When Byju’s turned a unicorn in 2018, ‘unicorn’ wasn’t really a buzz word. Today, India has 100 unicorns and six of them – including Byju’s are edtechs. Unacademy achieved the cult status in 2020, while upGrad, Vedantu and Eruditus reached the $1 bn valuation mark in 2021. LEAD became India’s sixth edtech unicorn in 2022.
Clearly, ever since the pandemic struck, the edtech space has been brimming with activity (read investment) with several reports claiming the segment’s unprecedented growth in the coming years. While a Blume Ventures report said that the edtech market was close to $750 mn in 2020 and will hit $4 bn by 2025, a recent report by management consulting and market research firm Redseer puts that number at $5 billion by 2025.
But is all really well in the edtech space? Some recent developments indicate trouble brewing within the segment.
It all started when in a virtual town hall in February, Sahil Sheth, founder and CEO of Lido Learning -- in front of his 1,000-2,000 employees -- announced that the company was closing down due to fund crunch. He also asked the employees to start looking for jobs promising that their salaries would be paid within 90 days. Several other players since then have been reportedly trying to acquire Lido.
In early April, Unacademy laid off around 600 employees on account of non-performance and role redundancy. The company in a statement said that it was part of a regular appraisal process and reevaluation. “As an organisation we are focussed on becoming profitable by the end of Q4 CY2022 in our core business, while investing for growth in our Group companies. Based on the outcome of several assessments, a small subset of employee, contractor, and Educator roles were re-evaluated due to role redundancy and performance, as is common for any organization of our size and scale,” the statement said.
The latest edtech to join the layoff bandwagon was Vedantu, which laid off 200 of its employees -- 120 contractual and 80 full-time – citing load rebalancing. Almost all of those laid off were from the company’s academic teams, working as assistant teachers.
In another development, Inc42 in an exclusive report recently said that over 800 WhiteHat Jr employees have resigned from the Byju’s-owned edtech start-up in the last two months after being asked to work from office. The Mumbai-based startup acquired by Byju’s for $300 million in 2020, had reportedly asked all its employees to work from office within a month’s time. Such a large number of employees rendering their resignation doesn’t seem like a regular move. According to Inc42, a few employees termed the exercise a cost-cutting one as they complained that giving a month’s time to relocate isn’t enough.
Wind of Change
One of the biggest reasons for edtechs resorting to cost-cutting is the tapering demand for online education as offline educational institutions/schools open up. To attract students, Vedantu recently launched Ai Live, an interactive platform to help bring down the fee structure for a one-year long-term course for grade 6 to 12 from Rs 22,000-25,000 a year to Rs 5,000 annually.
Experts say that the intensity of action in the segment in terms of hiring, investments and new enrolments may come down as more offline classes begin to resume.
Phase of Consolidation
Redundancy in jobs is also because of edtechs entering a consolidation phase in terms of acquisitions and mergers, suggest experts. Byju’s, the world’s most valued startup has made 16 major acquisitions since 2017 – nine of which were in 2021 alone. Unacademy, India’s second most valued edtech startup already has 11 acquisitions under its belt. upGrad, which turned a unicorn last year also has made about nine acquisitions to consolidate its position in the segment.
“The skill set required in edtech firms are rapidly evolving -- partly due to technology and partly due to natural progress from startup to an enterprise. For the same reason employees also find themselves doing very different things from what from what they wanted to do when they joined,” says Narayanan Ramaswamy, National Leader - Education and Skill Development, KPMG in India explaining the possible reasons behind the recent layoffs. The pressure from VC/PEs for results is also something that not many employees can cope with, he added.
Role redundancy and layoffs are also because edtechs are forced to look towards a hybrid model – to be present both online and offline. Byju’s acquisition of Aakash for a whopping $1 bn was a long-term plan. Aakash has more than 200 brick-and-mortar centres and a student count of 2.5 lakh. It can help Byju’s reach tier II and tier centres, which the edtech giant hasn’t quite been able to tap yet. It also announced the launch of BYJU'S Tuition Centre, a comprehensive programme that blends offline and online learning experiences across 200 cities. The edtech plans to enroll one million students into this programme in the next two years through its 500 centres.
Unacademy, too, is looking to tap the offline space by recently launching its first experience centre in Delhi. It is the first of four stores to be launched in Kota, Jaipur, and Lucknow, besides its current location. The stores will serve as a touch-point for potential students and parents who might want to talk to sales representatives before signing up for a course online. upGrad, forayed into the test preparation market by acquiring The Gate Academy, which has some 50 centres across India. It has been rebranded as ‘upGrad Jeet' and will focus on the Hindi-speaking small-town folks who are looking for mid-scale government jobs.
Edtechs, clearly, know they need to adapt and pivot. In doing so, they may have to relook at their employee mix and if need be, resort to ‘load rebalancing’. While Unacademy and Vedantu refused to comment on the layoffs hitting the segment, sources said that some of the educators who were given the pink slip knew about their dropping performance. Unacademy has ‘intern Educators’ – small scale educators who are onboarded, trained and scaled. They are contract-based and are regularly assessed for their performance – most layoffs were from this category.
Whatever the reasons be, layoffs aren’t the best way to manage/cut costs or scale up. What’s needed is a well-defined HR structure and policy, suggest experts. “Companies need to have a structure in place around HR, learning & development, reskilling etc. to hire the right people and retain talent. A hire & fire approach will be inefficient in the long run. Also, gig workers and gig jobs are here to stay so employees should have contusive HR policies in place and nurture talent for long-term roles,” says Ramaswamy.
Whether the edtech bubble is going to burst or will the segment thrive; only time will tell. But as of now the issues of valuation versus value – high valuation of edtechs as against the actual outcomes; acquisition costs versus profits; return to investors versus educational progress and offline versus online, is what will decide the sector’s fate in the years to come, and also of their employees.
Plus, with VC funding slowing down edtechs and startups in general need to preserve whatever cash they have. According to a Bain and Company report (in collaboration with Indian Venture and Alternate Capital Association), the number of VC deals is poised to go down this year. In fact, a Crunchbase report also found that the global VC funding last February ($52 billion) dropped by $10 billion month-on-month. The early-stage funding and late-stage funding fell by 17 per cent and 19 per cent, respectively, the report said.