“Go BIG or Go HOME” is the biggest startup myth ever!
Just look at Lido
- It raised $20.5M
- made $1.5M in 2021
- while losing $7.7M!
And finally, shut down in 2022.
Here’s how this ed-tech startup KILLED itself 🧵
Just look at Lido
- It raised $20.5M
- made $1.5M in 2021
- while losing $7.7M!
And finally, shut down in 2022.
Here’s how this ed-tech startup KILLED itself 🧵
Structure:
1. What exactly is Lido?
2. Origins of Lido
3. VC funding rounds
4. What went wrong with Lido?
5. It isn't just cash, it's much deeper
6. Why not solve these problems?
7. What do we learn from Lido's failure?
1. What exactly is Lido?
2. Origins of Lido
3. VC funding rounds
4. What went wrong with Lido?
5. It isn't just cash, it's much deeper
6. Why not solve these problems?
7. What do we learn from Lido's failure?
1/ What is Lido?
- Lido Learning was an Indian ed-tech platform that offered online tuition classes for students from KG to 12th grade.
- They quickly raised a total of $20.5M in various funding rounds.
- But, in early 2022, Lido Learning was suddenly shut down!
- Lido Learning was an Indian ed-tech platform that offered online tuition classes for students from KG to 12th grade.
- They quickly raised a total of $20.5M in various funding rounds.
- But, in early 2022, Lido Learning was suddenly shut down!
2/ Origins of Lido
Sahil Sheth founded Lido Learning in April 2019 in Mumbai.
Sheth was no stranger to the ed-tech world.
Previously, he founded a startup called 'Infinite Student', which was later acquired by BYJU'S.
(contd.)
Sahil Sheth founded Lido Learning in April 2019 in Mumbai.
Sheth was no stranger to the ed-tech world.
Previously, he founded a startup called 'Infinite Student', which was later acquired by BYJU'S.
(contd.)
After the acquisition, Sheth worked as the Vice President of BYJU'S.
During his time at BYJU'S, he realised that kids prefer studying with their friends, as they would when attending tuition.
He spent a year in China, studying their thriving tutoring market.
(contd.)
During his time at BYJU'S, he realised that kids prefer studying with their friends, as they would when attending tuition.
He spent a year in China, studying their thriving tutoring market.
(contd.)
Sahil returned home to create Lido Learning — an ed-tech platform that provided interactive online classes held in a small group format.
Lido was eyeing the $15B tuitions market.
So, it was hoping to replace local classes and not compete with giants like Unacademy or BYJU'S.
Lido was eyeing the $15B tuitions market.
So, it was hoping to replace local classes and not compete with giants like Unacademy or BYJU'S.
3/ VC funding rounds
From early on, VCs were eager to give their money to Lido. They raised
1. Series A ⇒ $3M (Nov 2019)
2. Series B ⇒ $7.5M (Mar 2020)
3. Series C ⇒ $10M (Sep 2021)
So, in only 3 years, Lido had a cash infusion of $20.5 million dollars.
(contd.)
From early on, VCs were eager to give their money to Lido. They raised
1. Series A ⇒ $3M (Nov 2019)
2. Series B ⇒ $7.5M (Mar 2020)
3. Series C ⇒ $10M (Sep 2021)
So, in only 3 years, Lido had a cash infusion of $20.5 million dollars.
(contd.)
By this point, Lido had established a presence in Tier 1 cities and they were quickly expanding to Tier 2 and Tier 3 cities.
With, 2000 paying customers, 400 teachers and VC funding Lido's ambitions had no limit.
Next, they wanted to enter international markets.
With, 2000 paying customers, 400 teachers and VC funding Lido's ambitions had no limit.
Next, they wanted to enter international markets.
4/ What went wrong with Lido?
Lido was ambitiously raising money and rapidly expanding to new markets when its operations came to a crashing halt in February 2022.
So why did Lido shut down?
Simply put, Lido ran out of money to sustain its current operations.
(contd.)
Lido was ambitiously raising money and rapidly expanding to new markets when its operations came to a crashing halt in February 2022.
So why did Lido shut down?
Simply put, Lido ran out of money to sustain its current operations.
(contd.)
Take a look at their numbers for instance
1. Lido's revenue 3x'ed from ~$500K in 2020 to $1.5M in 2021.
2. But, they lost $5.7M in 2020 and $7.7M in 2021!
They clearly needed more cash to burn.
But, they must already know this, so why didn't they raise more money?
(contd.)
1. Lido's revenue 3x'ed from ~$500K in 2020 to $1.5M in 2021.
2. But, they lost $5.7M in 2020 and $7.7M in 2021!
They clearly needed more cash to burn.
But, they must already know this, so why didn't they raise more money?
(contd.)
Well, they tried. In fact, they were expecting 2 deals, that didn't go through.
1. $100M+ from China's ByteDance — India's ban of Chinese apps possibly hampered this deal.
2. $10M from Curefit — Curefit had a huge setback due to Covid, so the deal didn't happen.
(contd)
1. $100M+ from China's ByteDance — India's ban of Chinese apps possibly hampered this deal.
