Is the EdTech Bubble About to Burst in India?
The Indian EdTech industry saw a dream run as the pandemic forced schools and colleges to remain shut. Unacademy reached the coveted $1 billion valuations in 2020. And in 2021, UpGrad, Vedantu, and Eruditus also attained unicorn status. Byju's, the first EdTech startup in India, rose to a valuation of almost $22 billion. However, the recent layoffs have experts worried that the sector was in a bubble all along, which is finally bursting.
Over the past several years, a slew of new EdTech businesses has sprung up in India. This helped boost the market for the sector to almost $2 billion. The enthusiasm was such that even conservative ed-tech companies in India proclaimed the end of the classroom. And now, with schools opening up again, uncertainties about profit and income, and a downturn in funding, even the biggest names in ed-tech are facing problems.
So is this the end of the good times in EdTech — we will look to answer that question shortly. But first, let us look at the factors affecting their long-term impact on education in India.
Reasons Behind The Bubble Burst
The Covid-19 pandemic accelerated technology adoption in India’s education sector, a traditionally slow-moving space. However, now that the pandemic is over and schools and coaching centers have started to open, the EdTech industry is facing many challenges.
Some of the reasons contributing to this decline are:
1. Push Marketing
Most EdTech businesses use a push marketing/sales model. They entice students with eye-catching advertisements, unique sales techniques, discounts, and EMI choices. A large number of Indian parents from the middle class take loans to pay for the courses. So, they ended up with unmanageable debt. These courses don't take the place of education. Rather, they add to the financial burden on parents who are told that their child would miss out if they don't enroll.
Due to this, many EdTech businesses that have attained unicorn status nevertheless fail to turn a profit, not even at the operating level. They don't appear to have devoted patrons, which makes issues worse. Now that offline education is a major competitor, parents are willing to switch their children out.
2. No Real Outcomes
EdTech players in the domains of higher education and employability concentrate on certification. But, very few of these certificates result in a degree or actual work. If this sector evolves toward real job outcomes, it will create a significant impact on the learner’s life.
3. Valuation Over Value
Quality has always been a priority in education. At the moment, the valuation of EdTech companies is the main topic of market reporting on the sector. Actual learning outcomes, customer happiness, and the effects that these courses have on the student are topics that are rarely discussed. Any education player's long-term success will probably depend less on how much money investors are willing to spend on advertising and more on whether or not customers are truly satisfied with the products.
4. Less Focus on Economic Growth
In India, education has typically been a non-profit industry. However, the majority of EdTech firms are profit-driven. With so many for-profit investors at the table and their founders holding a sizable portion of the business, it appears that only a select group of investors will profit from the economy's growth. How long before the government cracks down on unequal gains in EdTech in a nation where education is a fundamental right? The existing educational system in India can be improved if more EdTech companies shifted their attention to serving low-income students.
The Question: Where is This Sector Going?
While the epidemic gave the industry a huge boost, it has suddenly come tumbling down like a wall of bricks. Words like inflexion point and boom that had entered the Indian EdTech vocabulary since early 2020 have been replaced by layoffs, cutbacks, and restructuring as the new industry buzzwords.
To brace for impact, India’s biggest EdTech companies have turned their attention offline. The giant - BYJU’s acquired Akash Institutes with 250+ coaching centers in India in 2021. Besides, the company also plans to launch 500 offline tuition centers. Unacademy is launching its centers across nine cities and hopes to enroll 15,000 learners in the first batch. Vedantu is also coming forward with a hybrid model by launching offline learning centers.
However, the offline model and new products require more capital investment. The funding scenario has also become more challenging as a result of the Fed's rise in interest rates. Besides, venture capitalists are pressuring businesses to demonstrate their profitability rather than their capacity for generating revenue, eliminating the idea of using cash burn to attract clients. The 'best' use of what they have is what EdTech Giants are attempting to make.
In India, education has typically been a non-profit industry. However, the majority of EdTech firms are profit-driven. With so many for-profit investors at the table and their founders holding a sizable portion of the business, it appears that only a select group of investors will profit from the economy's growth. How long before the government cracks down on unequal gains in EdTech in a nation where education is a fundamental right? If more EdTech companies focused on helping low-income students, the current educational system in India can be improved.
The End or The New Beginning?
Undoubtedly, India is facing an education and employability crisis. Only if the EdTech companies can come up with solutions to tackle the crisis, will they be able to solve the problem of educational outcomes and create work-ready graduates.
Furthermore, the industry should integrate technology with the existing education system. The EdTech players should partner with millions of educational institutions to offer quality at a sustainable, reasonable price and robust outcomes. India will then have a real solution to our education crisis. This is when this bubble won't burst and will instead help India resolve one of its biggest issues.