The rise and decline of edtech startups in 2022
Due to its expected market size, India has excelled in the field of education and now edtech. By 2025, it is expected that the online education and lifetime learning market alone will be worth $5 billion.
Because of the high value that parents place on education, unicorns will continue to be minted here as businesses continue to show the kind of expertise and mastery of the market that they promise their students over courses.
Despite that many unicorn companies with headquarters in India are trying to expand abroad, the local market as a whole is expected to be worth $30 billion by 2030. Because 100% FDI is allowed, there is also enough room for ambitious ideas.
While the epidemic was a boon for Indian edtech businesses, the reopening of schools and coaching facilities and the funding freeze during the global economic downturn proved to be a double blow for firms in this field.
Until August 15, 2022, funding for edtech businesses fell precipitously from $5.82 billion to $2 billion. Only two edtech agreements were completed in the first two weeks of August, and the pipeline is getting smaller by the day.
The abrupt reduction in edtech investment is consistent with the industry’s overall trajectory, which saw total investment in Indian startups fall from $12 billion in the first quarter of 2022 to $7.86 billion in the second quarter (Q2). Additionally, overall funding for July was less than $1 billion, which is the smallest amount in the last 15 months.
After financing and rising valuations, uncertainty hangs over edtech.
In terms of fundraising, edtech startups shattered all earlier records in 2020 and 2021. Startups at all phases, from pre-product to late-stage, effortlessly swept up consecutive rounds. On the list of startups that raised money in 2020 and 2021, Byju’s, Unacademy, Vedantu, upGrad, Eruditus, Class plus, BrightChamps, Cuemath, LEAP, and Teachmint came out on top.
Unacademy, Vedantu, Teachmint, and BrightChamps are a few instances of those who have not raised any new rounds this year thus far, despite that the bulk of them continued to announce fresh rounds in early 2022.
We dug deeper into the data and discovered that Byju’s hasn’t closed the $800 million round it announced five months ago. The newly created unicorn PhysicsWallah raised $100 million in its first-ever outside fundraising, in contrast to Eruditus’ $350 million round, which was entirely debt. Along with upGrad, Leap, Scaler, and the two B2B-focused startups Classplus and LEAD, the top 10 funded edtech companies also had upGrad, Leap, and Scaler.
Around 17 edtech businesses, including Byju’s, upGrad, Teachmint, Classplus, LEAP, Quizizz, Eupheus Learning, and Leverage Edu, received two or more rounds of funding in 2021, according to Fintrackr statistics. But in 2022, no more edtech startups were raising two or more rounds of funding.
Early in 2022, there were still several important edtech fundraising rounds, with five startups securing $100 million or more. In 2021, that number was 11.
Layoffs and closures: The data speak for themselves
In 2022, layoffs affected all startup companies, but too many edtech companies scaled back as they expanded, letting rid of staff to cut costs and increase their runway. According to many media sources, about 1,000 employees each were let go by Byju’s and Unacademy in 2022. However, according to both businesses, there were just 500 and 600 layoffs, respectively.
WhiteHat Jr. sacked 300 employees, Toppr, owned by Byju’s, fired 350 employees, and more than 1,000 employees resigned collectively. Vedantu, a different unicorn, let go of 724 workers in three stages. Around 3,000–4000 employees have received pink slips from edtech businesses in recent months. Several companies, including Lido, Udayy, Crejo. Fun, and Super Learn, closed their doors in addition to the mass layoff.
In addition, there were no reports of layoffs at upGrad, Cuemath, Classplus, or Teachmint. It is important to note that Eruditus and LEAD did not pursue cuts on the same scale. If we focus on just one sector, edtech contributed close to 30% of the estimated 12,000 startup employees laid off in 2022, which is rather alarming.
Amid the confusion, some parties chose a different route, a hybrid model with access to the offline learning environment. Earlier this year, Byju’s, which bought Aakash in April 2021, announced the opening of its tutoring centres across India. Following suit, Unacademy and Vedantu opened offline learning facilities in other cities.
