edtech: 2022 Year in Review | As the pandemic bubble bursts, edtechs go back to class

The pandemic-driven boom has ended and tech funding has dried up. And this has forced edtech ventures to cut costs further and seek sustainable offline models with profit-generating revenue streams, say entrepreneurs and investors.

Edtechs are expected to move away from the K-12 business model in the coming year. They are also expected to focus on priorities such as a bigger offline play, tapping international markets with higher disposable incomes, and digitising the existing school system, multiple professionals engaged in the business told ET.
Over the next two years, Byju’s expects at least a third of its overall revenues to come from international markets, the company’s co-founder Divya Gokulnath told ET. Unacademy, which operates mainly in the test-prep space, will aggressively expand into the offline segment next year, said co-founder and CTO Hemesh Singh.

Singh told ET that one of the key priorities for the company in the coming year was expanding its offline presence. “There are areas where we are opening up our own centres. We are also contemplating whether to partner with some existing centres so that we can scale fast,” he said.

The General Atlantic-backed firm has “drastically reduced” its cash burn from running ads on Google and Facebook, as well as on technology costs, employees and infrastructure, among other heads, Singh added.

Meanwhile, Gokulnath said Byju’s did not have a “pressing need” to cut costs, but was aiming to achieve group-level profitability within a year. “This involves removing redundancies and cutting duplicate roles within the group,” she said. “Our path to profitability involves leveraging synergies from the newly acquired entities and focusing on efficient organic growth. The core business is now being expanded by reinvesting the profits it generates,” she added.

On December 15, ET reported that
Byju’s is seeking to exit its jersey sponsorship deal with the Board for Control of Cricket in India (BCCI) as it looks to cut down on its costs.

Edtech investors pointed out the importance of the physical schooling system in the K-12 category, and the potential for startups to complement the school system, instead of attempting to substitute it.

When Covid began turning into a pandemic early in 2020, edtech companies’ fortunes soared as they stepped in to fill the learning void left by schools and coaching centres shutting their doors during the nationwide lockdown. Over the year, startups in the segment raised a record $2.3 billion in funding. That record was broken again in 2021, when they raised $4.1 billion. In 2022, however, funding dropped to $2.6 billion.

As the pandemic began to ease late last year and normalcy began to return, edtechs witnessed reduced traction and growing customer dissatisfaction. Companies, especially in the K-12 and online learning segments, responded by downsizing their businesses, laying off employees, and in some cases, shutting down.

For instance,
Byju’s laid off 5% of its 50,000-strong workforce. Unacademy co-founder and CEO Gaurav Munjal claimed in November that the company had cut its cash burn rate
from $20 million a month to $7 million a month with a further reduction on the cards. Meanwhile Lido Learning and Udayy, finding it unable to sustain their business, shut shop permanently.

What next


Blume Ventures, which has backed edtech startups such as Unacademy and Classplus, reworked its edtech thesis this year, after early signs of market consolidation and online fatigue emerged.

Although rightsizing operations took precedence for edtech startups during the year, the next phase focuses on building profitably and looking at avenues that could generate revenues at lower costs.

Speaking at the recent ET Startup Awards LEAD co-founder Smita Deorah
said that companies in the sector have to be part of the “entire education system”, and that anything done outside of a school is a “band-aid solution”.

“One priority and focus has been to basically grow in a profitable, sustainable manner. Last year, we faced a situation with very high marketing costs and very high people costs, so we were not profitable last year. This year, the focus is on going back to being profitable and we are almost there,” Great Learning founder and CEO Mohan Lakhamraju told ET.

The Byju’s-acquired upskilling platform is aiming for profitability within the first quarter of calendary year 2023. The company has tried automating some of its operations to cut costs and is also preferring in-house software over external options.

Players are also exploring newer parts of the edtech market that do not have the burden of B2C cost structures. For instance, some players have begun tying up with schools to digitise curriculum in the K12 segment.

