Edtech startup Udayy shuts down. This is how employees reacted to mass layoffs
Udayy, an edtech startup, has shut down and laid off its whole team of 100-120 people. Udayy, a startup founded by Saumya Yadav, Mahak Garg, and Karan Varshney in 2019, was forced to close its doors in the post-pandemic world when children returned to school.
The decision to shut down Udayy, an edtech business that provided live learning courses to schoolchildren, was “perhaps the toughest thing” Mahak Garg has ever had to do, according to co-founder and chief operating officer Mahak Garg.
According to a LinkedIn post by Garg, all employees, including teachers, were given a hefty severance payment. She wrote that the decision to shut down operations was disclosed at a company-wide town hall on April 4 and that the employees’ reaction astonished her.
“What happened after the townhall astonished and relieved me,” she wrote. “The team was more concerned about us as founders than themselves.”
According to Mahak Garg’s article, several Udayy employees offered to join the trio’s future business venture. Some of the people who had watched the town hall from afar came to the office to meet the co-founders and say their goodbyes in person.
“Several team members wrote and sent WhatsApp messages thanking us and sharing their own unique growth stories within Udayy over the next several days,” said Garg, who shared screenshots of some of the encouraging messages she got.
Garg stated that the staff worked tirelessly over the next two weeks to reimburse the money to customers.
Udayy an edtech startup also assisted laid-off employees in finding new positions, according to co-founder Saumya Yadav. Almost every employee was able to find work elsewhere.
“We have reimbursed all of our customers’ money and offered our team workers and teachers a handsome severance,” Yadav added. We’ve already assisted nearly all of our employees in finding new jobs at other potential businesses. We are repaying the remaining funds to our investors, estimated to be roughly USD 8.5 million.”
High customer acquisition costs, Zoom fatigue, and low retention, according to Mahak Garg’s post, all contributed to the shutdown.
“After a series of failed pivots over the last 6-8 months, we decided to close Udayy. Despite having several months of runway ahead of us, we decided because we didn’t want to waste investors’ and LPs’ hard-earned money or teams’ time on a business we knew was bound to fail,” she added.
According to two people familiar with the situation, edtech firm Udayy is in advanced talks to close an investment round from new and existing investors. The Gurugram-based business received a $2.5 million venture round a year ago.
One of the individuals added, “Norwest Venture Partners is leading a $10 million round in Udayy, with existing backers expected to participate.” The source requested anonymity and stated that the transaction would be finalised in weeks.
Falcon Edge’s Alpha Wave, Info Edge, Better Capital, and CRED founder Kunal Shah are among Udayy’s current investors. Entrackr was the first to report about the startup’s seed round, which took place in November 2020.
Udayy, a two-year-old live learning platform for students in kindergarten through eighth grade, allows them to practise and strengthen their mathematics and analytical thinking. Udayy, founded by Saumya Yadav, Mahak Garg, and Karan Varshney, emphasises English and higher-order thinking skills in addition to Math.
“The deal will put Udayy’s worth between $35 and 45 million,” a second source claimed. “The method will be used to expand the company and produce new products.”
Udayy and Norwest did not respond to queries sent to them right away. According to its website, it has held over 1,30,000 sessions, employs over 200 competent teachers, and serves 50,000 children. Hello English, OckyPocky, Kutuki, and PlanetSpark are examples of renowned platforms that cater to children’s learning.
Norwest Venture Partners, which just closed a $3 billion fund, claims to have invested in over 600 startups since its establishment. According to the company, the company has started focusing on early to mid-stage investments in India, Apart from late-stage venture and growth equity investments. Swiggy, OfBusiness, Mensa Brands, Xpressbees, Pepperfry, Quikr, and Thyrocare are among the fund’s Indian investments.
Layoffs, restructuring, slowdown: India’s edtech firms are struggling post-pandemic
Neeta Singh (name changed), an educator at one of India’s prominent edtech unicorns, was ecstatic when the government announced a vaccination programme for 12-14-year-olds early this year. She assumed she’d be back in the classroom after almost two years.
Despite the reduced pay, Singh said she was eager to return to her old employment, a tutoring firm because she wanted to escape the ‘very toxic’ culture at the edtech unicorn where she had worked for over 15 months.
