The edtech landscape has been a tumultuous one in recent years, with giants like BYJU’S facing significant challenges. Now, it seems Unacademy is also struggling to stay afloat.
Days after laying off a chunk of employees, and preaching success mantras on Twitter (nee X), Unacademy’s co-founder and CEO Gaurav Munjal took to social media to address the situation, insisting that the company is “here for the long run.” But with reports of layoffs, cash burn, and a funding crunch, it’s clear that Unacademy is facing some serious headwinds.
Unacademy, once hailed as a rising star in the edtech space, has had a tumultuous few years. The company, which was last valued at a staggering $3.4 billion, has found itself in a precarious position as the industry grapples with intense competition and a funding slowdown.
According to reports, Unacademy has engaged in exploratory merger talks with other market players, as the edtech sector undergoes a period of consolidation. The company has reportedly approached multiple education companies, including the Bengaluru-based K12 Techno, which operates the Orchids International Schools chain. Munjal has acknowledged these discussions, noting that the industry is facing significant challenges, with EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) being affected by the intense competition.
Despite the turbulence, Munjal has insisted that Unacademy is in a relatively strong financial position, with Rs 1,600 crore in the bank and a runway of around five years. The company’s cash burn is also projected to be around Rs 350 crore this year, down from Rs 570 crore the previous year and Rs 1,400 crore the year before. However, the company’s struggle to secure fresh funds for some time, as evidenced by its last funding round of $440 million in August 2021, raises concerns about its long-term sustainability.
Like many other edtech companies, Unacademy has resorted to layoffs to minimize cash burn amid the funding slowdown. In March 2023, the company laid off 12% of its workforce, and before that, it had let go of 10% of its employees in November 2022. The Bengaluru-based firm’s employee count is said to be hovering around 2,000, and it has undergone several top-level changes, including departures, appointments, and promotions.
In terms of financial performance, Unacademy reported a loss of Rs 1,678.1 crore in FY23, down from Rs 2,847.9 crore in FY22. However, its operating revenue surged to Rs 907 crore compared to Rs 719.2 crore in the previous fiscal year. This suggests that the company has been able to generate more revenue, but its expenses have outpaced its income, leading to significant losses.
Unacademy’s struggles come at a time when another industry giant, BYJU’S, is also facing its own set of significant challenges. Once valued at a staggering $22 billion, BYJU’S is now reportedly pursuing new funding at a 99% discounted valuation through a rights issue, as it grapples with a liquidity crunch. The company’s largest institutional shareholder, Prosus, has even written off its entire investment in the edtech firm, a move that has further shaken the industry.
The edtech sector as a whole has been facing a challenging environment, with intense competition and a funding slowdown affecting the profitability of many players. Munjal has acknowledged that the industry is undergoing consolidation, with significant mergers and acquisitions expected within the next year. This trend is likely to continue as companies like Unacademy and BYJU’S struggle to maintain their market position and financial stability.
Despite the difficulties, Unacademy’s leadership remains optimistic about the company’s future. Munjal has emphasized that the company is “building Unacademy for the long run” and that it will have its “best year in terms of growth and profitability.” This ambitious stance suggests that the company is not ready to throw in the towel just yet and is determined to weather the storm and emerge stronger.
The challenges faced by Unacademy and other edtech giants serve as a cautionary tale for the industry. The rapid growth and inflated valuations of the past have given way to a more sober reality, where companies must focus on sustainable business models, cost-cutting, and strategic partnerships to survive. As the sector matures, the winners will be those who can adapt to the changing market conditions and offer genuine value to students and educators.
