After the spectacular implosion of Byju’s, another edtech unicorn is reportedly in trouble. The future of the entire industry seems to be cloudy—even as the Kota factories churn on. What went wrong—in a country where parents pay the moon for any kind of exam prep?
First, some basic deets
Unacademy was founded by Gaurav Munjal, Hemesh Singh, and Roman Saini in 2015. Munjal is the most visible and powerful of the lot. To date, the startup has raised $880 million in funds over 12 rounds, achieving unicorn status in 2020. The most recent raise of $440 million came in August 2021 at a company valuation of $3.44 billion. All of which sounds peachy.
What it does: The company prepares students for competitive exams—ranging from engineering (NEET) to civil services and medical schools. It is primarily an online platform—but has expanded into offline coaching, as well.
About Munjal: He doesn’t have the usual B-school background. Schooled in St. Xavier’s Jaipur, he started coding at 12 and later did a computer engineering degree in Mumbai. Fancying himself an Indian Steve Jobs, Munjal is infamous for building a brutal work culture—and an attitude of “pure aggression” toward rivals. Until recently, he predicted Unacademy will soon become a $100 billion company:
Munjal’s obsession with dominating, quashing rivals and increasing Unacademy’s valuation has come at the cost of antagonising rivals, his own employees, some investors and educators… “Early on, we decided that we will play the high-risk, high-reward game. We will not be a ‘good company.’ Either it has to be a great company or it has to be an utter failure,” Munjal said in conversation with Sequoia’s [Shailendra] Singh.
Much as Byju’s founder Raveendran, Munjal’s grandiose vision and cavalier attitude are at least partly responsible for Unacademy’s fall from grace.
Unacademy’s sinking fortunes
First signs of trouble: emerged in 2022—when Munjal became among the first to speak of a “funding winter.” In March, an unflattering MoneyControl profile painted the picture of an arrogant CEO running amok. By July, there were reports of sweeping layoffs and cost cutting.
Unacademy has now experienced five rounds of layoffs—with 2,000 people sacked just in the past year. It’s current headcount: 2,500. It is also heavily in the red—with a consolidated net loss of Rs 16.78 billion (1,678 crore) in 2022-23—and a heftier Rs 28.48 billion (2,848 crore) in the previous fiscal year.
Up for sale? As of February, Munjal told Mint he isn’t in the least bit worried: “Overall, my cash burn this year would be under $20 million. I have $200 million in the bank." But according to the latest bit of bad news—reported by Morning Context—Munjal is now looking for a buyer, with increasing desperation:
“The situation is bad,” says the fourth person quoted above. “The board had given him one year to turn the business around. If he can’t then the board will take a more central role in the company.” Already, the prominent investors of Unacademy—Peak XV, General Atlantic and Temasek—have been involved in its merger and acquisition conversations
Munjal dismissed Morning Context’s reporting—and offered up the popular Mark Twain misquote, “Reports of my death are greatly exaggerated.” But he also didn’t deny the prospect of a sale/merger:
We have had exploratory merger conversations with a few other players in the market. I feel that edtech will go through a consolidation phase before companies start to go public. There is too much competition right now, which is impacting everyone’s EBITDA. We will see a lot of consolidation happening in edtech in the next 12 months.
What went wrong: Edtech ki dukhi kahaani
The story is pretty much the same across all edtech startups. First came the pandemic boom, then the shopping spree—which ended in tears when the kids went back to coaching centres.
The pandemic boom: Everything shut down—but the 320 million kids still had to study. Online classes came to rescue. The mood was giddy:
The edtech sector raised a staggering US$ 1.88 billion in 2020 alone, surpassing in a single year its record of investments received over the five preceding years… By 2021, India’s edtech boom seemed unstoppable. The country had emerged decisively as the world’s second-largest edtech market after the United States (US). Edtech was also India’s most heavily funded startup segment, receiving an influx of US$ 4.73 billion in 2021 alone.
By 2022, there were 4,450 startups catering to those 300 million kids.