In June of this year, the Alakh Pandey-led PhysicsWallah ventured into offline education. According to a report from VCCircle, Scaler plans to open three co-living campuses of upskilling centres.
Overstaffing, overspending, and unsuccessful acquisitions
Edtech businesses have been able to expand over the past few years, but at an unsustainable cost—especially now that funding sources are drying up. One major offender was overhiring. For background, before the layoffs, Unacademy and Vedantu employed nearly 6,000 people. According to estimates, Byju employs more than 12,000 people.
These edtech businesses also reported large losses for FY21. Unacademy lost Rs. 1,537 crores, followed by Eruditus with a loss of Rs. 1,934 crores, according to their annual financial reports. In the same period, Vedantu reported a loss of Rs. 604 crores. The FY20 loss for Byju’s, which has not yet completed its FY21 financials, was Rs 262 crore.
The quickest way to establish traction within these bigger startups has been thought to be through big-ticket marketing. While Unacademy and Vedantu both made important financial commitments to the Indian Premier League for sponsorship and broadcasting rights, respectively, Byju will be one of the sponsors of the upcoming FIFA football World Cup in Qatar. Trophies for famous professors also played a part.
Allen’s director of academics, Brajesh Maheshwari, criticised teachers who were leaving the company for competitors. Allen is based in Kota. Twenty of the company’s former educators were also sued for contract violations.
However, Unacademy recently announced that it would implement several cost-cutting measures, including terminating its sponsorship of the IPL as of the upcoming season. Unacademy’s founder, Gaurav Munjal, made the news while pointing out that the business is flourishing and that it has Rs 2,800 crore in the bank.
However, Unacademy recently announced that it would implement several cost-cutting measures, including terminating its sponsorship of the IPL as of the upcoming season. Unacademy’s founder, Gaurav Munjal, made the news while pointing out that the business is flourishing and that it has Rs 2,800 crore in the bank.
Since January 2020, Byju’s and Unacademy have jointly purchased over twenty businesses in addition to spending a lot on promotion. Naturally, a lot of these buys haven’t been successful. Toppr, owned by Byju’s, laid off a lot of workers while WhiteHat Jr is having trouble. Unacademy closed its K–12 companies in the meantime.
It’s interesting to note that the top 4 valued edtech businesses—UpGrad, Byju’s, Unacademy, and Eruditus—have acquired around 50 startups since their founding. Check out the sheet’s complete list of purchases.
The pace of edtech acquisitions continued in the current calendar year as well, while Byju’s or Unacademy have been quiet. This year, Great Learning, which is owned by Byju’s, has purchased a few firms. With six acquisitions made so far in 2022, upGrad under the leadership of Ronnie Screwvala, has emerged as the top buyer of this season. Since its founding, upGrad has bought 14 firms in total.
The government is also anxious.
The Indian government is now focusing on edtech companies after voicing its concerns and exerting strict control over cryptocurrency and fintech businesses. Dharmendra Pradhan, the minister of education, recently declared that the federal government is developing a policy to control edtech platforms.
There is no doubt that the government will oppose profiteering of any kind, even though it won’t go quite as far as China’s strategy of only looking for nonprofit companies in the industry.
The government issued a warning to edtech companies last month against engaging in dishonest business practices, such as false advertising. The government reportedly treated the alleged mis-spelling of courses by the edtech company Byju’s and its affiliate WhiteHat Jr. seriously.
However, Byju contended that less than 2% of all complaints submitted to ASCI were in the edtech industry. The Serious Fraud Investigation Office (SFIO) has just received a letter from Congress MP Karti P. Chidambaram requesting an investigation into Byju’s financial situation.
