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Post-Pandemic Downturn For Indian EdTech Startups; Recession Fears Slows Funding

Indian EdTech Startups Getting The (Funding) Winter Chills Already?

Hardik, a 16-year-old student based out of Noida, feels relieved that the “torture” of studying on a laptop is over and is thrilled that offline classes, both at school and coaching, have begun, finally!

 

Another student of class 11th, Hemang, said that physical classes are a more feasible option where doubts can be solved on the spot. “Since we have been conditioned to a traditional pattern of attending classes from an early age, it feels more familiar and comfortable. Also, I faced a lot of logistical issues during my online classes and would any day prefer physical classes over online,” he added.

 

These are some of the testimonies of young students who are thrilled to return to school and even more excited about the prospect of meeting friends and teachers. Human interaction is one of the key factors for self-growth, but the pandemic ensured that it did not happen for over two years!

 

Now, the world is emerging from the ongoing Covid-19 pandemic and most economic activities have resumed across the globe, including the reopening of educational institutes. While schools and coaching institutes are welcoming students, online education service providers are facing a severe setback.

 

The domino effect of slowing demand for online education services and the easing pace of funding has pushed several Indian EdTech startups to restructure and initiate some cost-cutting measures like saying ‘goodbye’ to employees.

 

According to a report by The Economic Times, one of India’s top online ed-tech spaces—Byju’s—had cut an aggregate of around 600 jobs from its subsidiaries, Toppr—an online learning platform—and WhiteHat Jr—an online coding platform. Another ed-tech unicorn, Vedantu, has also sacked a similar number of employees so far this year. A rival of the two companies, Unacademy, has laid off over 1,000 on-roll and contractual employees across its core and group businesses in a bid to cut costs.

 

Along similar lines, edtech firm FrontRow laid off about 30% of its workforce, while Mumbai-based startup Lido Learning sacked about 200 employees as funding dried up amid mounting fears of a global economic downturn.

 

Vedantu’s co-founder and chief executive, Vamsi Krishna, in an email to employees, warned of a scarcity of capital in the coming quarters and a moderation of hyper-growth as pandemic tailwinds are receding and offline education models are opening up.

 

Unacademy co-founder and chief executive officer Gaurav Munjal, as cited by some media reports, told employees in a written mail that “(Funding) Winter is here.”

 

“Tech stocks globally are crashing and burning due to tighter monetary policies and rising interest rates. We are looking at a time where funding will dry up for at least 12–18 months. Some people are predicting that this might last for 24 months. We must adapt,” Munjal said, according to reports.

 

Apart from the ed-tech startups, the year 2022 did not fair well for e-commerce platforms like Meesho, which sacked over 150 employees from its grocery business. The fashion and lifestyle vlogging and blogging platform, Trell, furniture rental startup, Furlenco, online used-car selling platform-Cars24, and mobile e-sports unicorn Mobile Premier League (MPL) also let go of their employees amid corporate restructuring.

 

An American technology startup accelerator, Y Combinator, has warned founders of its portfolio firms to plan for the worst amid a visible declaration in funding.

 

Singapore-based venture capital firm Beenext has issued an advisory for companies with less than 18 months and more than 18 months of runway. For the former, Bennett has advised stopping experiments until their next funding round and suggested focusing on monetization for core products and freezing new hires. For the latter, the firm suggested stopping spending on non-focus marketing and business development and being ready for worst-case scenarios.

 

Another American venture capital firm, Sequoia Capital, has issued a 51-page advisory on the global downturn as policymakers in most world economies aggressively withdraw their pandemic-era support measures.

 

It seems like the world is emerging from the pandemic only to be welcomed by another problem: the global economic slowdown!

 

Central bankers in major world economies are tightening their monetary policies to tame inflation amid volatile oil prices. This comes at the heels of the ongoing Russia-Ukraine crisis, which is posing a downside risk to the fragile global economic recovery and prompting recession fears. Amid this uncertain environment, venture capitalists and investors would prefer to conserve cash. This could result in a further slackening of funding for startups and, going ahead, we could see more being asked to leave jobs.

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