Fatigue and FOMO: The span of Indian edtech VC emotions

Anil Nagar ended 2021 on a deliriously happy note. His online test-prep company, Adda247, had finally

raised


raised

Entrackr
Adda247 set to raise $20 Mn in a new round led by Westbridge
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 a $20 million Series-B round. On the back of this new funding—and a replenished cap table, with marquee investors such as WestBridge Capital and Info Edge—Adda247 even acquired a smaller but promising test-prep brand called StudyIQ. By all accounts, Adda247, founded in 2016, seemed to be following the playbook set into motion by the biggest edtech companies in India. 

But the story behind Adda247’s fundraise isn’t as straightforward as it was for other edtechs. To raise money, it had to practically alter its very DNA. 

Adda247 was a test-prep company that dealt with competitive government exams. The start of the pandemic wiped out that revenue channel—government exams were postponed or worse yet, cancelled. Adda247’s revenue, audience, and prospects for profitability melted away. 

With about Rs 30 crore (~$4 million) in the bank, Adda247 had no choice but to expand in order to bring in money—it last raised $6 million in November 2019. It quickly added the sprawling category of K12 classes, in addition to

GATE


GATE

Graduate Aptitude Test in Engineering
GATE is a national examination on the comprehensive understanding of the candidates in various undergraduate subjects in Engineering / Technology / Architecture and post-graduate level subjects in Arts, Commerce and Science


and

UPSC


UPSC

Union Public Service Commission
Union Public Service Commission (UPSC) is India’s premier central recruiting agency for central government public servants. It is responsible for appointing and conducting examinations for posts under the civil services cadre and defence services cadre of the Union government


. Nagar believes that Adda247’s USP is to cater to the regional, tier-2 and -3 audience, which bigger brands like Byju’s and Vedantu don’t directly cater to. 

Adda247’s main problem stemmed from the fact that investor interest was hard to stir. Over the years, fatigue had crept in. 

Edtech in 2020 was a market where, as one investor put it, “anyone with an online machinery” was being funded. It was phase one, an exuberant segment where the customer acquisition costs (CAC) plummeted to Rs 1,500-2,000 ($20-26) per student [from Rs 3,000-4,000 ($40-53) before], according to a Mumbai-based banker, who facilitates deals between investors and edtechs.  

“Everyone wanted to bet on these new, online business models that promised to fill up the gaps created by shut schools and institutes,” says the banker.