“My sense is that there was a bit too much that was read into a trend during Covid. While people did move to digital solutions, I don’t think that it was ever going to be 100% permanent. There was a shift in that direction because it was the best alternative to in-person education for K-12, etc (at the time). To think that the trend would continue forever was probably a bit too optimistic,” Jyotsana Krishnan, managing partner, Elevar Equity, told ET. Elevar Equity is one of the investors in LEAD School, which provides tech-enabled solutions to schools for comprehensive learning. It also contextualises the curriculum for students and teachers.

“As far as K-12 is concerned, the role of the schools is very important so the players that are delivering real value are thinking of complementing the school system, as opposed to substituting the school system,” she added.

International opportunities

Companies are also eyeing international markets as one of the areas of growth in the coming year. “Even though we aren’t cutting down on the budget for our verticals, we are not launching any new big verticals in India but taking the existing portfolio to the rest of the world,” a co-founder at an edtech unicorn told ET, on condition of anonymity.

Byju’s cofounder Divya Gokulnath told ET that the company will focus more on the US and Latin America.

“We expect at least a third of our overall revenue to come from international markets in the next two years. All the US subsidiaries of BYJU’S are growing and shaping up well. Osmo (phygital), Epic! (digital reading) and BYJU’S Future School (live one on one) are now working in sync to cater to a wide variety of learning needs,” she said.

One of the reasons for edtech platforms looking overseas is the higher spending power in developed markets. Lakhamraju said that Great Learning’s business is currently 50-55% in India and 45-50% in the rest of the world, with course prices at a higher delta of 30-40% abroad in comparison with other geographies.

Prepladder CEO Deepanshu Goyal also said that it was working on a US-first learning product in the medical education space, which is expected to be launched next year.

Math focussed online tutor Cuemath, which is heavily reliant on international markets currently, also expects its overseas revenues to double in the next year. “We will basically cross 100 countries,” CEO Vivek Sunder told ET. Cuemath currently operates in 71 countries.

2022 Recap

Funding in the edtech space fell to a meagre $2.6 billion this year, with the number of deals plummeting to 159, from 319 in 2021 and 222 in 2020, data sourced from Bengaluru-based data provider Tracxn showed.

Early-stage startups, including the Unilazer Ventures-funded Lido Learning, SuperLearn and Info Edge-backed Udayy, shut their operations during the year.

Acquisitions in the sector too have slowed this year, with just 30 in total, as against 40 in 2021, according to Tracxn.

The slump in these sub-segments in various edtech segments was visible in the number of funding deals. The number of deals in the K-12 segment fell to only 73 in 2022, from 163 in 2021, while the online courses segment saw only 38 funding deals in 2022, compared to 102 deals last year. Similarly, the test-prep segment witnessed only 16 deals in 2022 from 37 funding deals in 2021.

The overall fall in funding for the edtech sector aside, more than two-thirds of the funding that did come in this year was cornered by five deals worth over $100 million in value, raised by Byju’s, UpGrad, LEAD School and PhysicsWallah.

Despite the slowdown in funding, Byju’s received the most money in 2022 among startups in the sector. The edtech company raised over $1.2 billion from existing investors, which is almost 50% of the total funding received by the sector.

In total, edtech companies are estimated to have laid off nearly 7,500 people this year alone. While Byju’s gave pink slips to 2,500 employees, representing 5% of its workforce, Unacademy sacked more than 1,500 people. Again, Byju’s subsidiary WhiteHat Jr laid off 1,300 people, while Vedantu sacked over 1,100 people this year. Startups such as Toppr, Frontrow, Crejo.fun and Lido also laid off 350, 275, 170 and 150 staffers, respectively.

There has also been rising dissatisfaction among parents enrolling their kids in edtech courses in the K-12 segment and test preparation categories, including the Joint Entrance Examination (JEE) for the engineering stream and National Eligibility cum Entrance Test (NEET) for medical colleges. This has affected renewal rates and stressed edtech models further, according to the findings of
a recent survey by global strategy firm LEK Consulting and advisory firm DC Advisory.