Children’s coding startup WhiteHat Jr, owned by edtech unicorn Byju’s, has laid off around 300 employees worldwide. According to various media reports, the employees were largely from the code teaching and sales teams. Eighty of the laid-off employees were from the newly opened office in Brazil, where BYJU’S hoped to expand its ‘School of the Future’ offering.
According to WhiteHat Jr, the headcount reduction was due to cost-cutting measures with stability and long-term growth in mind. Byju’s had acquired Mumbai-based WhiteHat Jr in a $300 million cash deal two years ago.
But it’s not just WhiteHat Jr that is feeling the heat right now. The dismissal of employees follows similar layoffs at edtech companies such as Unacademy, Lido and Vedantu. Frontrow, another edtech company, laid off about 150 employees, citing a funding crisis. Alpha Wave-backed Udayy and SoftBank-backed unicorn Eruditus have laid off more than 100 and 80 employees, respectively, recently. These companies in total have laid off more than 4,000 employees in recent months.
In general, edtech companies, after having seen boom times in the last couple of years, are experiencing a huge crisis. So this begs the question: has the edtech bubble burst?
Online classes cannot replace traditional educational institutions
As with most things in a fluid economy, nothing can be said for sure. Therefore, the answer to the question will remain unsolved. But the fact is that the edtech sector cannot, for sure, have the race in the last couple of years. For the pandemic-induced home study scenario has brought unimaginable growth to the industry. Over the past two years, UpGrad, Vedantu, and Eruditus all became unicorns in 2021 ($1 billion in valuation). India’s first edtech startup, Byju’s, has reached stratospheric levels. It was valued at about $22 billion. This success has seen many companies take the plunge, bringing the industry’s market size to around $2 billion. Last year, edtech was the third most funded sector in India, raising over US$4.7 billion.
This record is, understandably, impossible to match. But the pace of growth slowing is one thing, seeing companies laying off employees is another. “This suggests things weren’t as rosy as they were built,” said a market analyst in Chennai.
He adds that there was a misconception that these edtech companies (online classes) can replace traditional schools and colleges. “That was a fancy balloon, mostly floated by these companies themselves. It certainly got popped.”
The general feeling in the market that these edtech companies may be supporting schools and colleges. But it can never replace them. Post-pandemic, with the reopening of schools and colleges, this idea was strongly taken home.
Much needed reality check
Ironically, some of these edtech companies are now investing in physical institutes. Byju itself acquired the Aakash Educational Services entrance test preparation institute for $1 billion. Unacademy announced its foray into the offline learning space, launching its first training center in Kota, which is, in a way, the community headquarters of the training center in India. Some others should also follow suit. Vedantu, supported by Tiger Global, e. PhysicsWallah, a recent unicorn, is also following suit.
Many in the industry opined that this reality check for edtech companies was badly needed, as some of them seemed drunk on their own success. They got carried away by the valuations, said R Pradhan, who until now was chief financial officer of an edtech startup. He says edtech companies are not going to die. They have their relevance. But not in the way they imagined. “Now is the time to sober up and do course correction.”