The pandemic brought about a revolution in the Edtech industry worldwide. From September 2020 to June 2022, the ed-tech sector produced as many as six unicorns, including Unacademy, Eruditus, UpGrad, Vedantu, Lead School, and PhysicsWallah. Prior to that only Byju’s, the first Indian ed-tech startup with a $22B valuation was the only unicorn. These successes inspired many budding entrepreneurs who started similar ventures, ultimately increasing the market size to billions. Edtech became the country’s 3rd most funded sector in 2021 with $4.7 Bn raised from 165 deals.
But the party is winding down now as even the mighty are scrambling for stability. The overvaluation formed an ed-tech bubble in India that is about to burst.
Ed-tech Funding Over The Years
👉Ed-tech Funding Over The Years in India
– The impact of the pandemic led to 3x growth in 2021.
– Failing to reach the same heights in 2022 so far.
– 6 Unicorns added since the pandemic.#edtech #edtechindia #edtechfunding pic.twitter.com/xRjYhNWeXP— Sanely rich (@SanelyRich) June 27, 2022
Why are Edtech startups underperforming now?
Edtech Layoffs in 2022
– More than 3000 people forced to resign in 2022 so far.
– Many startups had to shut off shops. pic.twitter.com/Q88zhbMIyj— Sanely rich (@SanelyRich) June 27, 2022
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CAC and Loyalty
- With increased competition, Customer Acquisition Cost (CAC) rose from around 20% of revenues to about 75%
- Edtech customers are parents with limited resources. When prices increase due to high CAC, they shift to other platforms. Loyalty amongst customers is low that ultimately raises Retention costs and leads to repeated CAC
- Bigger brands with good funding manage, smaller players however are forced to exit the market
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Pricing Model
- With high illiteracy rates and lack of awareness, education is a luxury for many
- A land where most of the population is either middle class or lower, high prices of edtech services seem like a waste of money. Schooling is available at much lower rates
- Edtech companies cannot sustain their business without raising costs.
- Naturally, they lose customers
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Schools are more than just academics
- The social skills that the child develops while being put in social setting are important for their future
- Academically, as well as methodically, parents want the course to remain the same
- Extracurricular activities are highly emphasized these days
- Students have limited time. With schools, homeworks and extracurricular activities, edtech services take a back seat
Recent Updates
- Byju’s – Awaiting its auditor Deloitte’s approval on the current year’s financials. The delay affects its reputation while indicating worsening of financial health
- WhiteHat Jr – The Byju’s owned startup posted losses worth INR 1690cr for FY’21. Over 1000 of its employees resigned once work from home ended
- Unacademy – Shut down its K-12 business while expanding to the highly competitive offline market and test preparations. Laid off 1250+ employees by now
- Lido Learning – Shut its operations in February
- Vedantu – Is reducing prices of courses to about 1/5th of original. Also going through layoffs and business restructuring
The Road Ahead : The Hybrid Model?
A ray of hope has been the new hybrid model adopted by these ed-tech companies. For example BYJU’S acquired Aakash Educational Services (AESL) last year for $1 Bn in a bid to set up offline tuition centres. Similarly, Unacademy has opened its first offline centre in Kota.
The hybrid model is difficult to scale, though, especially for early startups. Smaller players rarely survived the market while bigger names are barely earning at present. Just like any other industry, even Edtech will prove to be a game of “survival of the fittest”. Firms will need to adapt to the changing market needs. Diversification is the need of the hour with uncertainty of the pandemic.
#Edtech platforms need to focus on affordability, content quality and, most importantly, #profitability instead of burning cash on marketing and aggressive expansion. As we finish looking at the ed-tech bubble in India.