The shopping spree: Flush with VC money and sky-high valuations, the bigger boys went on a shopping spree. Since the pandemic ended, Byju’s was on a buying spree—spending $2.6 billion on acquiring other ed-tech companies. Not to be left behind, Unacademy bought 13 companies between 2018 and 2022. Munjal became infamous for bullying founders into selling their companies—promising to destroy them if they turned him down. The soaring ambitions also went global—with Byju’s, Unacademy, Emeritus and others entering the US market. With money available on tap, impulse buying was recast as “ambition.” When an investor suggested Munjal consider raising money through debt, he reportedly replied: “Don’t waste my time. I can raise equity at whatever valuation I think of.”
Point to note: The FOMO-driven rivalry between Munjal and Raveendran made him even more reckless:
[T]here was a full-blown rivalry [with Byju’s]. They also got into the K-12 segment in bits and pieces. The question that kept coming up was, ‘Can we do what Byju’s is doing?’ Gaurav wanted to acquire WhiteHat Jr. and Doubtnut, but it didn’t work out. Byju’s got the bigger deals because they had the money.”
In other words, crores of rupees were blown in a foolish race of one upmanship.
The post-pandemic thappad: When the pandemic ended, parents took their kids back to coaching centres. Demand for online courses plummeted almost overnight. The sudden lockdown boom ended in an equally abrupt post-lockdown crash. Also this:
Besides, the marketplace spurred by the boom years was oversaturated with companies large and small, all vying for a fast-shrinking customer base. The competition for market share relentlessly drove down prices and margins, which in turn impacted profitability, and discouraged investors. Funding for edtech startups dropped to US$ 2.6 billion in 2022 and then plummeted to US$ 297.3 million in 2023.
Old is gold: Faced with plummeting enrollment numbers, all the edtech companies pivoted toward offline learning. To stay in the game, Unacademy has now thrown money at 63 offline centres—including in the coaching capital of India: Kota. But even this gamble may prove futile:
It seems that idea hasn’t worked out. At least not in the way Munjal or Unacademy’s board would have wanted. “Gaurav is stuck,” says a fifth person in the know, requesting anonymity. “Online is gone. It is not generating any cash for him. And he can’t do offline for long. As things stand, I don’t think he has a business model to survive.” In the offline business, experts say, results matter most and if you can’t deliver, it becomes difficult.
Unacademy doesn’t have expertise—or the deep pockets—to outcompete established rivals in a cash-heavy bricks-and-mortar business. In other words, no one needs an edtech company to reinvent the exam prep wheel.
The epic fail of edtech companies
It’s easy to read Unacademy’s trajectory as a Shakespearean tale of bad timing and hubris. But to do so misses the more important point: With the stray exception of PhysicsWallah, ed-tech companies did not build a product that could compete with their offline counterparts. The coaching centres simply do it better and—most importantly—they deliver results.
A crap product: The elephant in the room is the quality of education offered by these ed-tech companies. Today, ed-tech is synonymous with price gouging, bullying marketing tactics, invasion of privacy—and shoddy teaching. The industry has had a free run—without a jot of regulation—and misused that freedom. It isn’t all that surprising that parents preferred the reliable benefits of offline centres.
‘Mis-selling’ education: Looping back to the ‘demanding’ work culture built by Munjal– what did management in these companies really demand? Edtech employees were driven hard to maximise sales—not deliver teaching:
Across edtech companies, pressure from the top often drives sales executives to ‘close’ the sale at any cost or to ‘hard-sell’, pushing parents who are unsure to buy these services on instinct. According to [a former edtech company manager], 30-40% of the sales force would indulge in what he calls ‘mis-selling’—pressuring parents, lying about limited time scholarships and even making false promises. Managers, too, turned a blind eye, saying ‘targets would have to be met at any cost’.
So it’s hardly surprising that they did not offer any innovation—or unique value to their customers.
The bottomline: In the words of Forbes, edtech companies had ‘Pandemic Market Fit,’ and not true ‘Product Market Fit’. And the market demands results—as in exam results. No amount of tech can change that.
Reading list
Older reporting in Inc42 lays out problems with the acquisition spree—and MoneyControl did a 2022 investigation into the Munjal school of management. Mint is best on his flawed business strategy. Deccan Herald and Rest of World are best on edtech startups running amok. Sundeep Khanna in MoneyControl calls out the criminal waste of opportunity to revolutionise education in India.
