Unacademy CEO advocates for profit-led growth, not blitzscaling, for edtech sector

Edtech is a business that shouldn’t be blitzscaled; instead, it should be built with a strong emphasis on profitability, remarked Gaurav Munjal, Co-founder and CEO of Unacademy at the Mumbai edition of TechSparks 2024.

Speaking to YourStory Founder and CEO Shradha Sharma in a fireside chat, Munjal said, “One thing we did wrong in COVID-19, which I also admitted to my team, [is that] this is not a business that should have been blitzscaled; this is a business that should have been built with immense focus on year-on-year profitability. And that’s how we are doing it now.”

The Unacademy chief emphasised that the company experienced a surge in its online business during the pandemic. However, after COVID-19, offline operations became a fundamental aspect of the edtech firm’s business.

Historically, in the offline coaching industry—with institutions like Aakash or Allen, 95% of education companies have traditionally been highly profitable, Munjal explained, adding that there is no reason why edtech should not be profitable.

“40% of our revenues are coming from this hybrid model where the customer is acquired on the app, and then the customer goes to offline [centres] and studies something online. So, the future is online, and online plus offline, which is hybrid,” he noted.

At a time when edtech is under scrutiny, with BYJU’S saga unfolding, Munjal said he’s extremely bullish on the segment because it holds vast profit potential and can positively impact lives.

“You have to build a product right keeping in mind that the educators are properly trained. Because the learner won’t be able to tell if you are teaching it wrong...and secondly, how we are selling the product is specifically more important, and this is the tough thing to do,” he further elaborated after previously pointing out, “We all knew that they were misselling,” without explicitly mentioning any names.

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Entrepreneurship journey

Speaking about his experience as an entrepreneur, the Unacademy chief highlighted the challenging phases that entrepreneurs often encounter.

“The highs are extremely high, and the lows are extremely low. It’s not easy. I didn’t know it was going to be this tough when we started. But at the end of the day, it’s worth it. It teaches you a lot, and if you can do this, then you start thinking that you can do anything,” Munjal added.

Entrepreneurship is tough, yet sometimes, the solution is straightforward; if one genuinely aspires to make it big, the key is not to give up, he said.

“I don’t think you should be optimising for anything other than your product-market fit in the beginning... You will have to sacrifice a lot of things, and many people don’t...You can’t work five days a week and build a startup. That’s not how it works. You have to go all the way in, and only then will you win,” Munjal added.

Investors play a crucial role in a startup’s growth journey by providing essential financial support, strategic guidance, and valuable networks. However, there are cases where there’s a conflict between a startup and its investors.

“A lot of the time, blame [falls on] investors... I’ve spoken to some of those investors, and [they] have been advising their founders for two to three years at times, [saying], ‘Don't do this.’ Sometimes founders don't listen, and the only option left is to dismiss the founder,” Munjal remarked.

He further added, “But, there's this conundrum: at what point do you pull the trigger? Because [investors] are also accountable to their LPs. So, at some point, they have to [acknowledge], ‘Hey, this is messed up.’”

He believes that in these kinds of situations, “investors are not at fault” but “it’s the founders”.

“Sometimes people get greedy… have this God complex, that they can do anything...acquire everyone and everything,” Munjal noted.

The Unacademy chief stated that the firm did not acquire companies solely for revenue; rather, it acquired them for talent and specific capabilities that it lacked. The company has come a long way over the last nine years, but it still has a long way to go, with an IPO on the cards.