Article: In a shakeup: What is the future of edtech in India?


In a shakeup: What is the future of edtech in India?

Industry experts say edtech is not a fad but a reality, had phenomenal growth in the last two years, which is here to stay and has a bright future, and that the recent layoffs in the sector are a result of course correction and realignment of business model, costs, and investments.
In a shakeup: What is the future of edtech in India?

India’s edtech industry, which was valued at $750 million in 2020 and predicted to reach $4 billion by 2025, appears to be staring at a crisis. 

The edtech is one area where India has punched above its weight thanks to its projected market size. The sudden development and fast rise came after the pandemic came as a tailwind for edtech companies in India.

The current scenario, however, appears gloomy. Several findings reveal the weak health of the industry.  A mass layoff is one of the prime reasons that are plaguing the edtech entities. It continues to have a bearing on financial credibility, employer brand, and consumers’ faith. There seems to be no end of agony for the sector. 

According to a Morning Context report, edtech giant Byju’s is likely to lay off over 12,000 staff next year. This follows the company’s announcement to lay off about 2,500 employees across departments to cut costs amid mounting losses earlier this month. 

In probably one of the largest layoffs by a major startup, Byju’s said it plans to cut about 5% of its 50,000 workforces across departments including product, content, media, and technology in phases over the next six months.

The edtech sector accounts for close to 45% of the 15,000-plus layoffs that the Indian startup ecosystem has witnessed this year. The Byju’s went for the largest number of layoffs in the edtech space, firing nearly 4,000 employees across its subsidiaries, says an Inc42 report.

Explaining the trend, Sumit Kumar, chief business officer, TeamLease Education Foundation, said the recent layoffs in the edtech sector are a result of course correction and realignment of business model, costs, and investments.

According to Kumar, organisations went too far to create flamboyance to attract talent and customers, invest in products, and make acquisitions. 

“The sky-rocketing growth made it an attractive sector for investments, hiring was done for the anticipated growth and to maintain competitive advantage. Pandemic accelerated the adoption of digitalisation,” he said.

Kumar pointed out that post-pandemic, there is a course correction to the high optimism, business models are being aligned to the macro situations, and advanced hiring for the anticipated growth is being corrected.

After the lockdown was over, everything became normal. Students wanted to go back to school and college. Edtech is essential to fill in the gap of quality teachers, and accessibility of quality education in the remotest part of the country. Be it K12, higher education, or for employed learners, edtech is a viable option. 

Kumar said the edtech option cannot be the primary learning platform but can be supplementary. Physical campuses, student-teacher interactions, and student -student interactions cannot be substituted completely with virtual learning.

The Covid-induced lockdown across the world forced even the most prestigious colleges and schools to turn to a digital platform, leveling the playing field for edtech startups that tapped into the digital space to provide education, leading to enormous growth initially for edtech companies. 

“This resulted in an unanticipated investment increase along with rationalisation in the coming time. Furthermore, with Covid-19 appearing to recede, edtech companies are undergoing a normalisation of resource requirements, which has reduced the workforce through employee attrition or off-boarding,” said Nishant Chandra, co-founder, Newton School.

Newton School, however, has not laid off a single employee since its inception.  “Instead, we are hiring more talent as we are experiencing a solid growth trajectory and ramping up our operations,” Chandra said.

Why has there been a sudden decline in edtech funding?

The funding winter has also forced as many as four edtech startups – Lido Learning, Crejo.Fun, Udayy, and SuperLearn – to shut operations, the Inc 42 report said.

Chandra attributed this funding falloff to a global slowdown, lower valuations for tech stocks, inflation, and geopolitical instability in many countries.

Kumar said the decline in funding is due to a correction in the anticipated sectoral growth and the returns aren’t in the range as expected.

“Majority of the edtech organisations are in red which is compelling them to relook at their business model for sustainability. Financial prudence is setting in and hopefully, the sector will be back in light for investment, but not necessary in a similar range. This is also time for consolidation and we could expect mergers,” he added.

However, according to Chandra, the funding slowdown is temporary, and the industry should overcome it in the next few months.

“The funding environment is expected to stabilise in the coming 10-12 months, allowing start-ups to extend their funding runway.”

The upskilling platforms have shown a rise in user numbers as companies’ demand for skilled developers and data scientists is at an all-time high. What is also boosting the demand for web development and data science courses is that working professionals can pursue them at their convenience without taking time off work.

What do recent acquisitions/consolidations mean for the edtech sector?

A recent acquisition is to strengthen the product portfolio and fill up the tech gap and customer acquisition said, Kumar. However, he added that these decisions are being made with financial prudence and in line with realistic market growth.

What lies ahead for edtech in India?

Industry experts said edtech is not a fad but a reality, had witnessed phenomenal growth in the last two years. This is the reason which is why it has a bright future and would stay on course.

“Pandemic opened up the avenue and accelerated the growth. There is a course correction which is good for the sector. The New Education Policy has brought out many reforms in education system, make way for online education and digital engagement, and we hope to have more liberal online guidelines for scaling up the education for a wider reach and optionality,” said Kumar.

He added that announcement of the digital university and setting up online campuses by foreign universities makes a good business case for edtech.

“At large, society has benefitted. Edtech has made education, more personalised, affordable, equitable (bridge the gap between the rich and marginalised income group), and accessible. There is a need to bridge the digital divide, and ramp up the connectivity.”

Saurabh Deep Singla, CHRO at Asia’s largest higher edtech company upGrad, said edtech is at a very nascent stage with a lot of room for innovations and outcomes that will positively impact the lives of millions.

“With the increased online penetration in India, we are observing a higher adoption of online and edtech products amongst consumers but honestly speaking, it’s at a very early stage. The lack of conventional learning opportunities or I should say a breakdown in recent times has allowed passionate entrepreneurs to come up with their products and services for enabling an uninterrupted flow of education while also accelerating India’s literacy graph across non-metros and rural regions,” he added.

According to Singla, edtech companies are actively creating an all-inclusive space with a high-engagement curriculum for driving maximum career outcomes for their learners, thereby also attracting early-stage investments, which in turn is creating a promising outlook for the sector.

Funding in the edtech segment has shown a positive trend in Q3 CY22 compared to the previous quarter (in value terms), as per the PwC India report titled, “Startup Deals Tracker - Q3 CY22.”

In Q3 CY22, 81% of funding activity was contributed by upGrad, which raised $225 million, followed by Sunstone, which raised $35 million.

Chandra sees edtech as a happening ecosystem in the startup world. 

“It is much more exciting than ever before. The industry has seen a massive increase in the number of startups in the last two to three years, with thousands of new players entering the market,” he said.

As per the recent report by Technavio on Online Education Market, India’s online education market is set to grow at a CAGR of 21% between 2020-24 to reach a market size of US$ 14.33 billion, indicating that prospects of this area are vast. With growing Internet penetration and increasing public awareness of edtech and digital technologies across remote and rural areas, a sizable untapped market will contribute to a promising future for edtech firms in India.

“The core problems that the education industry deals with are not limited to a single area but rather stem from many settings, from technological and infrastructural to behavioural. Therefore, edtech companies must work with public and private educational institutions to develop an adequate educational infrastructure and delivery system for inclusive learning,” he added.

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Topics: Startups, Technology, Funding & Investment, #Hiring, #DigitalTransformation

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