The Deal That Wasn’t, And Might Be
The latest deal is UpGrad’s second offer in two months. Talks in January fell through after differences over valuation surfaced. Cofounded by entrepreneur and film producer Ronnie Screwvala, UpGrad is said to have proposed an all-stock valuation of $300 million. This was significantly lower than the $2.25 billion that Unacademy’s investors were seeking and substantially below its peak valuation of $3.4 billion in 2021.
In 2024, Unacademy’s talks with Kota-based test-preparation major Allen Career Institute fell through for similar reasons. The gap between what investors thought their companies were worth and what buyers were willing to pay proved unbridgeable.
The potential revival of the deal—only a term sheet has been signed so far—should not, however, suggest that the sector is headed for recuperation. Further deals are unlikely to take place at the kind of headline-grabbing valuations of 2021 and 2022. The era of easy money and sky-high multiples is over. What remains is the hard work of building sustainable businesses.
The Funding Winter
The outlook among investors is that raising fresh rounds of investment would entail promoters taking substantial haircuts—which the UpGrad-Unacademy deal implies. In 2024, a small bump in edtech funding raised hopes of the funding winter coming to an end. But in 2025, the number of deals is reported to have dropped to 31 from 48 in 2024—way below 172 in the 2021 boom year and 95 in 2022—and the lowest in a decade.
Funding dropped from $572 million in 2024 to $240 million in 2025—again, a steep fall from $4.78 billion in 2021 and $2.44 billion in 2022. These numbers tell a stark story. In 2021, edtech was the hottest sector in Indian startups, attracting nearly $5 billion in investment. In 2025, it attracted less than 5 per cent of that amount.
The stock-market performance of Noida-headquartered PhysicsWallah, which became the first edtech to list, reflects the outlook. After listing in November last year at ₹145, the share now languishes at ₹80-86—a drop of more than 40 per cent. Public market investors, who are generally less susceptible to hype than private equity and venture capital funds, have delivered their verdict.
The Pandemic Bubble
In many ways, the edtech sector exemplifies the perils of poor strategic thinking both by entrepreneurs and private-equity and venture-capital investors. Most edtech platforms revelled in hyper-growth during the pandemic years in the K-12 (kindergarten to Class 12) space as brick-and-mortar schools remained closed during the lockdown, riding high on ever-higher valuations from investors.
The logic seemed impeccable. Schools were closed. Students were at home. Parents were desperate for educational continuity. Online platforms offered a solution. Usage soared, revenues grew, and valuations followed.
Unsurprisingly, they struggled for relevance in the post-pandemic period, when schools reopened. The temporary conditions that had created their market disappeared, but the costs they had built—the staff, the marketing budgets, the infrastructure—remained. The result was a classic boom-bust cycle.
Those in the test-preparation and coaching business faced a different but equally challenging problem: they have been unable to compete against experienced brick-and-mortar institutes. Kota’s Allen Career Institute, with decades of experience and a proven track record, is a formidable competitor. Unacademy’s attempt to take it on was always going to be difficult.
The Byju’s Effect
The collapse of Byju’s, India’s first high-profile edtech unicorn, has cast a long shadow over the entire sector. Once valued at $22 billion, Byju’s became a cautionary tale of what happens when growth is pursued at all costs.
Accusations over questionable corporate governance and irregular practices tarnished the brand and eroded investor confidence. The company’s aggressive acquisition strategy, buying up competitors and adjacent businesses, created a sprawling empire that proved difficult to manage. Quality control suffered. Losses mounted. The founders’ relationship with investors soured.
Byju’s was not just another edtech company; it was the symbol of the sector’s ambition and promise. Its fall has therefore been felt as a symbol of the sector’s failure. If Byju’s could not make the model work, investors ask, who can?
The Hybrid Gamble
Both Byju’s and Unacademy burned cash while attempting a hybrid online/offline model, vigorously acquiring startups, and expanding at a pace that ultimately impacted quality control. The logic of the hybrid model was compelling: combine the reach of online with the engagement of offline. But execution proved difficult.
Acquiring startups created integration challenges. Rapid expansion stretched management bandwidth. Quality control, never easy in education, became nearly impossible when operating at scale across multiple formats and locations.
Falling profitability, layoffs, and restructuring inevitably followed. Companies that had grown at breakneck speed found themselves having to shrink, to focus, to return to basics. The human cost—of employees laid off, of careers disrupted—was substantial.
The Investor Pivot
Investor preferences, too, seem to gyrate. In the post-pandemic era, upskilling, higher education, and professional learning were considered the more profitable options for edtech investment. The logic was that adults, unlike children, could choose to learn online, and that the professional education market was less susceptible to the reopening of schools.
