profit of $3.9 million in Q1 2023, compared to a loss of $0.6 million in the same period last year.

Although the company has reported stable growth numbers in terms of revenue and free cash flow, there is a small cause for concern. The NDR!

Freshworks recorded a Net Dollar Retention (NDR) rate of 107%, which is lower than the 108% recorded in the fourth quarter of 2022 and significantly below the 115% recorded in the first quarter of 2022. 

• In fact, the SaaS firm expects a lower NDR rate of 105% for Q2

(NDR measures changes in recurring revenue resulting from fluctuations within the revenue generated by the existing customer base. A lower NDR indicates that a company is struggling to retain its existing customers.)

"Although we saw churn improve in the first quarter, we are seeing some risk going forward...net retention rate may stabilise in the second half of the year," said Freshworks President Dennis Woodside.

GAAP stands for Generally Accepted Accounting Principles. Freshworks' Non-GAAP financial results exclude certain expenses such as stock-based compensation expenses, payroll taxes on employee stock transactions, amortization of acquired intangibles, and other adjustments.

• While non-GAAP operations were profitable, the company's GAAP loss from operations came in at $48.1 million

In Q1 2023, the company's GAAP net loss decreased to $43.5 million from $50 million in Q1 2022.

"...It's got a three-step process, get to sustainable free cash flow positive, then get to sustainable non-GAAP operating profit and then third, GAAP operating profit. I think we've done the first, the second," said Tyler Sloat, CFO of Freshworks.

The company has taken macroeconomic pressure into account and provided its outlook and forecast for the upcoming quarter and the entire year.

• Freshworks expects its adjusted net income per share to grow between the break-even level and $0.02 per share on revenue of $140 million to $142.5 million

• For its full year 2023, it expects revenue of $580 million to $592.5 million

One event that defined the fiscal year 2023 was the global funding crunch, which led to rampant layoffs at startups, both small and big, as well as struggles to stay afloat.

• This resulted in numerous strategy changes and cutting down on discretionary spending. The situation was not any different closer to home.

Indian startups laid off approximately 32,300 employees between Q4FY22 and the full year of FY23, according to estimates by market intelligence firm UnearthInsight. But did these measures really translate to cash conservation?

UnearthInsight surveyed more than 2,000 startups and found that in FY23, the ecosystem spent around $7 billion on employee costs.

• Employee costs in these startups have decreased by only $700 million year-on-year
  
  
• Of this, only $500 million could be attributed to the layoffs
  
  
• The remaining $200 million were saved by reducing variable pay, sales bonuses, commissions, and recruitment spends

• Technology spending was down by around $200 million YoY in FY23
  
  
• E-commerce and online retailers saw a double-digit decline in tech spends. Firms like Meesho and DealShare cut cloud spend by 50%
  
  
• Advertising and promotional spend was down by $800 million in FY23. This was visible across edtech, fintech and e-commerce

Not all segments have cut back on advertising spending.

It turns out that gaming and fantasy sports startups are continuing to increase their marketing and promotional spending, particularly the big three players: Dream11, Games24x7, and MPL. They have increased their ad spend by $138 million in FY23.

Find out more

ChatGPT's worldwide popularity, along with initiatives of Big Tech companies such as Google's Bard and Baidu's Ernie, has generated significant interest in careers in Generative AI.

Quick fact: India's active talent pool in Generative AI has grown by 54% over the past 12 months, which is the highest growth rate among top countries such as the US and Germany that are also creating AI ventures.

Globally, big tech giants such as Autodesk, Amazon, and Microsoft have become major recruiters of AI-specific talent. However, back home in India, it is the IT services companies like TCS, L&T, Infosys, and Tech Mahindra that are leading the race.

Here's everything you need to know about the open roles, salaries offered, and skill sets required to build a career in generative AI.

On May 3, 1978, Digital Equipment Corp marketing representative, Gary Thuerk, made history by sending the first-ever unsolicited bulk commercial email, which is now known as "spam." 

The email was sent to every ARPANET address on the west coast of the US and reached about 400 people. The message advertised presentations for Digital Equipment Corporation's mainframe computers, such as DECSYSTEM-2020, 2020T, 2060, and 2060T.

• Coinbase launched an international exchange for cryptocurrency derivatives amid rising tensions between US regulators and the crypto sector. Coinbase said it will allow institutional users in eligible jurisdictions outside the US to trade perpetual futures.

• The Biden administration is suggesting a tax on crypto mining to address their societal harms. The proposed Digital Asset Mining Energy tax would be 30% of a mining company's energy costs, potentially raising $3.5 billion over the next decade.

Backstreet's back (to India), alright!

Excitement is in the air among music fans as the iconic boy band returns to perform in the country after 13 years. A key indicator of this phenomenon is the surge in their streams and searches on Spotify.

The band has seen close to a 2x surge in daily searches on the audio streaming service since the February tour announcement, Spotify said. 

The service's “This Is Backstreet Boys” playlist, which includes some of the band's biggest hits, also witnessed an 88% increase in streams during this period, it said. 

Any guesses on the top streamed track in India during this period?

The 24-year-old song ‘I Want It That Way’

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