Edtech’s roller-coaster year: The BYJU’S conundrum and industry realities

The year 2023 saw BYJU’S grappling with several challenges, leading to a spillover effect on the edtech sector in the form of widespread layoffs and funding woes. As it stands at the crossroads, the sector must focus on a sustainable business model with a clear path to profitability.

Edtech’s roller-coaster year: The BYJU’S conundrum and industry realities

Monday December 25, 2023,

9 min Read

After a turbulent 2022, the edtech sector hoped for a rebound in 2023. Alas, that was not the case with the year seeing more adversities, eclipsing the positive strides from edtech firms. 

Prominent in this narrative was BYJU'S–one of the biggest names in the Indian edtech sector–which grappled with woes of epic proportions. What happened, and continues to happen, at BYJU’S is also symptomatic of the broader issues that the industry has to contend with: widespread layoffs, top-level departures, and funding constraints. 

On the positive side, edtech firms realised the need for strategic business improvements and prudent cost-cutting measures to tide over the liquidity crisis. The focus also shifted to offline channels and upskilling/reskilling efforts. 

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BYJU’S and beyond

Bengaluru-based BYJU’S faced mounting challenges, including the litigation surrounding the $1.2-billion term loan B, notice from the Enforcement Directorate, troubles with the Board of Control for Cricket in India (BCCI), liquidity crunch, as well as questions about its core business and acquisitions

These developments significantly impacted the entire industry, accentuating prevailing concerns and tempering the overall optimism. 

“Until 2022, BYJU’S was seen as the leader, guiding the entire trend of the industry, consolidating the industry through various acquisitions. However, over time, we have seen a series of events that led to a drop in valuation from its peak of $22 billion to less than $2 billion,” says Vikram Gupta, Founder and Managing Partner of IvyCap Ventures.

This, he adds, has eroded investor confidence in the edtech sector as such, affecting even startups with solid business models which struggled to secure follow-on capital. 

Funding in India’s edtech sector saw a significant drop in 2023 to about $712 million (till now), compared to $2.9 billion in 2022, according to market intelligence platform Tracxn.

Mayank Kumar, Co-founder and MD of upGrad, notes, “Investors’ intent to invest across businesses has taken a backseat, and the conversation in 2023 was largely about unit economics, profitability and sustainable cash flows as compared to TAM (total addressable market) or the market size earlier.”

The BYJU’S episode also affected the sentiments of customers. 

“On the customer side, there is a lack of enthusiasm in adopting edtech products unless they come with a trusted reference,” says Sumanth Prabhu and Nikhil Bhaskar, Co-founders of Ulipsu.

Edtech funding

Infographic design: Sharath Ravishankar.

Widespread layoffs 

As edtech startups, including unicorns, suffered losses, they had to put the brakes on expansion and resort to layoffs and other efforts to cut expenses. 

BYJU’S hoped to turn its business around with CEO Arjun Mohan helming a business restructuring exercise that involved streamlining the workforce. Others, including Unacademy, upGrad, LEAD, and Physics Wallah, also took to workforce reduction as part of a cost-cutting exercise, while some firms have called it “performance-related departures”. 

Layoffs were not restricted to unicorns alone; smaller edtech firms such as Simplilearn, Cuemath, Adda247, Skill Lync, and Teachmint too were forced to trim their workforce. 

Significantly, this year’s widespread layoffs went beyond entry and mid-level roles. There were several high-level departures, including CXOs, at companies such as BYJU’S and Unacademy.

Following a series of top-level departures at Unacademy, earlier this month, CEO and Co-founder Gaurav Munjal said that the company has reduced its cash burn by 60%, ensuring a runway of over four years with current cash reserves.

“It is likely that we will continue to witness layoffs going forward as companies in the sector streamline and aim to become more profitable,” says Neeti Sharma, Co-founder and President of TeamLease Edtech.

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Period of consolidation

Challenging funding conditions have led smaller edtech companies to either shut down or be acquired by larger entities

In April, Bengaluru-based DUX Education stopped operations after struggling to raise funds. 

Earlier this month, ALLEN Career Institute acquired edtech startup Doubtnut for a modest $10 million, despite the latter having raised about $50 million. ALLEN’S move comes at a time when it is looking to create more impact in the online channel, after more than three decades of offline coaching.

K-12-focused Toprankers made three acquisitions in 2023: ProBano in April, The Lex Guru in July, and Chinar Law Institute in December. 

Anil Nagar, Founder and CEO of Adda247, observes that the sector can experience a surge in mergers and acquisitions (M&A) as larger players broaden their offerings and market reach.

Edtech firms are turning to M&As and partnerships for scale and efficiency, aiming to reduce customer acquisition costs and streamline operations through resource and expertise integration.

“The Indian edtech industry is undergoing a shift from pandemic-driven growth to consolidation and specialisation,” says Atul Kumar, CEO Online at PhysicsWallah, which acquired a 50% stake in Xylem Learning for an estimated $61 million in June.

Kumar of upskilling firm upGrad states that, while upskilling continues to thrive in metros, it remains a lesser-penetrated phenomenon in Tier II and smaller towns. 

“Therefore, having more new-age partners would open up newer markets, providing wider access and reach to every household—a trend of consolidation that we can expect in 2024,” he explains, adding that the edtech sector is poised for a boost in the coming times.

Edtech M&As

Infographic design: Sharath Ravishankar.