Now, the advent of artificial intelligence is seeing investors pivot towards K-12 education, in which the ability of platforms to offer personalised education to school students will emerge as a key differentiator. AI, the thinking goes, can tailor instruction to individual needs, adapt to student progress, and provide feedback at scale—capabilities that could finally make online K-12 education work even when schools are open.
But here, too, the funding that would enable such innovation is yet to be seen. Investors are cautious. The wounds from the last cycle are still fresh.
The Lessons
What lessons should entrepreneurs and investors draw from the edtech saga?
First, temporary conditions do not create permanent markets. The pandemic created a spike in demand for online education, but that spike was not sustainable. Companies that built for the spike found themselves overbuilt when demand normalised.
Second, education is a difficult sector to disrupt. It involves deeply ingrained behaviours, trusted institutions, and high stakes. Parents want the best for their children, and they often equate “best” with “what has worked before.” New entrants have to prove themselves against incumbents with decades of credibility.
Third, growth at all costs is a dangerous strategy. The companies that grew most aggressively in the boom years are now the ones facing the most severe challenges. Sustainable growth, built on strong unit economics and clear competitive advantages, is more valuable than headline-grabbing scale.
Fourth, governance matters. Byju’s problems were not just about the market; they were also about how the company was run. Investors who ignored governance concerns in the pursuit of returns paid a price.
Fifth, valuations are not wealth until they are realised. Paper gains mean nothing if they cannot be converted into cash. The founders and investors who sold at the peak did well; those who held on are now facing reality.
The Path Forward
The edtech sector is not dead. Education is a fundamental human need, and technology will inevitably play a larger role in meeting it. The question is not whether edtech will survive but what form it will take.
Successful edtech companies will likely be those that:
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Focus on specific niches where they can build genuine expertise, rather than trying to be everything to everyone.
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Develop sustainable business models with clear paths to profitability.
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Build strong relationships with traditional educational institutions rather than trying to replace them.
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Use technology to enhance, not replace, human teaching.
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Maintain rigorous quality control even as they scale.
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Govern themselves transparently and accountably.
The boom years are over. The years of hard work are beginning. For the companies that survive, the future may still be bright—but it will be a very different future from the one they imagined in 2021.
Q&A: Unpacking the Edtech Crisis
Q1: What is the current state of the UpGrad-Unacademy deal?
A: UpGrad has made an all-stock offer to buy Unacademy, valuing it at approximately $300 million—a fraction of its peak valuation of $3.4 billion in 2021. This is UpGrad’s second offer in two months; January talks fell through over valuation differences. Only a term sheet has been signed so far, and the deal’s revival should not be taken as a sign of sector recovery. The valuation gap between what Unacademy’s investors sought ($2.25 billion) and what UpGrad offered reflects the broader market reality.
Q2: How severe has the funding winter been for edtech?
A: Funding has collapsed dramatically. Deals dropped from 172 in 2021 to 31 in 2025—the lowest in a decade. Funding fell from $4.78 billion in 2021 to $240 million in 2025. Even the modest uptick in 2024 proved temporary. PhysicsWallah, the first edtech to list, saw its share price drop from ₹145 at listing (November 2025) to ₹80-86 currently—a more than 40 per cent decline, reflecting public market skepticism.
Q3: What caused the edtech boom and subsequent bust?
A: The pandemic created temporary demand for K-12 online education when schools were closed. Edtech platforms grew hyper-fast, attracting massive investment at ever-higher valuations. When schools reopened, demand normalised, leaving companies with cost structures built for a larger market. Those in test preparation struggled to compete with established brick-and-mortar institutes like Allen. Byju’s collapse amid governance concerns further damaged investor confidence.
Q4: What were the strategic mistakes made by edtech companies?
A: Key mistakes included: mistaking temporary pandemic conditions for permanent market shifts; pursuing hyper-growth without building sustainable unit economics; burning cash on aggressive acquisitions and expansion that compromised quality control; attempting hybrid online/offline models without clear execution strategies; and, in Byju’s case, questionable governance practices. The result was falling profitability, followed by layoffs and restructuring.
Q5: What is the future outlook for edtech?
A: Investor preferences are shifting again—toward AI-enabled personalised learning in K-12 education. However, funding for such innovation remains scarce. Successful edtech will likely need to focus on specific niches, build sustainable business models, partner with traditional institutions rather than try to replace them, use technology to enhance rather than replace human teaching, maintain quality control, and govern transparently. The boom years are over; the years of hard work are beginning.
