Lido Learning becomes the first major Edtech casualty in India

The troubles in Edtech companies were never in doubt. It was evident from the scores of lay-offs done by these edtech firms. Now there is the first casualty in the form of Lido Learning, which has just filed for bankruptcy protection. Now, Lido is backed by the redoubtable Ronnie Screwvala and has other prominent backers like Vijay Shekhar Sharma of Paytm and Anupam Mittal of Shaadi.com. Despite such a marquee backing, Lido Learning just failed to live up to the early hype and hoopla. Now the company has called it a day.

According to a regulatory filing by edtech start-up, Lido Learning, the company has filed for insolvency and bankruptcy with the Mumbai bench of National Company Law Tribunal (NCLT). The details of this bankruptcy filing was also shared with the Ministry of Corporate Affairs (MCA). In fact, the board of directors of Lido Learning passed a special resolution to file an application under Section 10 of the extant Insolvency and Bankruptcy (IBC) code 2016. The company, as per the filings, was in an unviable position to continue to operate.

Ironically, this announcement of Lido Learning filing for bankruptcy comes exactly seven months after Lido Learning had laid off 1,200 employees from its rolls. Lido is not alone because most of the other leading Edtech players like Byju’s, Unacademy, Upgrad and Vedantu had all been laying off people aggressively in the last few months due to the pressure of business weakening. The bankruptcy filing was done as Lido Learning was unable to pay its debts falling due, leaving the company with no choice than bankruptcy. 

The layoffs at edtech companies in general and Lido Learning in particular must be seen in the broader context of how technology start-ups have been having a tryst with reality in the last few months. Several start-ups are estimated to have laid off a total of up to 11,000 employees since the start of 2022. However, informal estimates peg the actual number at more than twice this estimate. Edtechs gained from the pandemic-fuelled digitization of learning. However, with things back to normal, the aura of online classes is vanishing. 

Most of the edtech start-ups were nothing more than cash-guzzling start-up plays with little profit visibility. They were using easily available capital to browbeat their way into the minds of customers and create a niche. However, as quickly as this online learning fad picked up, it also started diminishing in appeal and interest. Meanwhile, funding from traditional VCs and PE funds for Edtechs dried up as the investors were sharpening their focus on profitability. The Edtechs had reached a point of no return, where it was almost make or break for them.

Lido Learning may be the first high profile casualty of the edtech meltdown but the industry is under a lot of stress. Edtech unicorns like Unacademy and Vedantu have also laid off staff aggressively over the last few months. Recently, another learning platform (Udayy) totally shut down its operations and laid off the entire workforce. For the Indian start-ups it may look like a long funding winter. The primary markets are far from impressed and the VCs and PE funds are not so liberal with their cheque books any longer. That is hurting Edtechs a lot.

Edtechs may just be representative of the larger churn in the digital industry. For too long, the PE funds and the VCs survived on the Greater Fool theory. With the IPO markets in India rejecting such aggressive valuations, the PE funds are starved for an exit route. The problems for Edtechs may have just begun.