By Abhay Ray 
Introduction
Investor and entrepreneur Ronnie Screwvala is sounding the alarm on the wave of edtech startups rushing to go public, calling it a “very worrisome” trend. The industry veteran, who is the Co-founder & Chairperson of online learning unicorn upGrad, believes many companies are mistaking IPOs for easy capital, despite lacking scale and credibility.
Ronnie Screwvala’s Caution on Edtech IPOs
Ronnie Screwvala, co-founder and Chairperson of upGrad, has expressed concerns about the current state of the edtech industry, claiming that no edtech company is prepared for an initial public offering (IPO) at this time. Ronnie Screwvala has voiced his concerns regarding the current state of the edtech industry and its readiness for public offerings. He firmly believes that no edtech company is fully prepared for an IPO at this stage. Screwvala highlights that many of these companies, despite their rapid growth, have yet to demonstrate the financial stability and profitability required for a successful public listing. He cautions that launching an IPO without a proven track record of financial health could lead to challenges in sustaining long-term growth. His warning reflects the need for edtech businesses to mature and solidify their operations before venturing into the public market.
Sales-First Mentality Needs to Shift
Ronnie Screwvala emphasizes that many edtech companies are currently focused on a “sales-first” approach, prioritizing revenue growth over long-term sustainability. This strategy, while successful in driving initial growth, overlooks the importance of developing a solid, outcome-based business model. Screwvala argues that the sector needs to shift toward a more balanced approach, where the focus is not just on boosting sales but on building a sustainable foundation for long-term success. He stresses that edtech companies must prove their ability to deliver consistent value and positive outcomes to users, rather than relying solely on aggressive sales tactics to drive expansion.
What Growth trajectory is upGrad following ?
Ronnie Screwvala said – Money corrupted this sector especially K-122 (kindergarten to 12th) creating a sales-first mindset. We had to hire a fair bit from outside because most (most people in the edtech sector) were conditioned to chase sales over learning. Edtech must be built on pedagogy, outcomes, and real impact. I’d like us to grow at 40% compounded for the next 10-20 years, and profitably. Profitable because this sector is going to require a lot more money to be ploughed back in.This is not a sector that’s going to give out dividends. The dividends will be how well you plough your profits back into the business for higher ROI. This is not like food delivery where we grow at 100% a year for 2-3 years. And this is not a sector where we should get to such exciting, exhilarating growth, where when it happens, the correction will drop the whole standard of everything else. This is the maturity with which upGrad is approaching this (growth).
Rush to IPO : A Short-Term Capital Fix
Ronnie Screwvala warns that many edtech companies are rushing toward IPOs in search of quick capital, without fully considering the long-term sustainability of their business models. He suggests that the allure of easy capital from public markets may be tempting, but this approach can overlook the importance of profitability and operational maturity. Screwvala cautions that such a rush could result in companies being unprepared to handle the pressures and responsibilities of being publicly listed, ultimately leading to financial instability. He advocates for a more thoughtful approach, where companies focus on building a solid, sustainable foundation before seeking public investment.
Edtech Companies Eyeing IPOs – The Case of PhysicsWallah
While Ronnie Screwvala cautions against the rush to IPOs, some edtech companies, such as PhysicsWallah, are moving forward with plans to go public. PhysicsWallah, one of India’s prominent online learning platforms, has generated significant attention as it prepares for its IPO. This highlights a growing trend in the edtech sector where companies are increasingly eyeing the public markets as a way to raise capital and expand. However, Screwvala’s perspective raises important questions about whether companies like PhysicsWallah are fully prepared for the demands and scrutiny of being publicly listed. Despite their growth and popularity, the key challenge remains whether they have built a sustainable, profitable business model that will stand the test of time in the volatile public market.
Conclusion
This statement by Ronnie Screwvala is an important warning on the increasing number of IPOs in the Edtech sector. He believes that when a lot of companies in the same sector bring their IPOs, it can increase competition in the market, making it difficult for investors to choose the right investment. Also, it can cause oversupply, which can put pressure on the valuation of companies. Therefore, investors should thoroughly analyze the financial performance, business model and long-term growth prospects of companies before investing in this sector. Also, it is important to be cautious and invest thoughtfully, so that any potential loss can be avoided. In this context, Screwvala’s statement promotes alertness to potential volatility and challenges in the market.
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