The art of a good unicorn | The quagmire of Edtech in a post-Covid world
Are the startups that owe their success to the pandemic caught up in a quagmire of their own creation? Perhaps the survival of EdTech may be a combination of online and offline
There was a time when people were derisive about Edtech (Educational Technology) startups, thinking they’d just be glorified digital coaching classes. Those same people had to eat their words with the advent of the Covid-19 pandemic making EdTech the new normal. Even the naysayers had to reluctantly admit that the face of the classroom may have permanently changed. They’d be petulant to not concede, especially with the Indian EdTech space getting valued at about $750 million in 2020.
One way they’re going is striving for a hybrid model, where they can be both offline and online. BYJU'S announced they would be launching 500 tuition centres across 200 cities. (Shutterstock)
The growth story
Think about how many EdTech unicorns India has. The latest addition to the club was PhysicsWallah, joining the likes of BYJU’S, Vedantu, LEAD School, upGrad, Eruditus, and Unacademy. Looks like EdTech startups struck gold, even more during the Covid-19 pandemic. According to estimates from Statista, as of June 2022, the current market valuation of the Indian EdTech sector is about $2.8 billion with about 9,000 EdTech startups in the country. That’s probably due to the burgeoning internet economy with about 749 million internet users in India in 2020 — one of the largest online markets worldwide.
Trouble in paradise
And now, there seems to be trouble in paradise. Schools and offices are reopening physically, there are receding Covid-19 tailwinds, and there is a magnifying glass on profit and revenue, leading EdTech players to fumble and stumble. That means there may have been a fall in the number of online courses and with a dry spell in the funding well, the hypergrowth is getting tempered and moderated.
There were even layoffs.
In April 2022, it was reported that Unacademy laid off about 10% of its workforce. However, the startup refuted this by stating that 2.6% of its employees were fired due to performance. In May 2022, Vedantu reportedly let go of around 620 employees, while looking to increase its capital runway. The carnage continued with BYJU’s-acquired WhiteHat Jr, Lido Learning and FrontRow engaging in layoffs and resignations.
So, what seems to be going on?
Well, the children of tomorrow are dreaming away in the wind of change at a time when we’re transitioning to a post-pandemic world. EdTech startups may have heavily invested in resources and labour and now, they may be scrambling to manage their expenses. And that may mean cost-cutting in the form of downsizing for EdTech startups for capital conservation with offline educational institutions opening up. It doesn’t help that funding is slowing down and the pressure from VCs and PEs for EdTech startups to perform is high, wanting them to have operating profits and cut down on cash burn.
So, what are these EdTech startups doing, besides layoffs?
One way they’re going is striving for a hybrid model, where they can be both offline and online. BYJU'S announced they would be launching 500 tuition centres across 200 cities. After all, they acquired Aakash, which has many brick-and-mortar centres and allows them to tap into Tier II. Unacademy is getting into the offline space by launching experience stores in four cities, though it’s just a way for the unicorn to showcase its brand, products and services and be a touchpoint. Furthermore, upGrad is exploring the test prep market through its The Gate Academy acquisition, rebranding as “upGrad Jeet” and focusing on small-town folks looking for government jobs. It seems like Education 2.0 is regressing to become its former version. EdTech may have become the very thing they sought to destroy.
Maybe just emulating a digital vis-à-vis isn’t enough. Anyone who listened to conferences or online presentations during the pandemic may have found themselves bored. EdTech folks need to have an engaging blended experience to go back and forth with the offline and online models.
The future of EdTech may be a combination of online and offline, having a sustainable omnichannel model. The two modes can complement each other to work with each other’s strengths. Scaling is a challenge for EdTech startups, because success is contingent on earning consumers’ trust. Some think the National Education Policy (NEP) will sustain EdTech startups with the allowance of online degrees & online and blended learning.
But all of it also speaks to a larger issue: Can pandemic-induced growth sustain?
Would funding and activity success continue to thrive or is this all a bubble? We may be seeing new debates and battles ensue: Rhetoric vs reality, valuations vs outcomes, offline vs online, and growth vs profits. It’s the dawn of justice in these civil wars. Even startups outside the EdTech space need to understand that they have to pivot and adapt wherever and whenever required to deal with challenges amongst upending changes. And it’s only the best of the best who will stick around. The rest will, eventually, be weeded out. The runway is much shorter now. That means attractive pricing, innovation in teaching, robust learning propositions to consumers and lean acquisition strategies, among other ideas. You can have your belligerent marketing and aggressive salespeople, but if the core product is mediocre, the pool is very shallow. But is that enough to keep them in the game? Is it still a doomsday scenario?
Is this a sign of what’s to come in a world no longer having the Covid-19 pandemic? Would startups, which were once the apple of people’s eyes, be able to keep up, sustain, thrive and survive? Have the rose-coloured glasses shattered? Are the startups that owe their success to the pandemic caught up in a quagmire of their own creation? Fitting for the EdTech space, this is a teachable moment.
Shrija Agrawal is a business journalist who has covered startups and private capital markets before it was considered cool in India
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