The reopening of schools and colleges has sparked a crisis in the edtech sector with falling valuations, slowing funding rounds and faltering investor sentiment.
In a totally altered, post-pandemic landscape where students are back at school and colleges, companies are scrambling to revert to bricks-and-mortar tuition centres and adopting a hybrid model of offline and online education.
Demand for online tuition has fallen, affecting the revenue of edtech companies in recent months. After two years of booming revenues, some experts say the sector is looking at a possible meltdown.
“Recent developments indicate that the industry is going through a major crisis, possibly a meltdown,” said Salman Waris, managing partner at technology law firm TechLegis Advocates & Solicitors.
“As the impact of the pandemic started receding and schools started reopening, these start-ups are now in a crisis,” said Waris.
Unicorn Vedantu has laid off 424 employees, that’s about 7 per cent of its workforce. The layoff took place days after the company fired 200 of its contractual and full-time employees
Recently, start-up Udayy fired 100-120 employees and shut down after its business slowed following the reopening of schools. It had raised around $10 million from US-based Norwest Venture Partners in February and $2.5 million in seed funding a year ago. It has returned around $8 million to the investors.
Edtech start-up Lido Learning has shut down altogether.
Experts say that companies are trying to focus on profitability, consolidation and cost-cutting to survive.
In a recent interview, entrepreneur and upGrad chairperson Ronnie Screwvala said the companies which have laid people off were not supposed to have ‘raised cash to blow it up, but to build rock-solid businesses’
“When you’re in permanent fundraising, valuation and hype mode, and are trying to please your investors, and when the investors want growth, the tune changes, and you’re left high and dry,” said Screwvala.
He said he was unsurprised that people who decided that ‘it’s growth at all costs’ and who were only concerned about ‘how do I get my next level of valuation’, have ended up completely losing focus. “It is extremely unfortunate that the toll of that is really on key members and the team,” said Screwvala.
Vaibhav Tamrakar, senior vice president-PGA Labs, a research and market intelligence firm, said edtech was one of the highest beneficiaries of the digital push during the covid lockdowns.
“While some of these shifts have been permanent, we are seeing several students return to offline classes and are prioritizing delivery models that are a hybrid of online and offline,” he said.
Now that students and parents understand the benefits and constraints of edtech, they are altering their purchases for the next year, assuming they will have access to offline also.
Edtech players are responding by altering their business models to suit this reality. “To retain customers, it is critical for edtech start-ups to reduce customer acquisition costs, innovate on pricing models, and create superior omnichannel learner/tutor experience propositions,” said Tamrakar.
The companies are indeed embracing the hybrid model and innovating to scale up their offline presence because the market is still big. India is positioned to become a $313 billion online education market in the next few years.
But learning will now evolve into a blend of online and offline.
“It was always expected that as the world moves back to a new normal, players that saw rapid off the charts growth would need to find new ways of delivering through a hybrid ecosystem,” said Ankur Pahwa, partner and national leader, e-commerce and consumer internet, at EY India.
He elaborated further. “The transition for education is to make bits and atoms work together as it’s no longer a choice of either. Most edtech players are working towards an omnichannel approach, which improves learning outcomes and experience, creates more stickiness, and reduces the cost of customer acquisitions,” said Pahwa.
Unacademy recently announced its foray into offline learning at its upcoming new Unacademy Centres. These will facilitate offline classes for learners and will extend access to top educators in the NEET UG, IT JEE and Foundation (9-12) course categories.
The firm aims to meet the growing demand for inter-personal mentoring with this new approach. The first Unacademy Centre will be operational in Kota this month, followed by Jaipur, Bangalore, Chandigarh, Ahmedabad, Patna, Pune and Delhi.
Byju’s will invest upwards of $200 million to open brick and mortar tuition centres in the next 12-18 months. Based on the feedback received from the first 80 pilot centres launched since December, it will launch 500 centres in 200 cities this year.
“Valuations have become more realistic with rationalization hitting the market. Only those growth-stage start-ups with solid business fundamentals can now establish trust with VCs,” said Vivek Sunder, CEO at Cuemath, a one-on-one online maths tutoring platform.
Source: Business Standard