[YS Exclusive] Curefit co-founders Mukesh Bansal and Ankit Nagori open up about layoffs, severances, payouts
Over the past few days, Bengaluru-based healthtech startuphas been in the news for downsizing its operations, which resulted in the laying off of trainers at gyms in Tier-II markets in India, Delhi, and in the United Arab Emirates.
Founded in 2016 by Mukesh Bansal, also the co-founder of Myntra, and Ankit Nagori, former Flipkart exec, Curefit has come under a lot of flak for the way it has been handling the crisis.
Many employees accused the company of forcing them to resign, causing an uproar over social media. Reports said that over 800 people were asked to resign after the startup had to rethink its business model due to the coronavirus pandemic.
And then, to make matters worse, media reports claimed that Curefit’s severance package was just worth Rs 2 crore, alleging that the startup had announced a donation of Rs 5 crore for the PM CARES Fund.
We reached out to co-founders Mukesh and Ankit for the full story.
In a candid conversation with Shradha Sharma, Founder and CEO, YourStory, Curefit co-founders Mukesh and Ankit spoke about the recent job cuts, the truth of the severance packages, the impact of the coronavirus on its business, and more.
Edited excerpts below:
Shradha Sharma (SS): Tell us the details of the layoffs, and the severance details.
Mukesh Bansal (MB): There has been a lot of misinformation. The fact is we have laid off about 300 trainers, mostly access staff, who were hired for future extension and from smaller towns — which is five percent of our business.
Close to 90 percent of our trainers are still with Cureft. We are, in fact, committed to keeping them on the payroll for the foreseeable future while we ride off this crisis. We are also supporting them in all ways possible. While there is a change in their compensation models, it has been done to ensure that we are well set to ride this crisis out in the long term.
Even for the trainers who have been laid off, we are giving them two months of severance, and two months of salary. We are also providing them with health insurance for an extended period of time and a separate emergency fund, which they can tap into.
Cult has all been about the trainers, and we have always gone out our way to create a phenomenal environment for our trainers — nutrition packs, additional skills training, English language training, and we are as empathetic to our trainers as anyone can be.
Ankit Nagori (AN): Unlike any of the startups out there, Cult has had zero revenue in the past few months. And we also believe that unfortunately, gyms will be the last to come back to life. They’re a place where several people gather, especially in our model.
It is difficult for our customers to workout with masks on. Even with the view that our business will be hit in the coming months, we have taken the call to retain 90 percent of the trainers.
We are not only looking at ways to ensure that the trainers remain with us, but also are looking at innovative models of giving them business.
SS: The talk in the market is that you have laid off 800 people, and the compensation you are giving them is Rs 2 crore, and the PM Relief Fund is getting Rs 5 crore from Curefit. Being a funded company and a role model for entrepreneurs, how did this decision making work?
MB: Let me begin with clearing all the misinformation. First of all, the count of 800 people is not just from Cult but our entire organisation, which includes kitchen staff, delivery staff, central staff, and trainers. For all the trainers, for the rest of the year, we have set aside Rs 25 crore — this is the compensation we will be paying without any revenue for the next seven to eight months.
Next, the severance amount across 800 employees is Rs 5 crore. The Rs 2 crore is an emergency fund, which has been set aside for any kind of personal emergency — health, school fees, family health, and more one may face. We are continuing to pay for health insurance for those affected and not affected; we are also looking at loans if we can provide them.
The revised compensation plan has been communicated to all trainers; everything is transparent. This Rs 25 crore is not just fixed compensation, it is additional per class compensation that we have chosen. Once the business starts to pick up in the digital space and offline space, they will make more than this, but this is the minimum guarantee, which the board is supportive of.
On the PM CARES fund and the ACT Fund, the money for the PM CARES fund is going for people who are not even able to put food on their table. As a company that has thrived and done well in the ecosystem, it is our duty to pitch in and contribute. The money has been contributed by the management team and us as founders.
The money that goes from ACT again is from the management. This is for the innovative ideas that can help combat the current coronavirus pandemic.
Shradha Sharma, in an exclusive interaction with Mukesh Bansal and Ankit Nagori
SS: I have been tracking your journeys for years now, and this is the first time there is negative news. Why was the communication so different?
MB: Unfortunately, we live in a world that social media works two steps ahead; for us, it was first important to communicate everything internally and we were looking at one thing at a time for people both affected and not affected.
It took us 24 hours to get the internal communications done and get out with the facts. I am willing to challenge anyone on this. We are treating our employees as humanly as possibly.
All the costs we are incurring in supporting people who are staying with the company or leaving the company are also being supported wholeheartedly by the board. Many people, however, are coming forward and retracting their comments and statements, and are supporting us. It is communication that has gone wrong.
SS: In most conversations, you have always talked about the team and you treat people with equality. The news, therefore, came as a shock to many, what is your take on that?
MB: We live in an activist social media world, where people take wrong facts and blow it out of proportion. Things do spiral out of control in a matter of minutes. But after clarifying everything, if you do go back to social media, you will see that several hundred trainers have come back in our support. There are heartwarming messages not only from our existing trainers but even trainers who have been affected.
I will again state this on record, we very firmly believe in equality, it doesn’t matter what level — management, engineer, operations, trainer, or housekeeping staff. We treat everyone with dignity. There is equal right to information for all with transparency and none of that changes for us in crisis. If anything, we will be doing more to create clarity and those who need us the most.
AN: One important fact is that while we had a large part of the business — Cult — shut, we had another large part running. Eatfit, Carefit, and others; all our engineers are working. Since when the crisis has hit us, we ensured that we stood by the trainers, and will continue to do that.