2. $10M from Curefit — Curefit had a huge setback due to Covid, so the deal didn't happen.
(contd)
But, you might be wondering why did they need so much cash in the first place?
Also, they had just raised $10M 4 months ago, in September 2021. So where did all that money go?
Well, there are deeper problems at play here. So, let's get into the real reason for Lido's failure.
Also, they had just raised $10M 4 months ago, in September 2021. So where did all that money go?
Well, there are deeper problems at play here. So, let's get into the real reason for Lido's failure.
3/ It isn't just the cash, it's much deeper
Lido was facing HUGE problems already before they were running out of cash!
A) Wrath of pandemic
Lido's selling model works similar to Byju's. Salespeople usually visit homes to sell products physically.
(contd.)
Lido was facing HUGE problems already before they were running out of cash!
A) Wrath of pandemic
Lido's selling model works similar to Byju's. Salespeople usually visit homes to sell products physically.
(contd.)
More than half of Lido's employees were salespeople.
But, with the pandemic, these people weren't able to make their visits, so the growth took a huge hit!
B) Bad hiring decisions
During Covid, Lido had pay cuts of up to 50% for existing employees.
(contd.)
But, with the pandemic, these people weren't able to make their visits, so the growth took a huge hit!
B) Bad hiring decisions
During Covid, Lido had pay cuts of up to 50% for existing employees.
(contd.)
Meanwhile, they were also hiring for key roles at the same time.
The new hires according to an employee interview were mostly friends & family of the top management.
These new hires ended up burning cash in all the wrong areas.
(contd.)
The new hires according to an employee interview were mostly friends & family of the top management.
These new hires ended up burning cash in all the wrong areas.
(contd.)
For instance, they ran ads on social media, where people were pouring in negative comments.
Forget the ROI for ads, this damaged the brand name even further.
(contd.)
Forget the ROI for ads, this damaged the brand name even further.
(contd.)
C) Unhappy customers
Now here's where everything broke down!
If Amazon was the epitome of customer obsession, Lido would be the exact opposite.
Pick up any tweet from Lido's timeline & you'll see a flood of replies asking for a refund.
(contd.)
Now here's where everything broke down!
If Amazon was the epitome of customer obsession, Lido would be the exact opposite.
Pick up any tweet from Lido's timeline & you'll see a flood of replies asking for a refund.
(contd.)
The customer service complaints started much earlier for Lido.
Customers were offered a 15-day free trial, wherein if people didn't like the classes, they could ask for a refund.
But these refunds never came through.
(contd.)
Customers were offered a 15-day free trial, wherein if people didn't like the classes, they could ask for a refund.
But these refunds never came through.
(contd.)
Guess what's worse? Lido's customer support didn't even bother to respond to these complaints.
All in all, the company already had its plate full of serious problems.
But then, why Lido didn't fix all these problems, before looking for more money or expanding?
All in all, the company already had its plate full of serious problems.
But then, why Lido didn't fix all these problems, before looking for more money or expanding?
4/ So, why not solve these problems?
Now, there is an argument against refund complaints.
Some say that such refunds came with a condition that customers had to return the devices given to them, which they never did.
(contd.)
Now, there is an argument against refund complaints.
Some say that such refunds came with a condition that customers had to return the devices given to them, which they never did.
(contd.)
Be what may, if your customers are unhappy at such a scale, you'd want to solve the problem.
Definitely before taking any BIG steps!
But, guess what Lido did with the $10M it raised in September of 2021?
(contd.)
Definitely before taking any BIG steps!
But, guess what Lido did with the $10M it raised in September of 2021?
(contd.)
Well, Lido decided to spend it all on expanding to international markets.
They opened up coding classes in the US & Canada when their troubles at home were still unsolved!
They opened up coding classes in the US & Canada when their troubles at home were still unsolved!
5/ Finally, what do we learn from Lido's failure?
This entire episode makes us think that the ambition to scale is clearly clouding people's judgment.
Of course, doesn't take an Einstein to make this inference for Lido.
(contd.)
This entire episode makes us think that the ambition to scale is clearly clouding people's judgment.
Of course, doesn't take an Einstein to make this inference for Lido.
(contd.)
But, sadly, most startups operate in a similar fashion.
Where you aim to scale fast and you have to raise & burn money even faster to do that.
But, it's key to understand that "Go Big or Go Home" is NOT the only way to grow!
(contd.)
Where you aim to scale fast and you have to raise & burn money even faster to do that.
But, it's key to understand that "Go Big or Go Home" is NOT the only way to grow!
(contd.)
In fact, it's insane to consistently think of scaling & literally compromising every aspect of your company to achieve it.
There is a sane way to grow a company.
Zerodha & Zoho have shown us that by scaling patiently to where they are now!
(contd.)
There is a sane way to grow a company.
Zerodha & Zoho have shown us that by scaling patiently to where they are now!
(contd.)
So, ultimately, this is a choice you make!
Do you want to constantly worry about scaling to a billion dollars when you're at zero?
OR
Do you want to grow consciously taking one step at a time?
Do you want to constantly worry about scaling to a billion dollars when you're at zero?
OR
Do you want to grow consciously taking one step at a time?
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