India’s EdTech industry has turned into a multilayered billion-dollar scam

Idk if this offends you, but India’s EdTech industry has turned into a multilayered

billion-dollar scam.

The closure of LIDO that raised its Series C only a few months ago further proves the point.

Let me explain how this scam unfolds -

1. Founders of funded EdTech ventures (Byjus, Lido, Unacademy, etc) work under tremendous pressure from their board members and investors.

Investors are under pressure to build a portfolio of companies that promises strong returns (because they have to raise another round from Limited Partners).

2. Now comes the problem - Returns for an investor are measured by a metric called - IRR (Internal Rate of Return).

IRR is a function of two factors - Time and Capital. The faster a portfolio company is sold, for as high an amount, the higher the IRR.

Exit delays create immense pressure on the investors. The longer a start-up takes to reach a critical value milestone (growth, acquired users etc), the more concerned investor becomes. After all, as mentioned the one metric that VCs live by called IRR - drops rapidly over the passage of time.

3. In every board meeting, founders have to justify their user acquisition strategy, blitzscaling strategy. As a result, education companies are reduced to a single line statistic, measured primarily by multiple of capital invested and gross IRR.

It is no surprise, the so called 'Education' companies hire more marketing professionals than real educators. And they innovate not to improve the course content, but to sell the course content.

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Author- Naman Shrivastava, Cofounder Global Governance Initiative, Ex- United Nations, Former Government of India Advisor