Leading edtech player Vedantu has been in the news for most part of this year but not necessarily for all the right reasons. The edtech’s tussle with high burn rate, burgeoning marketing spends and subsequent layoffs has been widely discussed and dissected. Vamsi Krishna, its CEO, however, refuses to accept that his start-up, which became a unicorn last year, is in any trouble.
Several reports put the number of employees given the pink slip in Vedantu at over 700—624 in two batches in May and another 100 in August—a figure that Krishna outrightly denies.
“We have laid off just 424 of our employees in a one-time exercise in May. Any other news of us laying off people is untrue,” says Krishna. “I want to clarify that before and after May, none of the layoffs have been from corporate functions. Every month, we have a 15 per cent churn (pruning) from functions such as sales but that is because of the nature of these roles. We have also hired 800 people in the last two months,” he adds.
Meanwhile, experts believe that Vedantu is struggling. High rate of burn and the failure of its Ai (Augmented Interactive) Live product priced at Rs 5,000 annually—a drop from about Rs 24,000—forced it to cut jobs and even slash salaries of teachers.
This year also saw external factors like a funding winter, global slowdown and reopening of schools and colleges severely impacting the edtech space. Within that, Vedantu belongs to the worst-affected segment—the K-12 segment—which only worsened its troubles. To top that, bad reviews from parents on social media and teachers’ outcry over poor work-life balance further tainted its image.
Through it all, its CEO has somehow remained optimistic. The question is: Is it sustainable?
The Burning Question
In March this year, Vedantu announced its broadcast association with Star Sports for the 2022 edition of the Indian Premier League (IPL), making it one of the key brands to advertise on the Star Sports network during the season.
Interestingly, within two months of the announcement, the edtech had fired its first set of 424 employees.
In an email to his employees, Krishna had said: “Given this environment, capital will be scarce for upcoming quarters. With COVID tailwinds receding, schools and offline models opening up, the hyper-growth of 9X, Vedantu experienced during the last two years will also get moderated. For the long term sustenance of the mission, V would need to adapt too.”
Vedantu had also sponsored Kaun Banega Crorepati and roped Bollywood actor Aamir Khan as its brand ambassador in FY21.
While Krishna concedes that the start-up went overboard with marketing activities in terms of sponsorships, cold calling and home visits, he also quickly adds that it was those activities that made Vedantu a household name.
“If I had known that the external environment would be this tight, we would have never partnered for at least this year's IPL,” he confesses.
The Offline Strategy
The reopening of physical schools was a big setback for players like Vedantu who had seen a 300% growth during the raging pandemic when life had moved online. With people now shying away from the online mode of education, several edtechs, including BYJU’s and Unacademy, entered the physical space with their own coaching centres.
While the acquisition of leading offline tutorial chain Aakash Educational Services for a whopping $1 billion left BYJU’s high and dry, it was seen as a long-term plan. With more than 200 brick-and-mortar centres and a student count of 2.5 lakh, Aakash could help BYJU’s reach the Tier II and Tier III cities. The launch of BYJU'S Tuition Centre—a comprehensive programme that blended offline and online learning experiences across 200 cities—was also a step towards cementing its offline presence.
Unacademy, too, has gone offline with its first learning centre in Rajasthan’s Kota, India’s coaching capital for engineering aspirants. It has reportedly onboarded about 30 top teachers from the city, some even from local favourite Allen Career Institute. More such centres are in the pipeline.
Vedantu, however, has taken the middle path—majorly because of Krishna’s prior experience. In 2006, the CEO, along with three of his friends, had founded his first venture, Lakshya, that trained students in a physical set-up but soon realised that achieving scale was not possible through the offline mode of teaching. Vedantu was born six years later.
“We very well know how an offline centre operates and have massive expertise on that. For us, to go back to the offline mode is like taking a U-turn, which we will never do. Instead, we are opening a hybrid centre in which a teacher would be taking classes online and there will be a local coordinator or a class teacher to ensure discipline in the physical class,” Vamsi explains.
He says that the model is a result of their research wherein 30-35 per cent of parents had said that while they loved the teacher, they would like some added supervision.
Money Matters
Vedantu’s numbers have been a cause for concern. According to an Entrackr report, while the company’s revenue surged 3.8X to touch Rs 93.7 crore in FY21 as compared to Rs 24.6 crore in FY20, its expenses widened to Rs 407.5 crore in FY21 from Rs 88.3 crore in FY20. The cost of advertising and promotion was a key component of that—surging 5.8X to Rs 177.4 crore in FY21 from Rs 30.5 crore in FY20.
Vamsi, however, is optimistic. “We are looking at profitability as a metric and as a business operation. We have topline and margins, and whatever expenses we are incurring have to come from those margins. We are trying to increase our runway to at least 30 months and eventually become profitable in the next one-and-a-half years. As a company, we calibrated across functions and year on year became 50-60 per cent more efficient,” he says.
The report also noted that out of the seven edtech unicorns, including BYJU’s, Unacademy, UpGrad, LEAD, Eruditus and PhysicsWallah, Vedantu had the highest expense-to-revenue ratio in FY21.
Defending that, Krishna says that the company’s actual collections are double the numbers that were reported as revenue. “My bigger objective is our expenses. If you look at revenue, our revenue grew by almost 4X but expenses also grew substantially and that is because we diverted a lot of our budget to awareness activities,” he explains.
Amid all this, Krishna also confirms his IPO aspirations. “We are focusing on the long term. We are a strong household brand in the K-12 segment with live tutoring being a category and we continue to focus on that,” he says.
With players like LIDO filing for bankruptcy after a very public shutdown, Unacademy resorting to all sorts of survival tactics, BYJU’s fighting its own struggles and talks of Vedantu’s possible buyout doing the rounds, many say that the future of Indian edtech is bleak. But is that really the case? “It is an overreaction at best and strategic blunder at worst,” says Krishna.
“Education is a large market and is underpenetrated with edtech, which is less than 5 per cent. For a country like India, there is no way offline can solve the quality education problem, hence I strongly believe that edtech is the biggest growth story for the next five years. Penetration will grow from sub 5 per cent to around 20 per cent,” he confidently asserts.
