Edtech startup upGrad is planning to hire as many as 1,400 employees by March 2023. The company has also signed new leases for 3,35,000 sq. ft for office spaces, offline campuses, housing for learners, studios, and training rooms across Bangalore, Pune, Mumbai and Noida in order to accommodate the hired employees.
The development comes on the heels of the domestic startup ecosystem witnessing mass layoffs and hiring freeze owing to weak global macroeconomic conditions, rising interest rates and a funding winter witnessed by new-age companies.
Notably, in June, the Ronnie Screwvala-backed edtech unicorn said that it will hire 3,000 employees over the course of three months. Commenting on the development, Mayank Kumar, co-founder and managing director, upGrad says, “Domestic expansion has been a priority for us. While our business model is reaping 100% results quarter-on-quarter, it's important for us to reinvest our gains to scale the impact we aim to drive. We are expanding to house the larger teams that we are bringing on board. Also, while our focus is on strong online delivery models, we encourage our current and prospective learners to meet us in person while they decide on the right program for themselves. Thus, having an offline presence allows us to be closer to our learners in their LifeLongLearning journey.”
The development comes days after the company reported that its losses have widened threefold to ₹626.6 crore in the financial year ended March 2022, as against ₹211.1 crore in the same period last year. The company’s consolidated revenue for the period under review doubled to ₹682 crore. But the edtech firms' expenses surged 2.5 times to around ₹616 crore in FY22, as against ₹248 crore in FY21.
Edtech’s mass layoffs
After schools and colleges reopened following two years of the Covid-19 pandemic, the Indian edtech space witnessed unprecedented job cuts with startups trying to sustain themselves. In the past six months, more than 10,000 employees have been handed over pink slips in the domestic edtech space, as companies are witnessing the financial crunch amidst fears of the global recession.
Last month, Byju’s, the country’s most valued startup, decided to lay off as many as 2,500 employees or 5% of its workforce in order to achieve profitability by March 2023. The edtech unicorn reported a standalone loss of ₹2,702 crore year-on-year (YoY) for FY21. Byju's revenue from operations also dropped to ₹1,378.51 crore, down from ₹1,918.25 crore during the year before.
Another edtech unicorn Unacademy, after laying off 10,000 contractual and full-time employees in April, is planning job cuts that will affect 350 employees or 10% of its workforce in the second round of layoffs. In order to maintain its balance sheet, the company has also resorted to cost-cutting measures such as slashing its monthly burn to ₹50-₹60 crore from its previous ₹200 crore and reducing its performance marketing spends from ₹18 crore to ₹2 crore.
Edtech startup Vedantu has also laid off 724 employees.
Tiger Global has asked the founders of some of its companies to slow down the investment pace. A report by PwC says that the sectoral funding for Indian startups hit a two-year low of $2.7 billion during the July to September quarter of FY22. Companies had garnered as much as $11.4 billion in the year-ago period and about $6.6 billion in the preceding quarter.
“There is around $562 billion in dry powder available for start-ups in VC funds, an indicator that we could see strong investment cycles ahead. The buildup of dry powder is due to a market pullback by VC funds that are being picky about their investments. The focus is on companies that have strong unit economics and a path to profitability,” said analysts at PwC.
Market intelligence platform Tracxn in a report stated that local startups raised $3 billion in Q3CY22, 57% lower funding as compared to the previous quarter. The average ticket size also witnessed a drop across all funding stages, with the late stage seeing the biggest fall of over 70%, from $142 million in Q3 of 2021 to $42 million in Q3 of 2022, indicating that investors are not willing to make large investments until economic conditions stabilise.