Is consolidation the answer as the sector evolves and recovers post-pandemic?
The Indian edtech sector has been going through a shift: companies are shutting down, consolidating via acquisitions, or merging with bigger players to stay afloat. Both 2023 and 2024 were seen as bleak, with the troubles of edtech behemoth Byju’s and its ripple effects dominating the sector and the headlines.
The sector saw massive growth and mind-boggling investment numbers during the pandemic years. 2021 saw the sector raise a record $4.1 billion in 357 funding rounds, while that number plummeted to $568 million in 2024. One could say that tech-enabled education in India was a growth space that went overboard and had no option but to see some kind of pullback.
But it’s not all gloomy: there’s still some steam left, and a few solid players have weathered the storm, along with some new entrants making good strides. While investors are treading with caution, the sector is picking itself back up, with a focus on upskilling, the use of AI, and a consolidation wave moving it forward.
The pandemic years: the rise and rise of Indian edtech
Between 2020 and 2022, India’s edtech sector experienced an unprecedented boom, fuelled by the COVID-19 pandemic, which forced a rapid shift to online learning. With schools, colleges, and coaching centres shut down, students and teachers turned to digital platforms, driving massive adoption of edtech solutions and online learning platforms.
Venture capital and private equity investors poured billions into the sector, betting on its long-term potential. Between 2020 and 2021 alone, Indian edtech startups raised over $4 billion, with major players like Byju’s, Unacademy, and Vedantu securing multi-million-dollar rounds. 2021 was the highest-funded year in Indian edtech with $4.1B raised.
The growth and demand in edtech wasn’t just limited to K-12 or test prep; upskilling and professional courses also saw significant traction. While early edtech startups focused on K-12 education, other major players tapped into higher education and exam prep. Eruditus and upGrad tapped into the booming market for online degrees and professional courses. Collaborating with global universities, they offer programs in management, technology, and data science.
Unacademy focused on competitive exams, transitioning from a YouTube channel to an edtech giant, offering live classes for competitive exams like UPSC, IIT-JEE, and CAT. PhysicsWallah is a blend of both, catering to K-12 students and competitive exam prep, and like Unacademy, began as a YouTube channel.
By 2021, India had become the second-largest edtech market in the world, with startups reaching record valuations. Byju’s, India’s largest edtech company, raised $800 million in March 2022, reaching a valuation of $22 billion. Unacademy became a unicorn in 2020 after securing $150 million from SoftBank and later raised $440 million in 2021. Vedantu and Eruditus also secured significant investments, helping them expand their services.
The unicorns also expanded aggressively through acquisitions. Byju’s went on a pandemic buying spree, snapping up WhiteHat Jr in August 2020 for $300 million, Aakash Educational Services in January 2021 for a staggering $1 billion (the largest edtech acquisition ever made by a VC-backed company), and later that same year, Great Learning for $600 million and Toppr for $150 million.
Over the months of June-July 2020, Unacademy acquired PrepLadder for $50 million, Mastree for $5 million and Codechef for an undisclosed sum, all to strengthen its suite of offerings.
The post-pandemic slump: consolidate to survive
The Indian edtech space is home to about 11,000 active companies and is the third highest-funded ecosystem in this sector globally based on funding to date. While it is still one of the biggest markets in edtech based on investment activity, funding has seen a steady decline since 2021.
With the pandemic ending, students and learners went back to traditional classroom learning, reducing the demand for online and remote/on-demand courses. And the once red-hot edtech sector wasn’t as favourable to consumers or investors. Some of the reasons for the slide include:
- Lack of a real problem: Online learning worked great during the pandemic and teachers and students both needed unique solutions to make learning fun and accessible. With schools reopening, online tools became less relevant.
- Lack of a sizable market: Again, with students heading back to school, there were fewer users to tap into. Plus, low engagement rates and students enrolling and abandoning courses mid-way had always been a problem.
- Lack of access to capital from investors: When there seems to be no problem to solve, it’s harder to find investors who believe in both the “problem” and the “solution.”
