Exclusive: Doubtnut slashes costs by 80%, raises $2.5 Mn in internal round

Doubt clearing edtech firm Doubtnut had raised about $50 million total funding, including a $31 million Series B round in February 2021, but the company didn’t focus on monetisation until FY22. Sources say that the strategy of hacking growth now and figuring out monetisation later has taken a heavy toll on the Bengaluru-based edtech firm.

While the company controlled its monthly burn by over 80% in March 2023 as compared to March 2022, it has found it tough to raise fresh capital and explored acquisition deals with several players, as per sources.

“It held talks with several companies in the past year but nothing materialised,” said one of the sources requesting anonymity. “High burn and little revenue were the two major reasons for their [acquirers] lack of interest in Doubtnut.”

Doubtnut’s co-founder Tanushree Nagori denies this. “We didn’t talk to anyone about acquisition in the past six months,” she told Entrackr over a phone call.

The fallout of talks forced Doubtnut to layoff 30-40% of its employees in the past year, said sources. This could also be validated from its monthly burn which was down to Rs 2.2 crore in March 2023 from Rs 10.6 crore in March 2022, as per its internal document seen by Entrackr.

According to Nagori, the company didn’t conduct any layoffs in the past two quarters but rationalized the workforce around sales, academic and marketing verticals before October 2022.

For context, the company spent over Rs 6 crore each month on employee benefits during FY22. Sources outline that its monthly burn on salaries is now in the range of Rs 1 crore. Over 80% reduction in employees benefits indicate large layoff. “The company had shut down its banking, SSC and other public commission prep verticals in the past six-eight months,” said another source who wished not to be named.

According to the documents, the company posted a revenue of Rs 26.6 crore in the last fiscal year (FY23), posting a nearly 44% growth as compared to its FY22 collection of Rs 15 crore.

Doubtnut claims that its presence and business have picked up in a big way on YouTube. The firm’s two YouTube channels NEET Hindi Medium and 9-10 Hindi Medium have grown 4X and 10X between March 2022 and March 2023, mentioned in the documents.

“...9-10 HM where revenues have grown 4X YoY [INR 22 L in Mar 2022 to 79L in Mar 2023] on the back of the growth in the channel…,” according to the documents.

Its NEET Hindi Medium (HM) monthly views on YouTube ballooned over 13X to 10 million in March 2023 from a little over 700,000 in March 2022 while the company’s 9-10 HM’s views also grew 70%, said documents. The company also made a belated effort to monetise its platform presence, and claims Rs 40 lakhs per month from there now.

“We see these growth numbers and reduction of cost by ⅛ as a turnaround. Doubtnut is on track of turning profitable by the end of the ongoing fiscal year (FY24),” said Nagori.

Doubtnut bled heavily in FY22 and spent Rs 194 crore during the year. The high burn-rate claimed most of its Series B round and the company was in a rush to raise new money.  While no new investors were ready to rescue, its existing investors: Sequoia, Omidyar and Waterbridge invested $2.5 million (Rs 20 crore) in the company through convertible notes. 

“The company will look to raise another couple of million in the same round with terms that are attractive for all stakeholders involved,” as per the documents.

Doubtnut has no doubt had to take strong steps to ensure sustainability, and in doing so, would have gone against many notions it had when it started off. From monetising its YouTube content to seeking charges for key courses, or even the higher focus on Hindi. The discipline and demands institutional funding places would have been considered positive, but for the apparently poorly planned spends through FY22. Cost cuts are usually seen as a sign of trouble, and for good reason. But in the current environment, many of the cost cutting exercises we are seeing are a much needed return to sanity and viability.

In Doubtnut’s case, one factor it has going for it is presumably a commitment to online teaching and monetisation, as its latest update has no mention of any offline push. That should allow it to avoid any major capex for some time now. Of course, it remains to be seen if that will be enough to remove any doubts about its future.