SUMMARY
Phablecare began laying off employees across departments in October 2022, while many employees left due to delays in getting salaries
The healthtech startup, which raised $25 Mn in March 2022, is trying to raise funds or merge with a larger player
The Bengaluru-based startup reported a 5X increase in its net loss to INR 154.2 Cr in FY22, with INR 78.7 Cr of miscellaneous expenses accounting for 45% of total expenses
Bengaluru-based healthtech startup Phablecare seems to have become the latest prey to the ongoing funding winter as it laid off hundreds of employees in the past few months, according to several sources close to the development.
The healthcare startup is in a grim situation as more than 70% of its workforce was either laid off or parted ways due to delays in salaries since October, the sources told Inc42.
The company had a headcount of over 800+ in August 2022. However, the size of its workforce has fallen sharply to 200 employees now, the sources added.
High cash burn after its last funding round and the inability to raise more funds has put the healthcare startup in a tight spot, several sources said. The healthtech startup had last raised $25 Mn in March 2022 from the likes of Kalaari Capital, Aflac Ventures, SOSV, Omron Ventures among others.
A detailed questionnaire sent to Sumit Sinha and Mukesh Bansal, founders of Phablecare, on Monday on the latest developments at the startup remained unanswered till the time of publishing this story. The story would be updated on receiving a response from them.
What Went Wrong?
While things were running smoothly at the startup till September, its management informed the employees around the end of that month that there would be a week’s delay in crediting salaries.
“Everything was going well and we had no idea that things were this bad. We sensed that something was off only when our salary got delayed,” one of the sources said.
As it turned out, the delay in crediting salaries for the month of September was not of a week but almost a month, with employees receiving the salaries in the last week of October. The months of October and November also saw the same delay in salary.
The salaries for the month of December and January are yet to be credited, one of the sources added.
In between, Phablecare started laying off employees in tranches from October. Employees were asked by their managers or the HR department to resign immediately. Employees from sales, marketing, product, and tech teams were impacted by these layoffs.
The layoffs are still continuing and the startup is likely to fire many more employees in the coming days, a source said.
While it has laid off around 350-400 employees so far, the remaining employees voluntarily resigned due to the delays in getting their salaries, another source added.
“What annoyed us the most was that there was no clear communication from the higher management about what was happening in the company,” said another source.
Sinha and Bansal addressed the issue only in December, saying that the startup was trying to raise new funding round and the delay in it was the reason behind salaries not being credited on time. They added that the employees would get their salaries as soon as the startup received fresh funding.
However, things remained unchanged till the end of January. In another town hall meeting in January, Sinha and Bansal said that they were still trying to raise funds.
“The founders didn’t mention salaries this time, and instead asked us to take other opportunities,” the third source said, adding that they also gave the employees the option to work from home and reduced the notice period.
The day-to-day operations of the startup have taken a beating due to the sharp decrease in the number of employees and questions about its survival.
Phablecare, founded in 2018, continuously monitors the health of patients, especially those suffering from chronic ailments like heart diseases, cancer, and diabetes, using machine learning-enabled Internet of Things (IoT) devices. It also offers online consultation with doctors, and delivery services for medicine. It has also partnered with healthtech startup Healthians to provide blood testing services.
To get an understanding of the startup’s current situation, the Inc42 team booked a video consultation with a doctor through Phablecare’s app. The payment for the video consultation went through and was scheduled for today (14th February), but the consultation never began. The company’s customer care number weren’t operational.
Phablecare Going MFine Way?
Almost all the sources Inc42 spoke to said that Phablecare went on a hiring spree after its $25 Mn fundraise in 2022 from marquee investors such as Kalaari Capital, Aflac Ventures, Digital Horizon, Stride Ventures, Omron Ventures, and Manipal Hospitals. The startup’s workforce grew to over 800 from around 450 at the time of the fundraise, one of the sources said.
As per the Employees’ Provident Fund Organisation (EPFO) portal, the startup credited PF for 918 employees in July 2022 for the wage month of June. Surprisingly, the startup last credited PF in October for the wage month of September for 704 employees.
“Post the funding, they (company) hired aggressively and filled all the top positions including CXO level, opened multiple offices in different locations, and even asked team leaders to show hiring plans for future projects. The founders believed that Phablecare would soon turn unicorn,” one of the sources quoted above said.
The startup also opened a new office in Bengaluru in January this year to bring together its teams sitting at three different locations.
“They burnt $25 Mn within 10 months,” one of the sources said.
In March last year, Phablecare also acquired Fused Training, a Type-1 Diabetes health management startup to strengthen its Type-1 Diabetes vertical.
The story at Phablecare is strongly reminiscent of the developments at another healthtech startup, MFine, last year. In May 2022, Inc42 exclusively reported about Mfine laying off around 75% of its workforce, or over 600 employees, eight months after raising $48 Mn in its Series C round led by Moore Strategic Ventures and BEENEXT, along with participation from existing investors Stellaris Venture Partners, SBI Group Japan, SBI Ven Capital Singapore, among others. The startup has to date raised around $37 Mn in multiple rounds.
Two months later, Mfine merged with the diagnostics arm of healthcare and diagnostics solutions provider LifeCell International Private Limited.
The sources said that Phablecare is in a situation similar to where MFine was last year. It is on the verge of shutting down, and needs to either raise fresh funding at the earliest or merge with a bigger player.
As per Phablecare’s filings with the Ministry of Corporate Affairs (MCA), it raised about INR 5 Cr from SOSV Ventures, Fresco Capital, Eltanin Strategic Limited, among others, during October 2022-January 2023.
Meanwhile, the startup’s loss soared 5X to INR 154.2 Cr in FY22 from INR 30.3 Cr in FY21.
Revenue from operations surged 8.5X to INR 20.9 Cr from INR 2.4 Cr in FY21, while expenses also ballooned 5.3X to INR 175.5 Cr in FY22 from INR 3.2 Cr in the previous fiscal year.
Phablecare spent INR 32.2 Cr on advertising expenses in FY22, a 22.3X jump from INR 1.4 Cr in FY21. Meanwhile, miscellaneous expenses, which stood at INR 78.7 Cr in FY22, accounted for the largest share in total expenses. However, the startup didn’t provide the break up of miscellaneous expenses in its MCA filings.
