Unacademy Valuation Drops Below $500M, Founder Confirms M&A Talks

Unacademy Faces Valuation Drop and Explores Strategic Options

Unacademy, formerly a leading edtech company in India, is currently estimated to be valued at under $500 million. This represents an 85% decrease from its peak valuation during the pandemic era.

The company is undergoing a significant restructuring and is actively considering both merger and acquisition possibilities.

CEO Confirms Valuation Decline and M&A Discussions

In a comprehensive post on X commemorating the startup’s 10th anniversary, Unacademy’s CEO, Gaurav Munjal, acknowledged the substantial fall in the company’s valuation.

He stated the decline from a high of $3.5 billion three years ago to the present value of less than $500 million. Munjal also verified that the company is engaged in discussions regarding potential mergers and acquisitions.

The Shifting Edtech Landscape in India

The Indian edtech sector has experienced considerable disruption following the pandemic-induced lockdowns. This period presented a unique opportunity for companies like Unacademy and Byju’s.

These startups secured substantial funding, expanded their workforce, and invested heavily in sales and marketing initiatives. However, growth slowed considerably once offline classes resumed.

Challenges Faced by Key Edtech Players

Byju’s, once India’s most highly valued startup, has seen its valuation effectively reduced to zero. The company initiated insolvency proceedings in September of the previous year.

In November, a U.S. bankruptcy court mandated its founder, Byju Raveendran, to pay over $1.07 billion for non-compliance with court orders and providing incomplete responses concerning the transfer of $533 million by the startup’s U.S. division.

Physics Wallah's Success Amidst Industry Turbulence

Conversely, Physics Wallah, previously considered a smaller competitor, has achieved profitability and continued its expansion. The company recently had a successful initial public offering.

Unacademy's Internal Struggles and Market Dynamics

Gaurav Munjal noted that the past three years have been characterized by decreasing demand, increased competition, and internal challenges. These factors contributed to financial losses and the abandonment of ambitious expansion plans.

“For us founders, this was the most difficult three years that we had ever seen,” Munjal wrote, highlighting the company’s first experience with month-over-month declines in growth.

Complacency and Failure to Innovate

Munjal attributes the downturn to a rapid change in market conditions after the pandemic. The return to offline learning and the emergence of lower-priced competitors impacted Unacademy’s demand and growth.

He admitted the company became complacent and failed to adapt its pricing strategy in response to competitors’ lower offers.

Focus on AirLearn and Investor Friction

Recently, Munjal has focused significantly on AirLearn, a new AI-powered language learning application inspired by Duolingo’s gamified approach.

This strategic shift has reportedly caused some friction with Unacademy investors, who expressed concerns that the core edtech business was being neglected during a challenging period.

Funding and Backers

Established in 2015, Unacademy has raised approximately $854.3 million across 13 funding rounds, as per PitchBook data.

Its investors include prominent firms such as SoftBank, Tiger Global, General Atlantic, and Peak XV Partners.

Operational Overhaul and Cost Reduction

Munjal stated that Unacademy has spent the last two years streamlining its operations. The company has reduced its annual burn rate from ₹14 billion (around $155.7 million) in 2022 to less than ₹1.75 billion (approximately $19.5 million) this year.

This was achieved through workforce reductions, decreased marketing expenses, and a renewed focus on its core subscription model.