Anil Sahasrabudhe, the chairman of the All India Council for Technical Education (AICTE), asserted earlier this year that edtech companies could not be allowed to venture into fields outside of their purviews, providing certificate and degree programmes.
He continued by saying that only universities and accredited colleges are permitted to provide postgraduate programmes in management and computer applications.
To give Indian students access to top-notch education, finance minister Nirmala Sitharaman announced the creation of a digital university during the presentation of the Union Budget 2022. The hub-and-spoke design of the digital university will allow edtech companies to provide infrastructure.
The future of edtech startups
Despite difficulties, not everything is lost for edtechs because some of them are still able to walk easily down their road. PhysicsWallah, a bootstrapped business, is the second Indian firm to achieve unicorn status at the Series A stage.
B2B firms like Classplus and Teachmint continued to run smoothly without cutting any staff. Leap, Leverage Edu, and Scaler, three competitors with diverse products, also succeeded in raising money consistently.
The sums already committed to the industry, a more restrictive environment might be the most effective approach to separate the actual business models from predictions. The polished PowerPoint from the actual ground delivery. India’s offers are simply too great for investors to ignore right now, so you can be confident that this is one sector that will recover from the tide reverses on the finance side.
In the meantime, some 90 startup-focused funds have already been established or are about to do so in 2022. SaaS, healthcare, agriculture, and D2C brands, as well as venture capital and private equity funds with an emphasis on edtech, are still in operation.
However, their focus has shifted from edtech to fintech. According to data, approximately 20 investment firms have stated that they will open new funds in 2022 with a focus on the edtech market.
All of this is to indicate that, even though the section received a reality check and will now need to be thrifty, those that exhibit promise will still be funded.
How edtech businesses are putting it?
To learn more about the current position and their growth goals, contacted 15 edtech businesses that had either experienced layoffs or were among the top fundraisers in the previous two years.
Since the economy is slowing down, I would say that the entire startup funding scene is going through a difficult period. Fortunately, our company has not experienced this; in fact, it is stronger than ever. We are taking on the brilliant individuals who are being let go as a result of these tragic situations, not laying them off. – spokesman for PhysicsWallah.
Should not generalise or categorise because every business is unique. We put ourselves in a solid position where we do not need to raise money, thanks to the $450M primary capital we raised in our Series E last year.
Despite the unpredictability of the external market conditions, we are committed to expanding our business safely and sustainably. — Ashwin Damera, the company’s founder and CEO.
LEAD operates in the segment of school edtech, which is very distinct from consumer edtech. The school edtech sector is poised for rapid growth now that schools have resumed operations across India and students are back in traditional classroom settings.
The School Edtech sector holds great potential for double bottom line organisations like LEAD, which has expanded from 135 schools before the pandemic to over 3500 schools today. There are approximately 470000 affordable private and low-fee schools throughout India. A representative for LEAD
Edtech: Funding, Layoff, Report, Revenue, Valuation
A group of investors just provided funds to Bareback Media. Some of the investors might have a direct or indirect stake in a rival company or be connected to other businesses we might write about. This won’t, however, have any kind of impact on the way we report or cover things.
Through its early-stage startup capital firm, the LC Nueva Alternative Investment Fund, LC Nueva Investment Partners, a platform for auto extended warranties called Wisedrive, has raised $1 million (AIF).
Bhavadeep Reddy and Spiral Ventures, a Japanese venture capital fund with a focus on Asia, also participated in the round. By forming partnerships with used car dealers and authorised service facilities, the funds will be used to expand operations in metro areas.
Wisedrive, which was founded by Kalyandhar Vinukonda, offers free maintenance on pre-owned vehicles at dealerships that are authorised by the manufacturer, as well as complimentary roadside assistance across all of India.
The company, which is now based in Bengaluru, plans to expand to all of the metro areas within the next 12 to 18 months.
Wisedrive Financing
A group of investors just provided funds to Bareback Media. Some of the investors might have a direct or indirect stake in a rival company or be connected to other businesses we might write about. This won’t, however, have any kind of impact on the way we report or cover things.
