From Talent Wars To Mass Layoffs, Shutdowns: Edtech Startups Fire 7,000 Employees In 2022

As the year 2021 ended, it seemed as if nothing could ever go wrong with the Indian edtech sector which was riding on an unprecedented funding boom. With more than $4.7 Bn in funding across 165 deals, edtech emerged as the third favourite sector for investors that year. 

The year also saw edtech players grow at a breakneck speed, offering sops to retain teachers and talent. The road ahead looked like an easy ride, but then came 2022. 

The tables have completely turned in the new year and the edtech startups have been facing a gamut of challenges in 2022 – from raging cash crunch to layoffs to shutdowns.

According to Inc42’s data, Indian edtech startups have laid off more than 6,898 employees in 2022 so far. A majority of the startups attributed the layoffs to restructuring and cost-cutting measures. Besides, many employees were forced to resign. 

The edtech sector accounts for close to 45% of the 15,000+ layoffs that the Indian startup ecosystem has witnessed this year. 

The fallout has also seen startups like Ronnie Screwvala-backed Lido Learning, Crejo.Fun, Udayy and SuperLearn shutting operations.

While many edtech startups doubled down on offline foray in 2022 despite the purported funding winter, the employees have had to bear the consequences. 

While the last year broke all records of funding, the current year has broken the ceiling in terms of mass layoffs. From giants such as BYJU’s to Unacademy, edtech startups have resorted to mass layoffs to conserve cash, citing ‘consolidation of operations’ in most cases. 

In total, as many as 12 edtech startups have laid off anywhere between 3% to 100% of their workforce. In terms of percentage, Crejo.Fun and Udayy led the charts, firing their entire workforce as both startups wound up operations, thereby impacting around 420 employees.

Decacorn, Unicorns In Doldrums

In terms of absolute numbers, India’s biggest startup by valuation, BYJU’S, has fired the largest chunk of employees. The edtech decacorn has directly or indirectly terminated close to 4,000 employees at its various subsidiaries. 

While the edtech giant fired close to 300 employees at WhiteHat Jr in June, it followed it up with an additional 350+ layoffs at Toppr the next day. In May, it also issued a diktat directing all WhiteHat Jr employees to join back duties at its office in a month’s time. The ensuing tussle saw over 800 full-time employees exiting the coding startup voluntarily.

The biggest mass firings came on October 12 as it fired more than 2,500 employees, or 5% of its total headcount citing its plans to become profitable by the end of the current financial year. This came close on the heels of BYJU’S reporting a 20X rise in its losses in FY21 to INR 4,588 Cr, largely on account of high cash burn of WhiteHat Jr.

The layoffs were announced days after Inc42 reported that BYJU’S is piloting cash guzzling celebrity-focused masterclasses under BYJU’S XCEL. 

Among the other startups, Bengaluru-based Unacademy has terminated the employment of 1,100 workers, or 19.2% of its workforce, citing cost-cutting measures. These include on-roll employees and contractual educators.

Even as Unacademy is on an overdrive to cut costs by firing people, it continues to invest heavily on its offline foray. Earlier this year, it launched its physical coaching centres in Kota. The aftermath saw Unacademy poaching staff from its competitor Allen and paying astronomical salaries to retain the staff.

While many have been left without jobs, Unacademy continues unabated on its expansion drive to improve its revenue. 

On similar lines, edtech player Vedantu, which turned unicorn last year, fired 724 people, or 10.5% of its total headcount, in at least three firing rounds this year as part of a ‘business restructuring process’.

Apart from these, Lightspeed-backed FrontRow has also fired more than 275 employees (75% of its workforce) in two firing rounds in the last five months. While LEAD has fired 100 employees since the beginning of the year for performance-related issues, its peer Eruditus has also laid off 40 workers amid a restructuring at the edtech startup. 

Funding Winter Worsens Trouble For Edtech Startups

The spate of mass layoff has largely been triggered by the ongoing funding winter which has dried up investments and lack of clarity about the players’ path to profitability. 

With schools opening up, more and more students are moving back to the offline model. As a result, edtech players have also ramped up their focus on offline coaching centres, spending heavily to fuel their offline forays.

As if this was not enough, profitability still continues to elude the edtech space. The three major players – BYJU’S, Unacademy and Vedantu – continue to accumulate heavy losses even as online users dwindle. Amidst rising marketing costs and even higher customer acquisition costs, these startups face an uphill task while vying for achieving profitability at scale. 

Amidst all these, the sector is struggling to raise fresh funds. The funding raised by Indian edtech startups in 2022, so far, is hovering very close to the 2020-levels. While the sector had raised $3 Bn in the entirety of 2020, it has barely managed to pick up around $2.2 Bn in funding from investors in nine months of this year so far. 

From $1.4 Bn in Q1 CY22, funding fell steeply to $537 Mn in Q2 CY22 and subsequently plummeted to $289 Mn in the quarter ended September 2022. In total, Indian edtech startups have amassed $8.4 bn in funding between 2020 and the Q3 CY22. 

With the funding winter expected to last for 12-18 months, it remains to be seen what is in store for the edtech space. While the prevailing market conditions have brought investors’ as well as founders’ focus on profitability, it is the employees who have emerged as the biggest casualty of this downturn in the edtech sector.