“I am a single mother of two children, and I cannot retire because both of my children are still in school.” When the government announced the first lockdown in March 2020, the local tuition centre where I was working told us to hunt for other jobs,” Singh stated.
“E-learning sites were giving large deals at the time, so I agreed.” I reasoned that working from home would be preferable since I would be able to control my time better. However, my job stability and rewards were tied to the number of classes, doubt-solving sessions, tests, and other activities I participated in, which became too much. I’m back at the local tutoring centre now. Although my pay is lower, I now have more time with my children and am mentally more relaxed,” Singh remarked.
Singh, to be sure, isn’t the only one. With the COVID-19 situation normalising, Moneycontrol spoke with at least five other educators teaching at various edtech businesses who have returned to offline physical tuition centres.
Singh also stated that she intends to enrol both of her children in an offline tuition centre for the upcoming academic year, which begins later this month.
“Offline tutoring centres are superior. My 11-year-old kid is always in front of his laptop, and I have no idea what he watches, reads, or does. “He should learn at a physical centre,” Singh explained.
“Technology is beneficial, and it is beneficial that it has progressed so far. Allow tuition centres to make effective use of technology. Still, I am a strong advocate of classroom teaching, and I believe that (classroom teaching) will continue to be the case in the future, which is why you see all these new enterprises. “Byju’s and others are reverting to opening offline locations,” Singh noted.
Many parents Moneycontrol spoke to echoed Singh’s sentiments, with the majority eager to enrol their children in traditional coaching centres as the COVID-19 situation stabilised.
Many upskilling students and college students are eager to visit institutions and campuses after almost two years.
Ranjana Giri, an 18-year-old Patna student, engaged in Byju’s coaching lessons in 2020, when the epidemic struck the city and schools were closed overnight.
“She remarked,” she said, “I’ve been studying on Byju’s platform for two years and can honestly say that it was a complete waste of my money. To me, the instructional method seemed incomprehensible. Animations and sound are all I recall.”
Giri claimed she couldn’t understand the themes adequately because of the videos’ speed and explanation quality. She is currently studying for the NEET medical entrance exam. Giri intends to relocate to Kota, Rajasthan, and enrol in a NEET course at Allen, a prestigious coaching centre.
She claims that offline classes provide a competitive environment that motivates students to reach their goals, which internet coaching classes, in her opinion, do not.
“I aim to enrol at Allen because that’s where all my family members who became doctors went to school,” she said.
This preference for traditional physical tuition centres, schools, and colleges has begun to harm edtech enterprises as demand for remote learning and technology-based education services has decreased.
The slowing demand for technology-based education services, combined with the much-discussed funding winter, has had a domino effect on India’s thriving edtech companies, forcing them to lay off employees, scale back expansion plans, cut back on unnecessary spending, and look for new revenue streams. Some edtech firms have even gone out of business.
Layoffs and forced resignations
Since the beginning of the year, the number of people laid off by edtech companies has increased nearly every month. In 2022, edtech companies will have laid off over 3,600 staff, according to data collated by Moneycontrol.
It all started when Lido Learning held a virtual town hall meeting and asked over 1,200 staff to resign. In the meeting, Lido Learning’s founder, Sahil Sheth, stated that the company was in a “financial crisis.” The sales and marketing staff accounted for about 900 of the 1,200 personnel.
Employees were invited to leave immediately, and Sheth assured them that they would be paid in less than three months since Lido would sell its assets to pay off all of its debts, including employee salaries. Employees of Lido Learning, on the other hand, have yet to receive their wages.
In a restructuring exercise, SoftBank-backed startup Unacademy fired off roughly 100 employees, including educators and members of the sales and marketing teams, from its PrepLadder team. In April, Unacademy fired off another 600 people, or nearly 10% of its workforce, as a cost-cutting effort.
In May, Unacademy was followed by Vedantu, a Tiger Global-backed edtech unicorn that laid off 624 employees, or more than 10% of its staff, including hundreds of educators. In a blog post, Vedantu’s co-founder and CEO, Vamsi Krishna, stated that the company anticipated a cash shortage in the following quarters due to a downturn in global financial markets.
“We don’t terminate academic teachers’ services amid the academic year as a company policy,” Krishna told Moneycontrol.
“We have two different types of classes: small and large. There is a master instructor and class teachers in a large class, but only one teacher in a small class. We decided to keep only a large class for grades six to eight, which resulted in the need for master teachers rather than class instructors. As a result, the surplus class teachers were requested to leave,” Krishna explained, explaining why the company laid off hundreds of teachers.
