Unacademy layoffs: What's stressing India's edtech sector?

‘Move fast and break things’ was Mark Zuckerberg’s motto for Facebook in its early days. He said that companies must not lose opportunities by moving slow, and that mistakes should be forgiven as you take risky bets.
 
While many founders live by the slogan, we can say from recent experience that it may not be suitable for the ed-tech industry.
 
In the quest for hypergrowth, Indian ed-tech companies have moved fast, disrupting the education sector.
 
Unacademy, India’s second-largest ed-tech firm after BYJU’s, has reportedly laid off 1,000 employees over the past few weeks in a cost-cutting drive.
 
Founded in 2015 as a YouTube channel by Gaurav Munjal, Roman Saini and Hemesh Singh, Unacademy is currently valued at $3.4 billion. The startup’s last funding round was in August 2021, when it raised $440 million. 
 
So far, Unacademy has raised $858 million in funding. While the total funding for its bigger rival Byju’s -- which is also India’s most valuable startup -- is at a whopping $5 billion.
 
Both of them have gobbled up smaller startups with niche offerings. They have each acquired at least a dozen startups. Byju’s spent almost $2.5 billion on acquisitions last year.
 
Byju’s co-founder and CEO Byju Raveendran made a personal investment of $400 million in the company’s $800 million round last month, which catapulted its valuation to $22 billion.
 
The move was reportedly part of the company’s strategy to show the founder’s confidence in the firm and help shore up investor interest at a time when the valuations are under stress globally.
 
Byju’s has constantly come under fire for its aggressive sales tactics. It has been accused of pushing its products on families who cannot afford them.
 
Mumbai-based Lido Learning, which provided live online tuitions in small groups of six, closed down in February and asked its 1,200 employees to hand in their resignations.
 
Before it ran out of funds, Lido had seen rapid growth and was on track to reach a $100 million revenue run rate by the end of the financial year.
 
With increasing smartphone users and rising demand for quality education, there is no denying that the potential for growth in the ed-tech sector is huge. Higher education institutions are also focussing on creating online programmes.
 
India’s ed-tech market is expected to touch $10.4 billion by 2025 led by K-12 and test preparation segments.
 
Ed-tech start-ups in India raised $4.7 billion in 2021, with BYJU’s alone raising about $1.9 billion. Majority of the funding went to test preparation and online certification startups.
 
As investors seek growth, major ed-tech firms are embracing the hybrid model to tap India’s booming $180 billion education sector.
 
Byju’s is investing over $200 million to open 500 brick-and-mortar tuition centres in the next 12-18 months, on top the existing 80. Last month, Unacademy launched its first offline experience centre in Delhi.
 
Expecting investors to temper their expectations for growth may not be a good idea. But ed-tech companies should realise that growth that comes at the cost of high cash burn may not be sustainable.