Scaler eyes operational profitability by December as edtech valuations take beating amid widening losses

Abhimanyu Saxena, Co-Founder, Scaler Academy

Scaler, an upskilling platform backed by Tiger Global, said it expects to be operationally profitable by the end of the year. This comes at a time when valuations of edtech startups have been in the spotlight because of their growing losses.

The company, valued at approximately $710 million, reported cumulative revenue growth of 2,500 percent in FY20 (2019-20) and FY21 (2020-21) and an annualised revenue run rate (ARR) of $110 million as of August of this year, it said in a statement on October 19.

The projections are based on a small revenue base of Rs 15.2 crore in FY20, according to the company's regulatory filings with the Ministry of Corporate Affairs (MCA). Scaler refused to provide specific figures.

Scaler reported a loss of Rs 7 crore for FY20. The company has not yet submitted its FY21 and FY22 results with the MCA yet.

The company also did not provide any information about its FY22 (2021-22) numbers, but stated that revenue is increasing by 15 percent month-on-month. In an emailed response to Moneycontrol, Scaler co-founder Abhimanyu Saxena said that the company expects to reach an ARR of $200 million by March 2023. Saxena also said that ARR (annualised booking run rate) increased from $4 million in October 2020 to $25 million in August 2021 and $110 million in August this year.

Saxena also told Moneycontrol that Scaler is well-capitalised and has no plans to slow down its expansion this year, in contrast to some of its peers, that have undertaken cost-cutting initiatives such as mass layoffs and the closure of non-core verticals as funding to the sector has dried up. He also said that the company has become cash flow positive as its monthly burn has fallen. He did not provide any additional information about the company's monthly burn.

“Of all the funds we have raised to date, we have spent about 20 percent towards acquisitions, 70 percent is still in the bank and the rest (around 10 percent) towards operational expenses. The cumulative operational burn is $8 million since January 2020,” Saxena said.

“Most edtech and startup players tend to spend a lot towards extensive marketing efforts that get them instant visibility, including roping in mega movie stars and sponsoring big-ticket events. We believe in keeping things super contextual and relevant for our learners and community, which is why we have kept our marketing efforts very niche and targeted. This allows us not to burn insane amounts of money and also helps us build a better relationship with our target audience,” he added.

In September, Scaler had said that it was planning to hire over 600 employees across sales, business-to-business (B2B) enterprise, instructors, and operations teams by December this year.

In May, Saxena had told Moneycontrol that the company had set aside $50 million for mergers and acquisitions in FY23 (2022-23) in order to capitalise on consolidation opportunities amid falling edtech valuations. Scaler's acquisition strategy, according to Saxena, will be to primarily focus on aquihiring and distributing its courses.

“Every company we have acquired or engaged with brings something productive or relevant to the table - talent, distribution, reach or product depth. Whether it was Coding Elements, Coding Minutes, or Applied AI, they all have helped us strengthen our current offering and allowed us to enter newer verticals like the Scaler DSML (data science and machine learning) program or the master's program - Scaler Neovarsity,” Saxena said.

Scaler's growth projections and profitability expectations come at a time when edtech startups in the country are aggressively conserving cash as funding to the sector has dried up. Moneycontrol previously reported on how SoftBank-backed Unacademy and Tiger Global-backed Vedantu had cut their monthly burn. To cut costs, many edtech startups, including some of the most valued, have laid off thousands of employees.

“The business is also growing in tandem to ensure we stay on the path of profitability. We will continue to invest towards building brand awareness and expanding our reach in India and the US. We will also look to explore newer verticals within the niche of tech education and upskilling,” said Saxena.

In addition, Byju's, the most-valuated edtech startup in the world, reported widening losses on a standalone and consolidated basis, which alarmed investors and drew attention to the valuations of edtech companies in India. Moneycontrol previously reported that Unacademy was having difficulty closing a funding round at a higher valuation.