Physicswallah Lays Off 120 Employees! 😥

Hey there,

Alakh Pandey started Physicswallah in 2016 with just ₹30,000.

And in 6 years, PhysicsWallah became a unicorn. Because of these two factors:

• Massive loyal following

• Focus on profitability

But last week PW shook things up, laying off 120 employees.

Here's why 👇

The company cites two primary reasons for this decision:

◘ Overhiring

◘ Performance reviews

While these explanations are provided by the company itself, the actual cause behind the layoffs may lie in the current state of the edtech industry.

• First, edtech funding has dried up.

In 2023, funding dropped to $172 million. This is down from $1.7 billion in 2022 and $3.5 billion in 2021. That's a 95% decrease in just two years.

This shows not just a reduction in available funds. It also reflects what top venture capitalists and private equity firms think about the future of edtech.

• Second, the COVID-19 pandemic temporarily boosted demand.

The pandemic changed edtech's direction. Schools closed. Education moved online. And, the major players in the Edtech space facilitated this shift.

After all, India is a massive market for edtech. It has 15 lakh schools, over 97 lakh teachers, and more than 26.5 crore students. And, to put things in perspective; these numbers are just at the school level.

• Third, only the higher education and upskilling sectors seem stable.

School education is the main driver of India's edtech sector. K-12 edtech relies on parents' willingness to pay. And as everything moved offline, they don’t see much value in online education anymore.

On the flipside, higher education/ upskilling makes up a small part of this big sector but is the only stable sector. The reason is that the buyer is also the user. They know what they are purchasing. Other segments in the B2C sector appear vulnerable.

These industry-wide factors may be as significant as the internal reasons for the layoffs.

For Physicswallah, a profitable company with a large number of loyal students, prioritizing sustainability during difficult times is crucial.

This strategy can help them navigate through the funding winter until they secure their next round of funding, which will provide more stability.

✍️ Jargon of the day

Private Equity (PE) - Private equity firms raise money from large investors to invest in private companies. They take an ownership stake in companies in exchange for providing capital.

The goal is to help improve the companies over several years before exiting at a profit by selling or going public. This provides private companies access to money to grow their business.

Loved this edition? Or have some thoughts to share? We'd love to hear from you

Cheers,
Hrishikesh