Is Covid-19 a Boon or Bane for Edtech Sector?

What image does it form when you listen to the word “EdTech”? Don’t you imagine online classes, right? “EdTech” became an important part of every student’s life during the pandemic. But do you know what exactly EdTech means? Education technology (EdTech) is a term used to describe the industry that combines education and technological advances, revolutionizing the conventional landscape of education.

Even though EdTech allows educational institutions to serve a diversified and large audience, it also enables the participants to interact with each other, whether it’s teachers or students, in a very trendy way. This not only led to huge market growth in this sector but also led to the new entrants within the same as many start-ups came into the existence and many developed and earned huge profits. But, after the pandemic, there is a heavy decline in the sector, and wondering why so? Let’s discuss it. But first, let’s see some data for the Indian EdTech sector.

Indian Edtech industry

India is among the leading markets for global venture capital funding in education, following China and the United States. According to the reports the Covid-linked Edutech boomed in 2021, driving the growth of three Indian EdTech players (Eruditus, upGrad, and Vedantu). In 2022, Lead and PW became the latest entrants to the billion-dollar club.

Investment in the Indian EdTech sector

The Indian education sector has received approximately INR 300 billion (US$4.04 billion) of funding since the beginning of the Covid-19 pandemic. According to Tracxn, a data analytics firm, between January and August 2021, Edtech players attracted a whopping US$3.81 billion in funding.

In 2021, India’s largest EdTech company, BYJU’s, attracted the lion’s share of approximately US$1.7 billion in investments, followed by Eruditus with funding of US$650 million and upGrad, which got funding of US$185 million whereas, Unacademy raised a total of US$440 million, propelling its valuation to US$3.44 billion. 

Players in the Indian EdTech industry who bagged major funding deals in 2020 were: Byju’s, Unacademy, Vedantu, Doubtnut, Embibe, and Testbook.com in the test preparation category; Lido in the k-12 category; Coding Ninjas in the online certification category; and Classplus in the enterprise solution category.

For a better understanding of the EdTech Industry’s business, we will discuss it further in three stages.

Stage 1 – Start of EdTech Sector

The EdTech sector was growing in India at a relatively slower rate as there was some resistance to online education. Online Coaching Business has many advantages over normal ones. After changing to the online model

• Business became very economical,
• The market didn’t have to be restricted to a small radius,
• The offering could be customized,
• Customer acquisition cost was lower

With so many advantages, the profit margins of Ed Tech Businesses became huge. This led to a rush of investors with billions of dollars of funding. 

Stage 2 – Influx of Competition 

Covid-19 could be considered a blessing in disguise for EdTech Industry which was evolving at a snail’s pace. But that’s where problems began.

Due to low barriers to entry (because of low working capital, high-profit margin, and limitless scalability), there was an influx of competitors. And due to this increase in competition, customer acquisition cost increased drastically. 

This increase in the cost of customer acquisition was compounded by the pandemic. During the pandemic, companies were ready to take huge losses because they knew it was the prime time to get customers habituated to online learning.

Stage 3 – Post Pandemic

As the Pandemic faded away and schools and colleges started, demand for the EdTech sector slowed down. 

Reasons for slowing demand for the EdTech sector are:

• Lower pressure and job security in local tuition centers for teachers
• Parents preferred offline tuition centers for their kids
• It was tough for students to keep up with online classes
• Lack of competitive atmosphere

Because of these reasons, the demand for remote learning and technology-based education services dropped.

The humongous resources gathered by EdTech companies were no longer needed. This coupled with the loss accumulated during the pandemic led to layoffs and shutdowns.

Layoffs and shutdown

After this, layoffs, cutbacks, and restructuring have become the new buzzwords in the industry. Edtech laid-off employees to cut costs and increase efficiencies. The number of employees laid off by EdTech companies are close to 3600 in 2022.

[source: money control]

Unacademy is the company that is likely to benefit most from any slip by BYJU's. But it has also shut down its K-12 business to focus largely on test prep and is expanding offline, where it faces tough competition.

Vedantu too is going through a layoff and has had to restrict part of its business. Front Row has also fired employees, while UDAYY has had to shut down.

Future of ED tech

The educational institutions, to cope with this decreasing demand, are moving towards the hybrid model, where they are providing online classes with the traditional way of providing classes. In order to cope with this great damage, the institutions are also introducing new courses in unusual areas like culinary management, forensic science, cyber law, etc. Despite, the decline in the EdTech sector it is still one of the leading sectors for investment currently. What are your views on this please let us know in the comment section.

References

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4. The future of India’s EdTech sector. (linkedin.com)
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