About 800 employees from Byju’s-owned Whitehat Junior also resigned a week later after being instructed to relocate to various cities right away. Employees stated that Whitehat Junior was trying to save money and had asked them to relocate without warning, leading to many resignations.
Another edtech firm, Frontrow, which is backed by Unacademy’s founder Gaurav Munjal, laid off roughly 150 staff due to a financial shortage. According to Moneycontrol, about 150 more employees voluntarily resigned in response to the mass layoffs. Udayy, funded by Alpha Wave, followed Frontrow, and Eruditus, supported by SoftBank, which laid off over 100 and 80 staff earlier this week.
Company shutdowns and streamlining of verticals
Udayy’s co-founder Saumya Yadav said that the company would cease operations and return its remaining money of around $8.5 million to its investors. With schools resuming, Yadav told Moneycontrol that the K-12 market (kindergarten to class 12), in which Udayy operates, has become problematic, prompting the company’s founders to decide to wind down operations.
“K-12 is complicated right now since pupils are switching from online to traditional school.” Priorities and time constraints change, as makes the amount of money they wish to spend. It’s a once-in-a-lifetime challenge for enterprises founded during the pandemic, like ours,” Yadav told Moneycontrol.
According to Yadav, the founders also considered selling the company, but the plan didn’t work out because many edtech companies are downsizing their operations due to the funding drought.
“We looked into selling our company, and I had conversations about it.” However, it appears that people are either taking a step back or not expanding because K-12 is struggling across the board. “None of the discussions came to fruition,” Yadav added.
Udayy isn’t the only edtech company to close its doors. In march, employees at Lido Learning were also alerted that the company was trying to wind down operations. Sheth of Lido Learning, like Udayy, was considering selling the company, but the deal has yet to materialise.
Lido Learning, whose investors include Vijay Shekhar Sharma of Paytm, Ronnie Screwvala of upGrad, and Shark Tank judge and Shaadi.com founder Anupam Mittal, among others, was looking into a slump sale of its business to larger rivals and a conglomerate, among others.
While smaller edtech startups like Udayy and Lido Learning have struggled to stay afloat, well-funded edtech unicorns are shuttering non-core verticals and simplifying other operations.
Unacademy, which dabbled in the K-12 (kindergarten to class 12) market, shut down the vertical in months.
“Those areas of edtech that are failing are those where the offers are homogeneous, and there is too much competition.” A few Indian K-12 consumer startups have closed their doors. “Vedantu laid off people, and Unacademy shut down the entire business line,” Mujtaba Wani, an investor at GSV Ventures, stated.
Meanwhile, Eruditus has announced that it will close some of its non-core companies this year.
“There are certain projects where we will say, hey, this may not be a core project today, so let us shut it down,” said Ashwin Damera, Eruditus’ co-founder and CEO, in a telephone conversation.
“We were working on an app-based product with a $99 price tag that we classified as a non-core product.” We will not invest any further in it; it will remain as is, but we will revisit it later. As a result, we’re keeping a careful eye on both core and non-core, attempting to figure out our fate,” Damera stated.
The decision by edtech unicorns to shut down non-core sectors comes at a time when many in the industry are focusing on profitability rather than growth. Unacademy’s Munjal recently wrote a letter to staff in which he stated that the organisation should focus on ‘profitability at all costs.’
Munjal also advised employees to ‘learn to work under pressure and stated that the company must make efforts to become profitable, such as reducing brand promotion and focusing on organic growth channels.
Eruditus, on the other hand, will take its time expanding this year, particularly in terms of geography, according to Damera. He also stated that the company would only hire 100-150 people this year, compared to 1,300 in 2021.
“We’re opening an office in Sao Paulo and a handful of other locations.” So, this year, we will take it easy on the expansion and focus more on our profitable India company. We want to expand on it. That isn’t to say I won’t grow in Brazil; it just means it will take a lot of time and effort to set up a new office, construct a tech stack, hire local language employees, and so on, so I’ll focus on the core profitable business instead,” Damera added.
Damera also predicted that the edtech industry will consolidate due to the slowdown and that several well-funded companies, including Eruditus, will seek mergers this year.
