Sustainability still a daunting task for edtech cos

Mumbai Sustainability and relevance remain a big challenge for edtech sector which is one of the fastest growing industries in India. The country has over 4,500 edtech players in the industry. But in an industry so big and wide, sustainability and relevance remain an ongoing challenge. While the sector is driven by advancements in technology, changing learning paradigms, and evolving market needs, mergers and acquisitions (M&A) are also a key driving factor.

As per data sourced from Tracxn, there were 29 acquisitions in the edtech space in the year 2022.

In the edtech sector, two kinds of M&A have been observed - the first involving larger players raising funds. Secondly, smaller edtech players are coming together to compete with the giants. These acquisitions are done for numerous reasons including increasing user base.

Having said that not all acquisitions by giants or small players in the edtech sector have panned out as expected, some of the reasons include misalignment with business objectives, lack of funding, challenges to scaling amongst others.

Unacademy’s attempt in becoming a super app did not work out as expected with the closing of USMLE test prep segment and exit from K-12 space. Byju’s acquisition of White Hat Jr. also went awry. These are the players which were thought of as too-big-to-fail kind of entities and today they are staring at huge losses due to their misplaced acquisition strategies.

However, there are some successful acquisitions as well in the edtech space. For instance, Adda247 acquired Study IQ in 2021 and in the last two years, the company has doubled down StudyIQ’s revenue. LoEstro Advisors, a leading investment banking and consulting firm, has enabled more than 10 education businesses to enter the Indian market through mergers and acquisitions in the past two years including the likes of Nord Anglia Education, Global Schools Foundation and Cognita.

Talking to Bizz Buzz, Anil Nagar, Founder & CEO, Adda247, said: “The edtech sector has witnessed numerous mergers and acquisitions in the past. These have been found to be done for numerous reasons with some being - an increase in user base, adding more offerings to the brands’ portfolio, diversifying geographically, or obtaining technology and expertise”.

Our acquisition of StudyIQ was strategic in the sense that we wanted to enter into UPSC test prep and they wanted a technological support partner. StudyIQ is #1 channel for UPSC prep and the team already had a strong content orientation, he added.

We helped them scale and have so far built various features on the app and web platform such as live class interface, doubt forum, etc. Together with StudyIQ, we are now the leading test prep platform for the government exams and UPSC. On the revenue side, gross revenue of StudyIQ has grown by 2X from FY22 to FY23, he said.

Further, some say funding winter also fueled acquisitions within the edtech space. Rakesh Gupta, Founder and Managing Partner, LoEstro Advisors, said: “The current funding constraints have prompted smaller companies to seek consolidation as a survival mechanism, while larger organizations with access to capital strategically acquired assets to enhance their portfolios. These acquisitions, driven by the challenging funding environment, have resulted in muted valuations and a notable reliance on non-cash components.”

Despite the challenges, these consolidation efforts aim to foster innovation and strengthen the industry’s ability to deliver transformative educational experiences, experts feel.

Key Driving Factors for M&As

l Technology advancements

l Changing learning paradigms

l Evolving market needs

" The edtech sector has witnessed numerous M&As in the past. These have been found to be done for numerous reasons with some being - an increase in user base, adding more offerings to the brands portfolio, diversifying geographically, or obtaining technology and expertise"

- Anil Nagar,

founder & CEO, Adda247,

tells Bizz Buzz