Vedantu grows 4x year-on-year, economics improve as edtech boom continues

Vamsi Krishna, CEO and Co-founder of Vedantu.

Online learning firm Vedantu said on June 25 that it grew by four times in the last one year and 50% month-on-month in May, underscoring the growth of online education during the COVID-19 pandemic and making it a more mainstream learning option even when the pandemic fades away.

Vedantu said that it currently had an annual revenue run rate of $60 million or a monthly revenue of $5 million (Rs 35 crore) for May 2021. To put this in context, Aakash, one of India’s oldest and biggest offline coaching centres had a monthly revenue of about Rs 100 crore in FY20.

“The monthly growth is great but you can perhaps dismiss it as a one off. The year-on-year growth is what excites me because it shows we are going in the right direction in the long term. We have a real shot at being one of the largest online learning platforms,” Vamsi Krishna, co-founder and CEO of Vedantu told Moneycontrol

Founded by Krishna, Pulkit Jain, Anand Prakash and Saurabh Saxena in 2011, Vedantu currently provides live coaching classes for K12 students, including for entrance exams such as IIT JEE Main and Advanced for engineering and NEET for medical colleges.

It provides classes for CBSE and ICSE, as well as various state boards, along with sample question papers, revision notes, mock tests and previous year’s papers. Vedantu said it has 27 million monthly visitors on its website and 68 million monthly views on YouTube. Many of these customers use Vedantu’s products for free but the scale indicates its growing popularity. It has 200,000 paid subscribers- which has grown by four times in the last one year.

Vedantu is aiming for a revenue run rate of $200 million in the next one year. Currently, about 60% of revenue comes from tutoring classes while 30% is from test preparation for competitive exams. The remaining 10% comes from its new vertical of Superkids - where kids from ages 4 to 10 learn coding, reading, speaking and other skills.

Further, Vedantu’s customer acquisition cost -- something many internet startups struggle to control-- has fallen by 25-30%, Krishna said. It is profitable on a contribution margin level, which means that its revenues cover all its variable costs. This is a key step towards eventual profits.

Vedantu wants to be operationally profitable in the next one year.

The growth and improving unit economics also comes at a time when Vedantu is up against Unacademy and Byju’s, two extremely well-funded players with a combined valuation of over $20 billion.

Vedantu was valued at $600 million last year, when US-based Coatue Management led a $100 million round. Its investors include venture firms Accel, Tiger Global Management and GGV Capital.

Krishna insists that Vedantu’s real competition is still the offline education space, which accounts for the majority of the education market. But investors tend to evaluate companies based on how well-funded competitors are, because a host of well-funded companies can potentially burn cash to acquire users, making it a race to the bottom. In that context, Vedantu’s improving economics are key.

For edtech firms, whether they could continue fast growth in users and revenue once the pandemic wanes is unclear. Krishna; however, said when Vedantu surveyed hundreds of thousands of users, 78% of parents said they will continue online classes even when the offline economy fully opens up.