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In-depth: Lido Learning episode a hard lesson for the edtech sector, but the bull market is still on

Don’t look at the edtech sector through the prism of 5-6 companies that have made big headlines. The focus must be on quality education, fulfilling promises and managing finances better, say edtech players and experts.

New Delhi / February 26, 2022 / 10:28 AM IST
Representative Image

Representative Image


Over a cup of coffee earlier this month, a senior executive at an edtech firm touched upon a subject that isn’t discussed much. He said the education technology sector has been in a “bull market for almost two years, and has not faced a tough time … and that is making them run unbridled”.


“They are young, vibrant and aggressive in their business approach. The Covid-19 disruption gave them that momentum in funding, reach and acceptance. But they have not seen both sides of the coin yet,” the executive, speaking on condition of anonymity, said during a friendly interaction.

The closure of Lido Learning and the ensuing uncertainty for hundreds of staff seems to have given the sector its first jolt in recent times, and brings to the fore a new debate on the edtech sector, its working model, and questions over whether several companies, if not all, are over-branding,  over-promising, and under delivering.

“Without naming company X or company Y, education technology players need to realise that the sector demands quality, it demands that you fulfil promises, and aggressive branding will make you more susceptible,” said Rohin Kapoor, co-founder of edtech firm Myedge, which operates in the school tuition space.

Kapoor said that while several edtech players have played a constructive role through the pandemic in furthering the cause of education, the unfulfilled promises of some can dent the good works and reputation of many. And unfulfilled promises and poor delivery by some are also among the reasons the government has started talking about a possible regulation for the sector. To be sure, though the education ministry spoke about a policy it is working to curb malpractice and monopoly, nothing concrete had taken shape as yet.

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“It is possible to run a profitable edtech business and deliver quality at the same time. Education is a long-gestation sector and you cannot achieve success overnight,” Kapoor said, adding that “employee welfare, manageable promises and a good relationship with clients will do good to all players.”

Managing finance

The Lido Learning episode is unfortunate in many ways – a promising startup closed down, hundreds of employees were rendered jobless, investors lost money, and customers felt cheated.


“Spend, spend and spend cannot be the only way forward. You have to look at cash flow, balance sheet and curb expenditure if you notice faultlines in business operations. It’s a reality check and I hope edtech startups will become more mature to evaluate these while charting their growth plans. There is nothing better like managing your finances well,” said Neeti Sharma, co-founder of Teamlease Edtech, the education technology subsidiary of Teamlease Services.

“It’s not easy to shut down a business but somewhere they may have realised that they need to cut further losses. Perhaps the concerned company and its investors did not evaluate the situation well, and did not notice the early signs. Profitability is a key factor no one can ignore,” said Sharma, adding that the development has given the entire edtech industry a reality check.

She said that other edtech players should start thinking about why this happened with Lido and look at how they could prevent this from happening to them or their businesses. Investments are important for growth but it’s important to be cognisant of results, she added.

Pandemic disruptions successfully hid flaws for the past two years. But as schools and colleges reopen and the focus shifts to physical learning and hybrid learning, online education players will have to be cautious and pragmatic, said an executive at a young edtech startup, who declined to be named.

Most educational institutions have opened or will open in the next two to four weeks and edtech will continue to be a supporter of the mainstream. Hybrid learning is here to stay as a new mode and with it, online players will be scrutinised by clients on delivery, quality of education, and whether they are focusing only on branding.

"Lido was facing a funding crunch for the last couple of months, and was struggling to pay the salaries of employees in 2022. But till the end of January 2022, they were talking about growth and expansion – even as some of their staff red-flagged salary issues and the full and final calculations for those leaving. And this shows that perhaps they were ignoring reality,” said an edtech industry insider, requesting anonymity.

Kapoor said the failures and overpromising by a few firms have led to him and his colleagues facing renewed scrutiny  from parents. “They’re asking: ‘Aap bhag to nahi jaoge? (will you flee taking our money?)...will you be able to deliver what you’re promising?’”

There are over 9,043 edtech startups in India, according to startup intelligence firm Tracxn. Though there is no official data, informal industry estimates indicate the sector raised between $4 billion -4.7 billion in 2021.

Bull run to continue

Don’t look at the edtech sector through the prism of four to six companies that made big headlines, said Maheswer Peri, founder of Careers360, another edtech company.


“Beyond the noise of funding, we must look at how the sector aided education delivery during the past two years. Yes, the education sector got hurt, especially in rural India, but a large amount of credit for education continuity goes to the edtech players who helped in various roles to take education to learners’ home,” Peri said.

He said that while 2021 saw edtech firms turning unicorn and billions of dollars getting invested in the sector, the focus must now shift to education delivery, quality of education, promises made and kept. “If you focus only on branding and promises, clients and customers will move away from you -- that’s true for any business and for the edtech sector,” he said.

Peri, whose firm is also part of the newly formed edtech consortium, asserted that the sector would continue to progress fast. Because hybrid learning is here to stay, higher educational institutions are allowed to offer up to 40 percent of their courses in online mode, more universities are offering online degrees, and edtech players are addressing the employability and skilling aspect of both the workforce already in the market and those pursuing education to enter the market.

Sharma of Teamlease Edtech almost concurred. “The bull run of the education technology sector is here to stay at least for the next couple of years. You won’t see a flattening of the growth curve, but growth may slow down to some extent", she argued.

Edtech companies are creating jobs, they are creating content and also aiding the education of women more. And India’s desire to increase higher education gross enrollment ratio to 50 percent from almost 28 percent now needs education technology players.

This is because if you expand purely through physical campuses it will need a big corpus.  As per official data, both the Centre and States spend 3.1 percent of GDP on education. Academics and experts have been demanding for years that spending be increased to 6 percent of GDP. India is home to over 51000  higher educational institutions including a 1000 plus universities.

The Lido case

Lido Learning, an edtech firm offering online tuitions, closed down earlier this month and the management has asked employees to tender their resignations. Founded in April 2019, Mumbai-based Lido Learning offers online tuition in the school education space and has raised over $20 million to date.

Though the exact number of employees working at Lido Learning is not known, it is believed that the edtech firm had 900 to 1,200 staff members. Ronnie Screwvala had invested $10 million in the firm. Other investors include Paytm CFO Madhur Deora, Picus Capital, BACE Ventures and 9Unicorns.

Founded by Sahil Sheth, Lido Learning was aggressive in brand building and expansion, and said in September that it was venturing into the US and Canada with offerings that included coding classes. Its website is still alive.

 



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Prashant K Nanda is an Associate Editor at Moneycontrol .
first published: Feb 25, 2022 04:57 pm
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