– Prof Dhruv Nath, Author, “The Earnicorns”

Just a few years ago, the colour of the edtech sector in India was green. On-line learning was the in thing, whether for schools, competitive exams, or even professional learning. Startups in the space were growing like nobody’s business, and the rupees (or dollars if you prefer) were flowing in. Reaching unicorn status (a valuation of a billion dollars or more) was a given. It was not a question of if. It was a question of when. Byju’s, Unacademy, Vedantu, Toppr, Eruditus, the list went on, and everyone was smiling.

But now that shade of green has turned to a very sorry pink. That’s right, the flavour of the season is pink slips, with the giants in the business competing with each other to see who can retrench the largest number of unfortunate employees. Why has this happened, and what’s the way forward? 

Actually, there are a couple of major reasons for this dramatic turnaround. First of all, there was the inevitable Covid pandemic, when most businesses simply collapsed. But edtech got a further boost, if that were possible. Everything was shut – be it schools, tuition centres, or coaching centres for competitive exams. However, education had to carry on, and so did competitive exams. Therefore, all learning shifted on-line mode. And that’s when our edtech giants grabbed the opportunity. They made ambitious growth plans, and recruited people en masse. 

In any case, internet-based businesses are able to scale rapidly, simply because geography is no longer a constraint. As a consequence, the big players – those with a solid brand as well as lots of funding – would grow rapidly, usually at the cost of the smaller guys. And this became the mantra for success: “Grow rapidly, and reach a dominant position in the market”. Unfortunately, this mantra became, “Growth at any cost. Even at the cost of profitability.” By the way, investors were also keen to be part of this “growth at any cost” story. They believed that profits would come later, once their investee companies had reached a position of dominance. The result? Unicorns – including most of our giant edtech companies – growing dramatically, but making bigger and bigger losses.

But then, fortunately for the world, and unfortunately for our edtech companies, Covid began to abate. Schools, tuition centres, coaching centres, all began opening their doors to learners once again. Given the convenience of on-line learning, edtech did continue, but so did physical classes – with a bang. Which meant that the massive plans of the edtech companies had to take a beating. Quite naturally, a lot of the manpower they had added during Covid times, suddenly became surplus.

In addition, investors started running out of patience. “When will you show profits?” was the common refrain. Of course, the Ukraine war, the rise in interest rates in the USA, and the recession in parts of the western world and the consequent squeeze in the availability of money in the western world, only exacerbated the problem.

And that is the double whammy that hit our edtech companies. With Covid easing, growth plummeted. And because they were loss-making, getting investors became that much tougher. That’s why edtech companies have been doling out pink slips by the hundreds.

But in this doom and gloom, there is at least one founder who has shown the way: Alakh Pandey of Physics Wallah, who insisted on creating a profitable company. Yes, the company did become a unicorn in the year 2020, but it was a profitable unicorn. And since it earns profits, it is natural to call it an EARNICORN. 

How did Alakh do it? Well, he was clear that he was not pursuing growth at any cost – definitely not at a loss. He ran a frugal business. And he was insanely focused on the customer. Have you ever seen massive Physics Wallah ads with film stars on television? I certainly haven’t. But have you seen lots of free content from them on Youtube? Yes, of course you have! And that explains Alakh’s philosophy in a nutshell. Don’t spend big time on ads. Instead, create great content, and make it available free. Customers will come to you – and bring more customers with them. To repeat, run a frugal business, and keep the customer happy.

By the way, earnicorns are not limited to Edtech alone. You have Naukri.com in the recruitment space, Zerodha in the online stockbroking space, Dream11 in the fantasy sports space, and Zoho in the SaaS-based software space, among others. All of them market leaders, all of them profitable, and yes, all of them unicorns. In other words, all of them are earnicorns. All these founders have insisted on running frugal businesses, and not chasing growth at any cost. 

So it can be done. We’ve seen it in one edtech company, namely Physics Wallah. And given the current environment, the others are also buckling down to the tough task of making money. Hopefully, the tough period was just a passing phase. A bad dream. And maybe some of these guys will become real businesses – not mythical, loss-making ones.

Yes, hopefully, we’ll have more earnicorns!