Edtechs have a reality check moment. Will they survive it?

Blame it on the operational challenges of Byju’s, the erstwhile poster child of the edtech space, or the unending funding winter for startups, but the once-promising sector seems to be losing the plot. That’s an embarrassing about-turn for a segment that became a household phenomenon during the pandemic as remote learning drove many companies to a boom. But it’s possible for edtech to bounce back from its short-term challenges once funding improves, given the evergreen demand for learning, some experts say.

In its glorious days, this much-touted segment saw an influx of investments to the tune of $4.1 billion in 2021, almost doubling over 2020 and growing nearly seven times since 2019. Close to three-fourths of this came through late-stage deals, suggesting a focus on more established firms. Two edtech firms featured in the top five funding rounds among all Indian technology startups that year: Byju’s ($864 million) and Eruditus ($650 million), data from financial aggregator Tracxn shows.

The segment also went on an acquisitions spree. Soon the tables turned. A pall of gloom descended as the world returned to normalcy with a looming recession that made investors wary.

They tamped down on investments and funding plunged over 90% in the post-pandemic period. “The drying up of funding and the reduction in mergers and acquisitions (M&As) reflect a broader market correction and a more cautious approach from investors, who are now seeking evidence of long-term viability and profitability rather than just rapid growth," said Karan Gupta, co-founder and director at Kapso, an M&A firm for small-scale enterprises. Earlier, with money sloshing around, valuations ran through the roof.