EyeMyEye, a full-stack eyewear platform that has been operating for a year, is raising Rs 39.35 crore ($5 million) with the help of LC Nueva AIF, a joint venture between Lighthouse Canton, with headquarters in Singapore, and Nueva Capital, based in Delhi, among others.
The board of directors has adopted a special resolution to allot 27,95,736 CCPS at an issue price of Rs 140.75 per share to raise the aforementioned amount, according to the company’s regulatory filing with the Registrar of Companies (RoC).
The round’s lead investor, LC Nueva AIF, contributed Rs 18.65 crore. Lets Ventures and Rajesh Bothra (Kobian Pte Ltd) respectively contributed Rs 2.75 crore and Rs 10 crore.
A fund with a focus on India called LC Nueva raised $40 million in its initial corpus in April of this year, raising Rs 300 crore. According to the investment firm at the time of its establishment, the investment manager and important Lighthouse Canton stakeholders contributed around 25% of the overall fund size.
The estimates that the Gurugram-based business is worth about Rs 142 crore ($18 million) (post-money). Its valuation at the time of the most recent investment was Rs 102 crore.
EyeMyEye is an online eyewear retailer that was established in 2021 by Ganesh Iyer and Sudha Kalyan. It claims to have one million customers. It competes in the eyewear market with companies like Lenskart, Himalaya Opticals, MedPlusLens, Cool Winks, and Lens2Home, among others.
In the past nine months, EyeMyEye has received the money in two rounds. The business acquired Rs 20.5 crore from angel investors and several high-net-worth people in November as part of its pre-Series A round.
EyeMyEye Funding
A group of investors just provided funds to Bareback Media. Some of the investors might have a direct or indirect stake in a rival company or be connected to other businesses we might write about. This won’t, however, have any kind of impact on the way we report or cover things.
Due to recent funding from new investors at a valuation of more than $1 billion, Shiprocket is the newest member of the unicorn club.
To earn Rs 260 crore ($33 million), the business has approved a special resolution to allot 59,793 preference shares in its ongoing Series E transaction at an issue price of Rs 43,394.13. This looks like it belongs to the Series E2 round.
With Rs 78 crore and Rs 75 crore, respectively, Light Rock India and MacRitchie Investments Pte. Ltd. Temasek Holding) gained the upper hand in this battle. With a combined investment of Rs 107 crore, other investors, Bertelsmann Nederland BV, Moore Strategic, Paypal Inc., and MCP3 SPV LLC, took part in this current series E round.
It believes that the company has raised new capital at a $1.23 billion valuation. When Shiprocket received $185 million in a Series E round co-led by Zomato, Temasek, and Light rock India in December, it was valued at roughly $930 million. Since then, it has made three consecutive acquisitions, including Omuni, Rocketbox, and Pickrr from Arvind Internet Limited.
To help businesses integrate their shopping websites across enablers like Shopify, Magenta, and others, Shiprocket offers technological solutions. The company claims that about 250K vendors use its products and services, which allow for the delivery of 70 million shipments annually.
Shiprocket scale increased 2.2X to Rs 358 crore in FY21, and the company reported a profit of Rs 12 crore, even though it has not yet submitted its financial statements for FY22.
In the Indian startup ecosystem, there have been 106 unicorns to date. Of these, 43 firms accomplished the feat in 2018, whereas just 21 startups have so far surpassed the $1 billion value threshold in 2022. India won’t likely see as many unicorns this year as it did in 2021, based on the current rate of growth.
Due to the unpredictability of the global economy, the funding landscape has become challenging for entrepreneurs. The number of unicorns in 2022 and 2023 will be directly impacted by the funding winter, according to specialists monitoring the private investment market, and the valuation of growth and late-stage enterprises will also be significantly correct.
Edited by Prakriti Arora