When there’s less capital flowing through the market, players have to either shut shop, pivot, or consolidate. During the pandemic years, consolidation was about big players like Unacademy and Byju’s closing big takeovers fuelled by even bigger funding rounds. Once the edtech bubble burst, led largely by the unravelling of Byju’s from its $22 billion valuation to near-insolvency (a result of mounting losses, layoffs, and pending loans).
A snapshot from 2022 onwards indicates that consolidation and M&A activity continues, albeit at a more measured pace. The purpose of an acquisition in any sector is pretty straightforward: companies can expand their user base, enter newer markets, eliminate competition, enhance their product offerings, or gain access to valuable technology and expertise.
Both large and small players are making strategic acquisitions. PhysicsWallah, one of the youngest players in the edtech space that launched in 2020, made key acquisitions during 2022 and 2023, picking up KnowledgePlanet (to enter the MENA region), iNeuron (an online learning platform that offers courses in emerging technologies like artificial intelligence, cloud, and blockchain), AltisVortex (academic publishing), PrepOnline (online test prep platform), and Freeco.
Eruditus, which collaborates with top universities around the world to offer executive education programs, acquired the Silicon Valley-based iD tech in 2021, a platform that offers short courses in coding, robotics and game development for kids aged 13-19.
The current consolidation trend is being driven by the fact that many of these smaller companies have unique value propositions and a specialisation in niche categories, and can be acquired at attractive valuations at a time when funding is nowhere near pre-pandemic levels. It’s a win-win for both sides, offering steady growth and expansion.
What’s ahead?
The reopening of physical classrooms and waning investor confidence, especially after the Byju’s debacle, dealt quite the blow to the sector. Edtech firms now understand that rapid expansion, alternative “schools” that compete with traditional classrooms, high marketing and customer acquisition costs and low student engagement rates were serving no one.
After navigating several challenges, the sector is at a turning point today, gearing up for a rebound through strategic consolidation and ongoing innovation. Here’s what’s changing and what’s in store for the future.
Renewed investor interest: In 2024, PhysicsWallah secured $200 million in funding in September, followed by Eruditus raising $150 million and upGrad securing $60 million in October—clear signs that the market is making a comeback. There is also talk of a PhysicsWallah IPO for later in 2025. Tracxn reports that India is home to 11,000 active edtech startups that account for making up 20% of the global edtech market.
Complement, don’t replace: Edtech companies cannot afford to function as replacement for traditional education but rather as a complement to it. Beyond conventional schooling, edtech has huge potential in areas like upskilling and vocational training. By using technology to offer personalised self-paced learning, edtech can tap into a large market of learners who want to learn-as-they go.
Consolidation + specialisation: Industry executives note that consolidation is being fuelled by smaller companies that offer unique value propositions and specialised courses in niche categories. With investors continuing to be cautious, these smaller specialised startups are attractive M&A targets for the surviving larger players, benefiting both sides.
AI integration: Generative AI, AI-driven learning platforms, virtual labs, gamification, AR/VR and personalised education tools will be a part of the innovation that reshapes edtech and drives growth. These tools can help create a more personalized and adaptive learning experience for learners
Government policy: The government has been actively promoting digital education by collaborating with edtech companies to offer adaptive learning solutions. Plus the National Education Policy (NEP) 2020 focuses on transitioning traditional classroom instruction to online platforms across various segments.
All things considered, this shift in gears is a positive in the long run. The edtech sector and investors have learnt a thing or two from the pandemic rise and post-pandemic fall, moving away from rapid expansion and instead focusing on sustainable growth and profitability.
Sources
https://inc42.com/features/at-568-mn-edtech-funding-continues-to-sulk-in-2024-revival-anticipations-timid/#:~:text=As%20per%20Inc42’s%20Annual%20Funding%20Report%2C%202024%2C,2024%2C%20up%20from%20$283%20Mn%20in%202023.&text=According%20to%20the%20report%2C%20Indian%20growth%2Dstage%20edtech,across%20sectors%20at%20this%20stage%20in%202024.
https://yourstory.com/2023/05/edtech-sector-merger-acquisition-deals-consolidation-pw-byjus-upgrad
https://www.livemint.com/companies/start-ups/physicswallahacquires-ineuron-11671728267800.html
https://inc42.com/features/indian-edtech-preview-2025-byjus-unacademy-physicswallah/