Year Ender 2023- Why ed-tech startups need to press the reboot button 

Year Ender 2023: Why ed-tech startups need to press the reboot button 

It has been a topsy-turvy year for the ed-tech industry. Not only funding declined by 89% this year, but investment in mature rounds including Series C, D, E, F, among others, reduced drastically. What this means is that early-stage funding has gone up. For instance, Saarthi Pedagogy has received seed funds worth $3,700,000, as per data from Traxcn, a start-up data platform. Similarly, only a clutch of companies have managed to fund Series A and B. “Investors are in search of companies with resilient business models that significantly influence the target market. Early-stage enterprises must showcase potent and impactful product solutions that effectively address the needs of learners. Companies addressing profound challenges and demonstrating the potential for revenue and profits will secure funding,” Balu Ramachandran, founder and CEO, OC Academy, told FE Education.

Interestingly the data further reveals that over the years the nature of ed-tech start-ups have gone through a sea of change. For instance, examination preparation platforms to platforms providing solutions to students to study abroad and financial services platforms – are some of the kinds of start-ups which have managed to raise funds when compared to pure-play digital learning platforms. “The ed-tech industry has added many new dimensions in the past couple of years. Initially, it was K12, exam preparation, certifications, higher education and causal learning. Today we have course and college discovery, funding for courses, executive coaching and B2B and B2G content solutions. Each of these have different business models and target markets in India,” Sreedhar Prasad, start-up advisor and former partner at KPMG, explained. For instance, Avanse, which received most funds at $96,796,000, is a loan service provider to students.

Yet another factor which has led to the slowdown in the growth story is the negative publicity gathered due to certain companies not being able to manage its businesses, thereby defaulting on loans. While Byju’s was a good example of an ed-tech company going public, it, however, experts suggest that the company’s expansion seems to have occurred at an unsustainable cost, exacerbated by the effects of changing consumer behaviour post-Covid, resulting in both revenue and margin compression. “In retrospect, it seems that excessive hiring played a pivotal role in this scenario. The challenges were further compounded by heightened competition resulting from substantial investments in the sector. The company faced additional difficulties as customer complaints and governance issues not only eroded the trust established in the early years but also intensified the overall complexity of the situation,” Prashant A Bhonsle, founder, Kuhoo, said.