The edtech industry in India is experiencing a tumultuous period as startups are facing numerous issues. Indian ed-tech startups, which were once seen as the poster child of India's start-up ecosystem, are facing issues left, right, and center indicating ‘All Izz Not Well’.
Indian Edtech Startups in Crisis
India's edtech industry has experienced significant growth in the last few years, with many startups emerging and thriving. These companies have been able to tap into the growing demand for online education, driven in part by the COVID-19 pandemic. However, the industry has also faced a lot of challenges, including the lack of regulation, the need for adequate infrastructure, and access to technology. The lack of standardization and regulation has led to quality control issues, which have affected the industry's reputation and trustworthiness.
The ‘Big Boys’ of the Indian EdTech Startups have been surrounded by controversies and are looking down the gun with significant incurred losses. The losses have forced them to layoff employees as well, further deepening their concerns.
Unacademy's Troubles Deepen as Controversies Mount
Unacademy, one of India's most valuable edtech startups, recently announced another round of layoffs, making it the second round of layoffs in 2022. The decision to lay off over 350 employees came after the company's CEO had declared that there would be no more layoffs. Unacademy has already laid off over 800 employees since the start of the year.
Unacademy's troubles began when the company announced its first round of layoffs in July 2022. The layoffs were attributed to the economic slowdown caused by the pandemic, which had adversely affected the company's revenue. However, CEO Gaurav Munjal had assured employees that there would be no more layoffs and that the company would focus on other cost-cutting measures.
Despite this assurance, Unacademy announced another round of layoffs in November 2022. This time, over 350 employees lost their jobs. Many have questioned the company's management and the effectiveness of its cost-cutting measures.
Unacademy's woes are not limited to the layoffs. The company has also faced numerous challenges in its attempts to diversify and expand into new verticals. The company has made several acquisitions in recent years, spending over Rs 500 crore on 12 edtech startups. However, most of these acquisitions have not been successful, and the company has had to shut down most of the new ventures. This has led to a significant impairment charge in FY22.
Byju's Faces Regulatory Heat with ED Scrutiny
Byju's, the ed-tech giant that recently raised $1.5 billion at a valuation of $16.5 billion, is in trouble with the Enforcement Directorate (ED). The agency recently searched three locations in Bengaluru connected to Byju's founder, Byju Raveendran, and seized incriminating documents and digital data under the Foreign Exchange Management Act. The ED has accused Byju's of not preparing financial statements since 2020 and not getting the accounts audited, which is mandatory. The agency is cross-examining the company's figures with banks to determine their genuineness.
This is not the first time that Byju's has faced regulatory scrutiny. Last year, the Competition Commission of India (CCI) initiated an investigation into Byju's after receiving complaints from several ed-tech start-ups that alleged that Byju's was engaging in unfair business practices. Byju's has also been accused of aggressive marketing tactics and creating a monopoly in the Indian ed-tech space.
Cuemath's Financial Woes Highlight Challenges Faced by Edtech Startups
Another ed-tech startup that is facing financial issues is CueMath, a math learning start-up backed by Sequoia Capital. The company posted a loss of Rs 216.6 crore in FY22 against losses amounting to Rs 130.7 crore in the financial year 2020-21. CueMath's largest expense was on employee benefits, which amounted to Rs 125 crore. The start-up's overall expenditure went up 64.7% to Rs 369 crore in FY22 from Rs 224 crore in FY21. Its advertising and promotion expenses grew 18.4% to Rs 96.5 crore. In addition, the company's legal professional charges rose sharply to Rs 98.7 crore in FY22, up 126.3% from the year prior. The startup reported total revenue of Rs 152.9 crore in FY22, a 63.3% increase compared to the previous fiscal. Its revenue from operations increased to Rs 148 crore in FY22 from Rs 91 crore in FY21.
The troubles facing Byju's, Unacademy, and Google backed CueMath are indicative of the broader challenges that the Indian ed-tech sector is facing. Despite the pandemic-induced surge in demand for online education, many ed-tech start-ups are struggling to turn a profit. The intense competition in the sector has led to a price war, with many start-ups offering discounts and freebies to attract customers. However, this has resulted in a race to the bottom, with start-ups cutting corners to keep costs low.
Edtech in India: A Promising Industry with Challenges to Overcome
The case of the three startups highlights some of the challenges faced by Indian edtech startups. These challenges include the lack of standardization and regulation, the need for adequate infrastructure, and access to technology. The lack of regulation has led to quality control issues, which have affected the industry's reputation and trustworthiness. The need for adequate infrastructure and access to technology has also been a significant challenge for startups, especially those operating in rural areas.
Another challenge faced by edtech startups is the need to compete with established players. Many startups are struggling to compete with large edtech companies that have already captured a significant share of the market. These established players have more resources and a more extensive network, making it challenging for startups to compete.
The edtech industry in India is facing a difficult period, with major startups such as Byju's, Unacademy, and Cuemath encountering numerous issues. These challenges include financial losses, regulatory scrutiny, and quality control issues. The lack of standardization and regulation has affected the industry's reputation and trustworthiness. Despite the surge in demand for online education due to the pandemic, many edtech startups are struggling to turn a profit due to the intense competition in the sector. The industry needs adequate infrastructure, access to technology, and regulation to address these challenges and ensure its growth.