A Look At The Future Of Edtech In India From The Firings At Unacademy, Vedantu, And Lido
In a cost-cutting frenzy, edtech companies have begun laying off employees. Is there, however, more to it than meets the eye?
When Byju became a unicorn in 2018, the term “unicorn” was not widely used. India now boasts 100 unicorns, six of which are edtechs, including Byju’s. Unacademy was declared a cult in 2020, while upGrad, Vedantu, and Eruditus were valued at $1 billion in 2021. In 2022, LEAD became India’s sixth edtech unicorn.
The edtech market has been buzzing with activity (read: investment) since the epidemic hit, with multiple predictions predicting tremendous growth in the next years.
While a Blume Ventures analysis predicted that the edtech business will be worth $750 million in 2020 and $4 billion by 2025, Redseer, a management consulting and market research organization, estimates that the sector will be worth $5 billion by 2025.
Is everything, however, well in the edtech world? Recent events suggest that danger is developing inside the industry.
It all began in February, when Sahil Sheth, the founder and CEO of Lido Learning, announced the company’s closure due to financial difficulties in front of approximately 1,000-2,000 workers in a virtual town hall. He also told the employees to start seeking work immediately, promising to pay their paychecks within 90 days. Since then, several additional players have been reported.
Unacademy fired off roughly 600 employees in early April due to non-performance and role redundancy. The corporation claimed in a statement that it was part of a routine appraisal and reevaluation procedure.
“As a company, we are focused on becoming profitable in our core business by the end of Q4 CY2022, while investing for development in our Group companies.” A tiny portion of employee, contractor, and educator positions was re-evaluated as a result of role redundancy and performance, as is usual for any business of our size and scope, according to the statement.
Vedantu, the latest edtech company to fire off 200 staff (120 contractual and 80 full-time), cited load rebalancing as the reason for the layoffs.
Almost everyone who was fired worked as an assistant instructor for the company’s academic teams.
In another instance, Inc42 recently reported that over 800 WhiteHat Jr employees had quit in the previous two months after being requested to work from home. Byju’s purchased the Mumbai-based business for $300 million in 2020, and all of its workers were reportedly instructed to work from the office within a month. It does not appear that such a big number of staff have resigned. According to Inc42, a few employees referred to the move as a cost-cutting exercise, claiming that a month’s notice was insufficient.
The Change Wind
One of the main reasons for edtech companies decreasing costs is that demand for online education is dwindling as more offline educational institutions/schools operate. Vedantu has introduced Ai Live, an interactive platform aimed at lowering the cost structure for a one-year long-term education for students in grades 6 to 12 from Rs 22,000 to Rs 5,000 every year.
According to experts, when more offline classes resume, the intensity of recruiting, investments, and new enrolments in the category may decrease.
Experts believe that job redundancy is also due to edtechs entering a consolidation phase in terms of acquisitions and mergers. Since 2017, Byju’s, the world’s most valuable startup, has acquired 16 big acquisitions, nine of which occurred in the year 2021 alone. Unacademy, India’s second most valuable edtech company, has already made 11 acquisitions. UpGrad, which became a unicorn last year, has also completed nine acquisitions to strengthen its position in the industry.
“The skillset necessary in edtech companies is fast expanding, partly as a result of technological advancements and partly as a result of the natural progression from startup to business.”
According to Narayanan Ramaswamy, National Leader – Education and Skill Development, KPMG in India, “workers also find themselves doing completely different things from what they planned to do when they joined,” explaining the likely causes for the recent layoffs. He also mentioned that the pressure from VC/PEs for performance is something that not many people can handle.
Role redundancy and layoffs are also a result of edtech companies being pushed to adopt a hybrid strategy that requires them to be present both online and offline. Byju’s $1 billion purchase of Aakash was part of a long-term strategy. Aakash has over 200 physical locations and a student population of 2.5 lakh.
It may be able to assist Byju in reaching tier II and tier centres, which the edtech behemoth has yet to attain. BYJU’S Tuition Centre, a comprehensive program that combines offline and online learning experiences in 200 cities, was also revealed. Through its 500 centres, the edtech hopes to enrol one million students in this program over the next two years.
Unacademy, which just opened its first experience centre in Delhi, is also aiming to penetrate the offline market. In addition to its current site, it is the first of four stores to open in Kota, Jaipur, and Lucknow. Potential students and parents who wish to chat to sales staff before signing up for a course will be able to do so in the stores.
By acquiring The Gate Academy, which has 50 locations across India, upGrad entered the exam preparation business. It has been renamed ‘upGrad Jeet,’ and will target Hindi-speaking small-town residents seeking mid-level government positions.
Edtech companies are well aware of the need to adapt and pivot. They may need to rethink their workforce mix and, if necessary, resort to “load rebalancing.” While Unacademy and Vedantu declined to comment on the layoffs that have impacted the sector, sources claim that some of the instructors who were fired were aware of their poor performance. Intern Educators are small-scale educators who are onboarded, trained, and scaled by Unacademy. They work on a contract basis and are evaluated regularly — for the most part.
Layoffs aren’t the ideal approach to manage/cut expenses or scale-up, whatever the cause. Experts agree that a well-defined HR organization and policy are required. “To employ the proper people and retain talent, companies must have a system in place around HR, learning & development, reskilling, and so on.” In the long term, hiring and firing will be inefficient.
Furthermore, because gig workers and gig jobs are here to stay, employers should implement consistent HR practices and develop talent for long-term positions, according to Ramaswamy. Only time will tell if the edtech bubble will burst or the segment will prosper. But, for the time being, the challenges of valuation vs value – high edtech valuations versus real outcomes; acquisition costs versus profitability; return to investors versus educational development; and offline versus online are what will determine the sector’s and employees’ fates in the years ahead.
Furthermore, with VC financing drying up, edtechs and entrepreneurs, in general, must conserve their capital. According to research released by Bain & Company (in partnership with the Indian Venture and Alternate Capital Association), the number of venture capital agreements is expected to decline this year. Indeed, according to a Crunchbase analysis, worldwide VC financing fell by $10 billion months over a month in February ($52 billion). According to the study, early-stage and late-stage financing declined by 17 and 19 per cent, respectively.
edited and proofread by nikita sharma