The Unacademy founder says the startup is now worth less than $500 million, and confirms merger and acquisition talks

Unacademy, once one of India’s most popular edtech startups, may now be worth less than $500 million, 85% below its pandemic-era peak valuation, as the company undergoes a sharp reset and explores merger and acquisition options.

In a detailed note to publish On Wednesday, marking the startup’s 10th anniversary, Unacademy CEO Gaurav Munjal said the startup’s valuation had fallen sharply from its value. Peak $3.5 billion three years ago to less than $500 million today. He also confirmed that the startup is in merger and acquisition talks.

India’s edtech scene has been shattered since the outbreak of the pandemic, when the sector witnessed a rare moment of opportunity during the lockdowns. Startups like Unacademy and Byju’s raised billions, hired freely, and invested heavily in sales and marketing to attract customers, but growth stalled after lockdowns eased and students returned to offline classrooms.

Byju’s, India’s most valuable startup just three years ago, has seen its success The rating is written to virtually zeroSo he entered Insolvency proceedings In September last year. In November, the US Bankruptcy Court ordered its founder, Baiju Raveendran He paid more than $1.07 billion For ignoring court directions and providing “evasive and incomplete” responses regarding the transfer of $533 million by the startup’s US unit that it never recovered.

Meanwhile, Physics Wallah, long considered the underdog, has It turned profitable And it continued to expand, last month It had a strong debut in the general market.

The past three years have been characterized by shrinking demand, intensifying competition and internal turmoil as the startup suffered losses and abandoned aggressive expansion plans, Unacademy’s Munjal said in his note.

“Personally, for us founders, this has been the toughest three years we have ever experienced in our lives because until 2021, we had not experienced a single month of declining growth,” he wrote. “But in the last three years, we’ve seen us lose market share in the game we literally invented and it hurts.”

Munjal believes the recession was driven by the rapid shift in market dynamics post-pandemic. As students returned to offline classes and competitors launched low-priced offerings similar to Unacademy’s early strategy, the company saw demand decline and growth stagnate.

“We became complacent,” he wrote, adding that the company had failed to innovate on price even as competitors undercut it.

In recent months, Munjal has devoted increasing attention to AirLearn, his new AI-driven language learning app that mimics Duolingo’s game-based approach. The shift has created friction with some Unacademy investors, who feel its core edtech business has been left adrift during a difficult phase, people familiar with the matter told TechCrunch.

Founded in 2015, Unacademy has raised about $854.3 million over 13 funding rounds, according to PitchBook, and its backers include SoftBank, Tiger Global, General Atlantic and Peak XV Partners.

Unacademy has spent the past two years overhauling its operations, reducing its annual burn from 14 billion rupees (about $155.7 million) in 2022 to less than 1.75 billion rupees (about $19.5 million) this year, Munjal said. The startup has noticeably Reducing the number of employees through layoffsreduced marketing costs, and refocused on its core subscription business.

Recent reports indicated that rival UpGrad has discussed acquiring Unacademy for itself Between 300 and 400 million dollars.