Working to improve business

Edtech firms are striving hard to enhance their top-line, narrow losses, and reduce expenses as they aim for a sustainable and profitable business in the coming years.

Some companies ticked some of these boxes in the financial year ending March 2023.

In FY 2022-23, LEAD narrowed losses and doubled operating revenue, yet overall expenditure increased. Meanwhile, upGrad saw twofold revenue growth with stable losses, even as total expenses rose in FY23 compared to the previous fiscal.

However, for some companies, it might take a bit longer before they see healthy sales figures. 

For instance, despite reducing expenses, Cuemath saw business sales drop in FY23, impacting the topline and widening the consolidated net loss.

Edtech companies are exploring various approaches to enhance their business, including hybrid learning methods and upskilling efforts. 

While digital-first firms like BYJU’S, Unacademy, and PhysicsWallah are ramping up their offline strategies, traditionally offline players such as ALLEN and Sri Chaitanya are making efforts to boost their presence in the online space.

PhysicsWallah’s Kumar notes that the hybrid approach (combining online and offline education) offers students the advantages of both worlds, facilitating social interaction and direct teacher-student engagement. It ventured into the offline space with PW Vidyapeeth last year.

“Offline centres accounted for 40% of PW’s revenue in 2023. The company anticipates substantial growth in its offline operations as it expands to more centres by next year,” he points out. 

In April, Unacademy’s Munjal highlighted that the firm’s revenue from offline centres surged 655% in CY23 compared to CY22. Although it observed a surge in revenue from offline growth, the online test preparation segment—the core business—experienced a decline in revenue.

In the hybrid learning space, the upskilling/reskilling segment has seen significant growth due to the demand for continuous learning, amid rapid technological changes and the evolving job market. Companies like upGrad, Eruditus, Simplilearn, Scaler, PhysicsWallah, and Digiaccel Learning have seized the opportunity to meet the increasing demand for skilling, reskilling, and upskilling. 

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Emergence of B2B

The year also saw the B2B segment emerging from the shadows as edtech startups diversified their offerings. 

“Edtech startups were misled by the sudden growth seen during COVID, leading to several incorrect assumptions, such as the belief that B2C is the only path for growth and that online education will inevitably dominate,” say the co-founders of Ulipsu, adding that the sector will witness growth in the B2B space. 

Though they did not abandon B2C entirely, some edtech companies began to intensify their focus on B2B. Originally B2C-centric players, such as Eruditus, Simplilearn, PhysicsWallah, and upGrad, are redirecting their resources towards partnerships with enterprises and institutional clients such as schools and colleges.

edtech AI

Image design: Nihar Apte.

Building for the long-term

As edtech firms head into a new year, they must focus on strategies that augur well for them in the long term. This translates to quality content and teaching, improved customer experience, and technology adoption. 

“Edtech firms should shift their focus toward customer experience and retention as this is the best long-term strategy, moving away from expensive marketing strategies to creating better content, quality faculty, efficient platforms, and good customer service,” says TeamLease Edtech’s Sharma.

She emphasises the need for edtech companies to invest in AI-based chatbots for 24x7 customer service to provide a positive user experience. However, she advises firms to carefully evaluate the return on investment in technology and infrastructure.

Edtech firms like BYJU'S, upGrad, Vedantu, CueMath, Simplilearn, and Adda247 are leveraging technologies such as artificial intelligence, machine learning, augmented reality, and virtual reality to enhance the learning experience. 

Adda247’s Nagar foresees these trends continuing in future and stresses the need for advanced AI applications and extended reality (XR) technologies for interactive learning and enhanced data analytics for informed decision-making.

PhysicsWallah’s Kumar says the upskilling/reskilling segment is expected to outperform other areas in 2024. 

“Edtech platforms offering relevant, high-quality courses for professionals to upgrade their skills are poised for significant growth. Success in this segment will hinge on the ability to provide personalised, flexible, and industry-relevant courses,” he explains.

The adoption of microlearning is also expected to accelerate in the coming months, with short, bite-sized learning modules seamlessly integrated into the daily routine, making learning more accessible and convenient for users, adds Kumar.

Going forward, edtech firms must tailor their offerings to cater to learners from non-metro areas, given that there is a surge in user base from Tier II and III cities. This will make education more accessible to learners from every part of the country. 

“Increased collaboration within edtechs to make accessible education a ground reality for millions will not only continue to instil confidence amongst VCs but also make India the digital hub and teaching capital for other developed economies to see,” says upGrad’s Kumar.

As far as BYJU’S is concerned, it has to focus on building a sustainable business model and tackle governance issues, say industry experts. 

“This can be addressed by building robust systems and processes and having experts manage them,” notes Anil Joshi, Managing Partner at Unicorn India Ventures.

He adds, “The business model needs to continuously evolve with the situation. BYJU’S missed the advantage of the pandemic and didn’t evolve in line with post-pandemic requirements.”

On investments in edtech, Gupta of IvyCap Ventures envisions investor confidence returning in the second half of 2024 and investments materialising towards the later part of 2024.

In the meantime, to attract investor interest, edtech firms must exhibit scale, customer retention and engagement, a sustainable business model, a clear path to profitability, and longevity, all the while avoiding cash-burn situations.

(Cover image by Nihar Apte; infographics designed by Sharath Ravishankar)


Edited by Swetha Kannan