InvestorQ : Why did Lido Learning go bankrupt and what does the mean for the India Edtech story?
Aditi Sharma made post

Why did Lido Learning go bankrupt and what does the mean for the India Edtech story?

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Mahima Roy answered.
4 weeks ago
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You must have heard of the financial challenges that edtech companies like Byju’s, Unacademy, Vedantu and Upgrad are facing. Profits were low, business was looking down and PE funds had stopped cutting the cheques. Now there is the first high profile casualty as Lido Learning files for bankruptcy protection. Lido Learning is backed by Ronnie Screwvala, Vijay Shekhar Sharma of Paytm and Anupam Mittal of Shaadi.com. Despite such a marquee line-up of backers, Lido Learning failed to live up to the edtech hype built around it.

Company officials have confirmed that Lido Learning had filed for insolvency and bankruptcy protection with the Mumbai bench of National Company Law Tribunal (NCLT). The same has also been reported to the Ministry of Corporate Affairs (MCA). The board of directors of Lido Learning passed a special resolution for bankruptcy application as the company was in an unviable position to operate. This comes just 7 months after Lido laid off 1,200 employees. Lido was unable to pay its debts falling due, leaving the company with no choice.

Let us first get the bigger picture clear. Several start-ups are estimated to have laid off up to 11,000 employees since the start of 2022. In fact, informal estimates peg the actual number at more than twice this estimate, but we will leave that aside for the time being. Edtechs were big beneficiaries of the pandemic-fuelled digitization of learning, but faltered when kids returned to classrooms. The reality was that these Edtechs were nothing more than cash-guzzling start-up plays with limited profit visibility.

Most of these Edtechs were using easy funding to bulldoze into the minds of customers. The problem started when the appeal started diminishing as the classroom nostalgia took over. Along with that, the funding from traditional VCs and PE funds for Edtechs dried up. All of a sudden, the financers were asking for leaner and meaner structures as well as sharpening their focus on profitability. The Edtechs were never really built to face this reality, at least most of them never really were prepared for such tough times.

Lido Learning may have gone bust, but it is indicative of the overall edtech meltdown and an industry is under stress. Lay-offs have been rampant across Edtechs like Byju’s, Vedantu, Upgrad and Unacademy. For now, the Edtechs have to worry about the long funding winter. The VCs and PE funds are tired of the existing model and not so liberal with their cheque books any longer. IT was possibly the Greater Fool theory at play for a little too long. IPO markets were the first to issue a warning and now it is catching up.

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