The story of PrepLadder: From $625 investment to a $50 Mn acquisition in 3 years

The acquisition of PrepLadder by Unacademy has brought to notice a company that has been under the radar for the last two years. Tucked away in Chandigarh, far from the bustle of Bengaluru’s startup ecosystem, PrepLadder stayed away from everyone’s gaze and built a platform that offers preparation material for medical PG and Foreign Medical Graduates Examination (FMGE). 

Founded by Vitul Goyal, Deepanshu and Sahil Goyal (brothers), PrepLadder has been valued at $50 million and the transaction was a mix of cash and equity deal. Sahil has confirmed this to Entrackr over a telephonic conversation.

PrepLadder started out as medical PG platform four years ago and two years later they registered as a private company. The platform, which offers everything from videos to text notes on its app, has over 85,000 subscribers. Users can also request for physical notes through courier.

The exceptional thing about PrepLadder is that it has been completely bootstrapped since its inception. “We invested close to Rs 40,000 from our pockets,” recalls Sahil. “We were profitable from the first year itself and that allowed us to re-invest in the business.”

And the numbers add up — PrepLadder generated returns on capital employed (RoCE) at a whopping 130% during FY19, growing from 96.2% in FY18. According to regulatory filings, PrepLadder’s revenue from operations shot up 4.4X from Rs 5.9 crore in FY18 to Rs 25.8 crores in FY19. With increasing scale, total expenses tripled from Rs 5.18 crore in FY18 to Rs 15.8 crore in FY19.

Payments to educators on its platform and royalties amounted to Rs 8.13 crore during the last fiscal, making up around 51.5% of the total expenses incurred by the company. Being popular in its niche ed-tech market of medical PG, the company benefited from word-of-mouth marketing through freshly minted doctors which allowed their spends on sales and marketing to be low. 

During FY19 the total expense on business promotion and advertisement stood at Rs 67.3 Lakhs i.e 2.6% of the revenue generated by the company during FY19.

Before we proceed further, let’s understand how PrepLadder has been able to churn sizeable revenue and profit. The company charges anywhere between Rs 25,000 to 46,000, depending on the choice of the package. 

While the financial results of FY20 are yet to be filed, Sahil is optimistic about 2.5 to 3X growth in the last fiscal. “We probably had around 400% growth in FY20,” he said.

The current assets comprised around 94% of its total assets at the end of FY19 and PrepLadder utilised the high flexibility of this asset-light business model to scale up rapidly with efficiency. The company managed to more than triple its net profit margin from 8.4% during FY18 to nearly 28% in FY19 during its second full year of operations. 

“The majority of the subscriber base i.e more than 70% comes from medical PGs and rest from FMGE,” added Sahil

When it comes to ownership, Vitul holds 50% while Deepanshu and Sahil command 25% equity each in PrepLadder.

The acquisition of PrepLadder and the way founders have scaled the company is incredible. We have rarely seen such an acquisition in the ecosystem. The founding team is a classic example of creating value for a niche but premium audience.