India’s edtech sector: Surviving the rollercoaster

After a scorching growth trajectory during the pandemic, the Indian edtech industry is now undergoing a course correction and consolidation, leading to shuttering and acquisition of many companies, and the loss of thousands of jobs. The industry had attracted investments worth $1.7 billion for the whole decade from 2010-20, but in the year 2020 itself, it had venture capitalists making a beeline, and the edtech sector received close to $2.1 billion, with many companies turning unicorns and some even having valuations crossing $10 billion and being called ‘decacorns’.

Investors saw a huge potential in this sector as the pandemic lockdowns had made people more amenable to online education. In addition, India’s distinction of being the world’s second-largest smartphone market and its young population tilted the scales in favour of major Indian players like Byju’s and Unacademy. Even smaller startups attracted investor attention. In 2020, hardly a month passed by without edtech startups making announcements of a funding round.

However, once the Covid-19 cases started tapering off in 2022 and schools and colleges began reopening, there was a slowdown in fresh enrolments in edtech firms, especially in the K-12 segment, which offers regular online classes to primary and secondary school students. The subsequent Ukraine war and the fears of an economic slowdown have made venture capitalists tighten their purse strings.

As per a recent PwC India report, startup funding in India hit a two-year low at $2.7 billion in the JulySeptember quarter and only two startups attained unicorn status during the period. The decline in funding is noted across all stages of investment - early, growth, and late. This also mirrors the global trend.

Edtech major Byju’s announced raising $250 million on Monday, but the Bengaluru-headquartered company’s valuation ($22 billion) was the same as in the March financing round. This is indeed a far cry from earlier days when its valuation used to scale new heights with every funding round. The company attracted funding of $1.02 billion in 2020, $3.56 billion in 2021, but this year so far it is around $800 million. The story of other edtech companies is more or less the same with lower funding amounts and it only shows that investor enthusiasm is waning.

For those working in the edtech sector, it is a period of grave uncertainty with widespread layoffs and many resigning as they can no longer handle the pressure. Market leader Byju’s had recently announced that it’ll be laying off 5 percent of its 50,000 workforce, translating to 2,000-2,500 employees in future.

Within the edtech ecosystem, the worst hit is the K-12 segment, which has been impacted due to the reopening of schools. However, test preparation platforms like Aakash, and certification and skilling platforms like Udemy and Simplilearn continue to have many takers for online content. Instructional video courses for developers, business professionals, and courses related to new-age technologies such as artificial intelligence and machine learning, which are used by employees to upgrade their skills continue to be in demand even in the post-pandemic era. Hence for edtech companies the way forward will be to diversify in these areas