There also has been talk that the pay cut for the trainers and the central team is different. To answer to that, we would like to say we have tried to balance the pay cuts for those who are putting in 100-hour work weeks versus those who haven’t been able to put any hours, as the centres are shut.
If we made that equal, it would be unfair on people who were putting in the extra hours who helped bring the digital model in such a short span of time. Also, to clarify, the digital model has not come at the cost of the offline spaces. We will be happy to get the Cult centres up and running. It is a large business for us, with a large NPS.
If there is inequitable cut in salary, it is because the trainers, who are currently aren’t able to put any hours, are being given a fixed amount, and we are also engaging them with the digital model. For every 50 hours they put in a month, they are not only paid a fixed amount, but are also given a fixed pay. We hope that in time we get back to the 100 percent pays.
For those working in kitchens and Carefit centres, we have made sure there is no pay cut because they are risking their lives to keep the essential services on. We have also been able to get into the grocery business.
SS: While we understand the challenges that business face in these times, Cult runs on a subscription model? Many people would have paid for a year or at least a few months in advance. Doesn’t that give you cushioning?
MB: If you are a Cult member, you would know that you are getting an indefinite pause if you paid us for three months in advance; we aren’t deducting a single day from your plan. This means, we do not recognise that revenue until the centres are open. The entire cost of the pause is borne by the company — rent, trainers salary, and other things.
We have created a page on our app, where if members choose, they can contribute a portion of their membership to the trainer emergency fund. It could be a day, week, or a month, it is up to the consumers.
Gyms are cash flow business, with lot of capex and when cash flow stops, the payments don’t stop, and we aren’t able to recognise any of the revenues of the collected fees.
SS: It is said that many people were forced to resign on the same day, and their emails were deactivated the same day. What is the scenario?
AN: I think the process we followed as per due processes. In all cases, we have given more than the agreed notice period. The emails were deactivated only when there was consent from the employees that they were agreeing to part ways, everyone has been given more than the employment agreement.
MB: We have asked people to leave and if they can resign, and we have focussed on doing more than what the contract says and are doing a lot more. Our intent wasn’t to affect anyone, and our apologies to all of them. Our intent was to do well for all stakeholders of Curefit. It isn’t a great situation for anyone. We are dealing with a catastrophe at the greatest level. If the business doesn’t survive, a lot more people will lose.
SS: These are unprecedented times and has changed a lot of things for businesses. How are you looking at the business? And dealing with everything that is happening right now?
MB: For us, there is more than a silver lining in this crisis; if you look at the last two months, we have over half a million people working out on our platform every day.
We have had 10 million people working out on the platform. And we never imagined this kind of scale. We are offering these services for free; we have enabled workouts in the format they want.
We see an opportunity for a massive digital business that has no boundaries across the globe. Our engineering and operations team hasn’t gotten any rest to turn this around. This has given us great digital traction. We are already offering paid personal training, which will grow, and offer an opportunity for trainers making more classes.
On the offline side, we have a brand, and our customers love the proposition we give. We are waiting to ride this challenge, and are working proactively towards that.
SS: What is the most important thing that goes in your mind? Most entrepreneurs think of survival right now.
AN: The ability to run an offline business or ones that need people at close gatherings will be low until a vaccine is out. We need to think of how to make our businesses safe for users. Like I mentioned, gymming with masks doesn’t seem feasible at the moment.
It will hit business like us and restaurants. We need to think of alternate ways, we know we will come back in full business, but one to two quarters are dire. There needs to be a strong backup plan and a cash sustaining plan.
SS: Are you looking at your model differently? Is there going to be something different from Cult?
AN: We had dense classes with 50 to 60 people working out for an hour, and back-to-back classes. We are looking at sparse classes, and more distributed. We are looking at 10 to 20 percent lesser, durations may be shorter.
We are working on the model and with the industry body for best-in-class gyms that can work in this situation. We are looking at gym guidelines for the country. We are looking at more number of classes, with shorter durations and longer breaks.
But these are still in works. We have to see how social aspects improve in the coming weeks.
SS: What should entrepreneurs do in these tough times, especially those who haven’t even raised funds?
MB: The fact remains that it is a minimum five to 10 year journey to build a journey. And there will not be a straight path to that growth. While some crises are direr, we all remember the 2008 financial crisis — Myntra barely survived in that time. There were lot of tough times. Again 2016 was a tough year.
The first and foremost thing that you need to do is not die, no matter what happens, you may go into hibernation, cut costs while opportunities that you were working in the past may not work now, but new opportunities will be there. Think on your feet and be ready to respond to situations fast and nimbly.
AN: This is the most unprecedented path. But all journeys are topsy turvy. The best part of the Cult business was that it was profitable and cash flow positive, so it has hit us hard. As a company, we need to figure out how to keep our customers engaged and a lot of companies have to think on those lines.
It now makes sense of why companies need to invest in an R&D business because that is what will take them to a growth in future.
Once we see a black swan event, we will all realise that everyone needs to have a backup plan in place. Earlier Plan B’s were luxurious, but now it will be very important.
SS: For people facing crisis and cuts, what would you say?
MB: It is tough, we cannot empathise enough with people who are getting affected whether it is at Curefit or any other company. There is significant economic pressure, the global economy is likely to shrink. Having said that, if people have downtime, there are a number of ways to work on their skills. There are numerous educational certifications, we are an economy that values educational certifications so that will help.
One can also live quite frugally, and your lifestyle needs to reflect that. Try making your savings last as long as possible and ask where help is needed.
It is also a great time to start a company. Most great companies have started up during down times and recessions. You can take a year to work on your product, and when life comes back to normal, you will have a differentiated product.