Coding-for-kids startup WhiteHat Jr, owned by edtech unicorn Byju's, has laid off around 300 employees globally. According to multiple media reports, the employees were largely from the code-teaching and sales teams. Eighty of the laid-off employees were from the newly opened Brazil office, where BYJU'S was hoping to expand its 'Future School' offering.
According to WhiteHat Jr, the employee reduction was due to cost-cutting measures with long-term stability and growth in mind. Byju’s had acquired the Mumbai-based WhiteHat Jr in an all-cash deal worth $300 million two years back.
But it is not just WhiteHat Jr that is feeling the heat now. The employees retrenchment there comes on the back of similar lay offs at edtech firms like Unacademy, Lido and Vedantu. Frontrow, another edtech company, had laid off about 150 employees, citing a funding crunch. Alpha Wave-backed Udayy and SoftBank-backed unicorn Eruditus sacked over 100 and 80 employees respectively recently. These companies in total have fired more than 4,000 employees in recent months.
In general, edtech firms, after having seen boom times over the last two years, are going through enormous crisis. So that begs the question: Is the edtech bubble burst?
Online classes can't replace traditional educational institutes
Like most things in a fluid economy, nothing could be said with certainty. So the answer to the question will remain unresolved. But the fact is the edtech sector cannot, for sure, have the run in the last two years. For the pandemic-induced study from home scenario brought in its wake unimagined growth for the sector. In the last two years, UpGrad, Vedantu, and Eruditus became unicorns in 2021 ($1 billion in valuation). India’s first edtech startup, Byju’s, went to stratospheric levels. It was valued at around $22 billion. This success spawned many companies to take the plunge taking the industry’s market size to around $2 billion. Last year, edtech was the third most-funded sector in India, raising over a staggering $4.7 billion.
This record is, understandably, impossible to match. But the pace of growth slowing down is one thing but to see companies firing off employees is another. "This suggests that things were not as rosy as they were built up to," said a market analyst in Chennai.
He adds there was a misplaced idea that these edtech companies (online classes) can replace traditional schools and colleges. "That was a fancy balloon, floated mainly by these companies themselves. That has surely been burst."
The general feeling in the market that these edtech companies can be supporting cast to schools and colleges. But can never replace them. Post-pandemic, with schools and colleges reopening, this idea has been driven home strongly.
Much-needed reality check
Ironically, some of these edtech companies are now investing in brick and mortar institutes. Byju's itself acquired entrance test preparation institute Aakash Educational Services for $1 billion. Unacademy has announced its foray into the offline learning space by launching its first coaching centre in Kota, which is, in a sense, the HQ the coaching centre community in India. A few others are also set to follow suit. Tiger Global-backed Vedantu and. PhysicsWallah, a recent unicorn, are also taking the same route.
Many in the industry opine that this reality check for the edtech companies was much needed as some of them seemed drunk on their own success. They got carried away by the vaunting valuations, said R Pradhan, who till now was a financial head of an edtech startup. He says that edtech companies will not die down. They have their relevance. But not in the manner they had imagined. "Now is the time to sober down and make course correction."
