Investment Thesis Part 1: Edtech

Two things happened in 2023. India’s Edtech sector went balls up. Valuations of companies such as Byjus were slashed. This eventually kickstarted what people today are calling the ‘funding winter.’ To me, this isn’t a funding winter, however. It is the start of the burst of the funding bubble that saw VC funds increasingly pump capital into unprofitable companies. Among them, Byjus, Unacademy, and Physicawallah were the unicorns.

In recent months, these companies in addition to several unicorns have begun a fresh round of layoffs. It comes from the funding crunch. Despite these companies charting paths to profitability, edtech remains an attractive sector for new startups that is. And of course, former senior executives from Unicorns making a move to companies like Upgrad. And so forth.

Despite this, India’s edtech sector is valued at USD 10.4 billion. As of 2025. As of 2020, it was valued at 2.8 billion. This is a multiple of 3.7 and a significant increase.

This raises a peculiar question. If Edtech is expected to rise as projected, why are investors not as bullish? VC fund houses have begun building theses on climate tech, semiconductors, and EVs. Getting to the bottom of this is critical in attempting to understand the way VCs think. And more importantly, what edtech looks like with and without investment.

Before we continue, there is something important to note. First, I am not an investment advisor. Not by a long shot. Second, this thesis is part of a larger thesis I’ve made. If you comment on your interest in this post, I might consider making it available to you. With these disclaimers now in place, we can move on.

Demystifying the Edtech sector in India

Edtech in India has become ubiquitous. Individuals in the country are always looking to educate themselves. At every level. Whether it is school, undergrad, or upskilling; Edtech is a big sector. In India, Edtech is seen as one of those sectors that survives the recession. Lee Iacocca famously stated that the food business will survive the recession. ‘Recession or not, people need to eat!’ he remarked. The same applies in the edtech space for India today.

During Covid (2020–21), India’s edtech sector saw a significant boom. This came on the back of massive layoffs and the onset of an expected recession. A few reports suggested that the Edtech space’s CAGR had doubled. Laid–off working professionals sought upskilling. Students, on the other hand, had to make do with online sessions. While challenging, the Edtech sector saw a significant boom.

It is crucial to note that some trends from the pandemic remain with us today. This will be covered in the section labeled Industry Trends.

Current Landscape

Crucial to analyzing a specific sector is the segmentation of it. Edtech has several sub-sectors with each having its drivers and dependents. Therefore, edtech can be broken down into multiple sectors.

This is how I would segment the Edtech industry:

1. K-12 education — Learning solutions for students from kindergarten to twelfth. This seems to be the most crowded space with most companies offering solutions. The best example in this case would be Byjus. Their entire business was built on selling K-12 products. Parents are always looking to give their students an unfair advantage. Therefore, the Bujus business model worked for a brief period. Codingal and Whitehat Jr. were other companies that offered coding classes for middle and high school students.
2. Undergraduate education — Students between 17 and 23 fall into this category. Companies that operate in this space are a mix of tech and consumer goods. For instance, companies offering internships dominate the eyeballs of this crowd. Companies offering freelance and contract work come in here as well. There are a handful of consumer brands here as well. However, the latter does not qualify as edtech or education unless they offer certain products. There are also a few Test Prep companies such as Kaplan and ETS that operate in this space. Other examples include Internshala, Twenty19, and LinkedIn.
3. Postgraduate education — This sector is similar to undergrad. However, it is slightly mature with staffing and recruitment companies coming into play. The number of D2C brands might increase depending on the purchasing power of postgrads. Internshala continues to work in this space given their ability to find postgrad internships. AIESEC is also a major player in this space in addition to companies such as Impact Consulting. And so forth.
4. Upskilling & Reskilling — Generally, upskilling and certificate programs are offered to working professionals. Mid-level managers and mid-career professionals opt for upskilling and reskilling programs to remain relevant in industries. Udemy and Coursera are among the biggest players in this space. Several other upskilling companies have been established as a result of the pandemic.
5. Test Prep & Overseas education — This is a fairly large sector. From SAT to CAT to GRE/GMAT, several businesses operate in this space. Despite not being very scalable, most companies witness significant revenues. Reports have suggested that around 750,000 students are studying abroad. Studies overseas remain to be aspirational. This trend is expected to continue despite India’s economic boom.
6. Teachers & Learning Management Solutions — Most Saas products such as Teachable exist for the ease of a teacher’s use. Classroom management was the pioneer of the edtech industry.

Industry Trends, Market Size & Growth

Statista’s report showed the growth of the sector during the pandemic. The value of the edtech industry was worth USD 2.8 billion in 2020. It is projected to rise to USD 10.4 billion in 2025. These numbers were part of a report published by IBEF. However, skill development, online certifications, K-12, and test prep were the only considerations here. Should one consider LMS and teaching solutions, the market size (Total Addressable Market) will be significantly larger.

The following are key insights from the report:

1. K-12 and Test Prep are expected to grow more than 100%. In 5 years. This points to an increase in the number of students applying to undergrad or postgrad educational institutions.
2. Online certification for working professionals is expected to increase by 137%. This is a trend that is expected to continue from the pandemic.
3. Skill development is expected to grow at 180% from 2020 to 2025. This increase will see individuals pick up industry-specific skills. Product Management is among the biggest skills being picked up today.
4. Overall, the Inc 42 report has an overly optimistic outlook on the edtech industry. However, the bullish outlook is justified given that most startups are now looking at profitability as opposed to valuations.

Regulatory Environment

Given the controversy Byjus has found itself in, it is crucial to impose certain restrictions. False promises of placements and poor quality of education have brought the need for governance. Most consulting companies are pushing for ESG frameworks to be set for edtech startups. However, at the moment, there aren’t any regulations imposed by the government on edtech startups. Read more here.

Risks & Challenges

Several risks and challenges are getting into edtech. The risks spread to entrepreneurs, investors, and consumers.

1. For those looking to start a business, edtech isn’t a lucrative sector. Investors are now looking at climate tech and semiconductors.
2. The press around Byjus and Physicswallah have also seen investors shy away from the sector.
3. Intense competition. Daily, school teachers and principals meet with several service providers.
4. News and media publications have been beating the anti-edtech drum. A few media outlets have also begun offering certificate programs. This has led to an increase in the competition.
5. Despite projections of growth, investors will continue to be wary of the edtech sector going forward.

Pros & Cons

Following through on the risks and challenges.

Future Outlook

The future of edtech remains uncertain. Despite several significant challenges, optimism persists. Given the aspirational mindset, education and edtech will remain to be a strong industry. However, it will be difficult to anticipate what works and what the risks will be.

However, I’d like to leave everyone with the following pointers. Should you look at starting in education or edtech.

1. The AI revolution will disrupt the edtech industry. Several tasks will become automated with teachers & instructors remaining to be in the front and center of the education process.
2. There are 750,000 students in the US, UK, and Canada. A post-pandemic trend will witness this number increase exponentially.
3. The above is expected to improve the test prep sub-sector as well. This is because most universities expect applicants to have standardized test scores.
4. Learning Management Solutions (LMS) are expected to continue their expected growth. However, they are expected to continue this trend in developed countries such as the United States.
5. Investors will think twice about investing in edtech. However, bringing in revenues and becoming a strong substitute will continue across sub-sectors and startups.