Acquisitions, offline forays and newer revenue streams
Eruditus set aside $1 billion for mergers and acquisitions in 2022 earlier this year. CPPIB provided $350 million in overseas acquisition debt financing to the company (Canada Pension Plan Investment Board).
Similarly, Byju’s has raised over $850 million in debt for international acquisition funding, and the corporation is aiming to buy companies worldwide, particularly in the United States. Byju Raveendran, the business’s founder, recently stated in an interview with The Economic Times that the company would search for multi-billion’ dollar acquisitions in the United States.
“Some edtech unicorns are sitting on massive acquisitions, and they need to shore up their revenue, especially when everyone is talking about a drop in demand for edtechs and everything,” said one investment banker who asked to remain anonymous.
“Most will make purchases to boost revenue, even if they claim it was for tech capabilities or something else. “Edtech businesses will aggressively seek newer revenue streams this year, not simply through acquisitions, by selling different sorts of packages, technological platforms, or going offline,” the banker noted.
The banker is correct. In recent months, companies like Vedantu have varied their goods to attract students and parents. To separate its product from competitors like Byju’s, the Tiger Global-backed business created an immersive learning platform in March, employing its artificial intelligence and machine learning skills. To entice parents, Vedantu has launched an ultra-low-fee package for students.
Meanwhile, Byju’s said that it would invest $200 million to build offline tuition centres in February. Over the following 24 months, the company intends to recruit one million students for the offline programme, according to the corporation. Unacademy followed suit in May and started offline tutoring centres. Before launching a full-fledged offline presence, Unacademy launched an ‘experience centre’ in March.
According to a source close to the situation, the experience store was launched to demonstrate the organisation’s technological skills, and the company hoped to recruit learners through it.
“Adding offline is merely a means for organisations like Byju’s and Unacademy to increase and diversify revenue streams. “They’re trying to broaden their offers to attract more students,” said GSV Ventures’ Wani.
Cloud over listing plans
The edtech slowdown occurs at a time when three of the country’s six edtech unicorns are planning an initial public offering (IPO) within the next 18-24 months. Munjal of Unacademy recently stated that the firm intends to go public in the next two years, whereas Krishna of Vedantu noted that the company might go public in 18-24 months.
Meanwhile, Byju’s has been looking into an international listing in the United States. According to reports, the Blackrock-backed company may also pursue a SPAC (particular purpose acquisition vehicle) with a valuation of more than $40 billion. The company’s current market capitalisation is $22 billion. Byju’s Raveendran recently stated that the company could be listed in 9-12 months.
Slowing investment, falling valuations, and a hiccup in demand for edtech solutions may jeopardise the companies’ intentions to go public. These companies have raised millions of dollars at multibillion-dollar values in the previous two years.
Bucking the trend
While the bulk of edtech companies have been affected by the downturn, a few have appeared to defy the trend. Backed by the International Finance Corporation, Ronnie Screwvala, the firm’s chairman, said the company aims to hire 3,000 workers in the next three months and is close to receiving new investment.
Screwvala also stated that in a country like India, there are still many prospects in the education sector and blamed the current set of issues on “halos” produced by select private equity groups that funded young entrepreneurs who became poster boys.
This year, upGrad isn’t the only upskilling edtech business looking to expand. This year, Scaler, which Tiger Global finances, will also invest $50 million in mergers and acquisitions, seeing a favourable consolidation opportunity due to the recent dip in tech firm prices.
In an interview with Moneycontrol, the company’s co-founder Abhimanyu Saxena stated that the company would spend on marketing and other growth activities this year.
PhysicsWallah, a bootstrapped edtech business that plans to raise $100 million at a unicorn value this year, is likewise growing rapidly. In a recent interview with Moneycontrol, the business’s founder and CEO, Alakh Pandey, stated that the company will aggressively expand in categories where it does not yet have a significant presence. PhysicsWallah, according to Pandey, hires 150 people each month for various positions.
Investors believe that only businesses with good unit economics in the edtech area can survive when the sector gets a reality check. Furthermore, late-stage firms may find it more challenging to raise capital because their valuations are already high.
“In this context, late-stage investing can be difficult because many firms have previously received funds at extremely high valuations compared to their sales. “It can be difficult to underwrite appealing returns,” said GSV Ventures’ Wani.
“We’re investing, particularly in seed or series A companies,” Wani said.