Physics Wallah Secures $210M Funding, Doubling Valuation to $2.8B Amid EdTech Slowdown

India's Physics Wallah raises $210M at $2.8B valuation even as edtech funding remains scarce | TechCrunch

Physics Wallah, an Indian edtech startup, has secured $210 million in fresh financing amid a tough funding environment for edtech companies in the country following the collapse of Byju's, once the biggest company in the space. Physics Wallah said on Friday the Series B round was led by Hornbill Capital, with Lightspeed Ventures Partners "significantly" participating, alongside existing backers WestBridge and GSV. The round values Physics Wallah at $2.8 billion, a substantial increase from the previous $1.1 billion valuation it scored in June 2022. The startup has raised $310 million to date. The startup began its journey as a YouTube channel in 2016, where co-founder and teacher Alakh Pandey posted his lectures for free to help students who -- like he had -- lacked the financial means to enroll in premium coaching classes. By 2020, Physics Wallah had grown to become the largest Indian education community on YouTube, prompting Pandey to formalize his efforts into a company that now serves 46 million students in five vernacular languages. "He always felt that he couldn't crack the IIT entrance exam because he didn't have access to quality education," said Prateek Maheshwari, co-founder of Physics Wallah, explaining the motivation behind the startup's mission. India, the world's most populous nation, boasts one of the largest education markets globally, with approximately 250 million students attending school and about 4 million giving entrance exams for engineering colleges and medical schools every year. Physics Wallah caters to a broad spectrum of this market, serving students from third grade through those preparing for competitive engineering and medical entrance exams and government positions. It even offers live classes that typically draw tens of thousands of simultaneous attendees. The startup employs teaching assistants and AI to address student queries, and has developed an app called AI Guru that helps students solve problems in their learning material. Maheshwari noted that Physics Wallah has trained the AI on its own data. One of Physics Wallah's key strengths is the affordability of its courses, with prices starting as low as $50 for an entire year. More than 5.5 million students are paying subscribers, the startup said. "We are covering nearly all exams in India, and for all the special ones - JEE, NEET, GATE, UPSC, and CAT -- we are No. 1 in terms of revenue and the size of the student base served," Maheshwari said. That traction is serving Physics Wallah well: It reported revenue of $96.2 million in the year ended March 2023, and the startup told TechCrunch revenue increased 2.5x between March last year and March 2024. It expects its fiscal year ending March 2025 to be its most profitable yet in EBITDA terms. Dev Khare, a partner at Lightspeed and one of the earliest investors in Indian edtech startups, told TechCrunch that many trends have converged to help Physics Wallah grow. "When you bring the price point down, it just makes things way more accessible," he said, pointing to budget-hotel chain Oyo, quick-commerce startup Zepto, and storytelling platform PocketFM as other examples of Lightspeed's portfolio startups that run similar playbooks. Maheshwari said Physics Wallah will explore inorganic growth opportunities with the fresh funds, but added that the company largely raised the capital because the funding was available and the investors saw value in doing so. The company is thinking about an IPO, but he cautioned that it would not make any immediate moves soon. The new funding arrives as India's edtech sector faces significant headwinds. Online learning startups, which saw rapid growth during the COVID-19 pandemic when schools were closed, have seen a sharp decline in usage since. Unacademy, a major edtech company based in Bengaluru, has cut approximately 2,000 jobs since 2022. The company cut another 250 positions in July this year, citing the need to restructure for profitability. Byju's, formerly India's most valuable startup at $22 billion, has suffered a dramatic downturn over the past two years. The company now faces the prospect of bankruptcy proceedings. Maheshwari said recent industry events haven't affected the market opportunity. "From a student's lens, things haven't changed much post-COVID. The market is entirely hybrid and students are enjoying the best of both worlds to strengthen their preparation," he said.

Physics Wallah Raises $210 Mn With An Eye On Acquisitions

Founded in 2020, PW entered the unicorn club in 2022 by raising $100 Mn in its maiden funding round at a valuation of $1.1 Bn Edtech unicorn Physics Wallah (PW) has raised $210 Mn (about INR 1,756.7 Cr) in its Series B funding round, led by Hornbill Capital, at a post-money valuation of $2.8 Bn. The round also saw participation from Lightspeed Venture Partners and its existing investors, GSV and WestBridge. PW cofounder Prateek Maheshwari told Inc42 that the startup will largely use the funds for its strategic plans, which include geographical expansion and acquisitions. "Currently, we are sitting on INR 1,200 Cr plus treasury.... For our internal growth initiatives - be it Vidyapeeth expansion, new category launches, new vertical business, and innovation which we are doing - we are sufficiently capitalised. But now we are a total group size of 15,000 employees (and) we thought of raising one round so that the treasury gives us more comfort. It's a comfort capital which we have raised," said Maheshwari. Overall, the edtech player, which seems to be following the path of its rivals BYJU'S and Unacademy in terms of aggressive fundraise, product category expansion, and acquisition, aims to use the fresh funds to pursue inorganic expansion, enter the K-12 formal education segment, enhance its content and publication offerings, and explore mergers with community-driven education platforms across categories going forward. Maheshwari said that the startup hasn't shortlisted any asset for acquisition yet but has a thesis in place, which includes companies in content-heavy categories, such as the publication industry. Besides, it is also evaluating companies that can help PW with geographical expansion, particularly in the southern part of India. "In general, we do not have a huge strength in the southern part. Xylem has done a phenomenal job in Kerala and they are planning to expand it to Tamil Nadu also. But Andhra Pradesh, Telangana, Bengaluru are the markets where we are not as strong (in terms of) online as well as offline presence..." Maheshwari said. It is worth noting that in June last year, PW acquired a 50% stake in Kerala-based Xylem in an INR 500 Cr (around $61.04 Mn) deal. Founded in 2020 by Alakh Pandey and Maheshwari, PW entered the unicorn club in 2022 by raising $100 Mn in its maiden funding round from Westbridge and GSV Ventures at a valuation of $1.1 Bn. Since then, it has expanded its offerings by entering the offline space and acquiring multiple companies. In 2023 alone, PW made three other acquisitions - iNeuron, which offers skill development courses in AI and ML; test prep platform Utkarsh Classes: and UAE-based K-12 online learning platform Knowledge Planet. PW currently operates tech-enabled offline and hybrid centres across 105 cities in the country. Its offerings span various educational segments, including two Gurukulam Schools, test preparation in 43 categories, a skilling vertical, and higher education and study abroad verticals. It also claims to offer free education to over 4.6 Cr students through its 112 YouTube channels in five vernacular languages. Speaking on the investment, Manoj Thakur, founder of Hornbill Capital, said, "Physics Wallah is a rare combination of vision, execution, and impact with a thriving 3C model - content, community, and commerce. We are excited to see PW's use of AI not only to help improve students' outcomes but also their emotional well-being." It is pertinent to mention that PW's indigenously built Alakh AI was launched in December last year. Its AI educational suite's offerings include AI Guru, Sahayak, and NCERT Pitara among others. Already 40 Lakh students are using its AI Guru product, as per the company. PW is also entering into a strategic partnership with Microsoft, Maheshwari said but didn't provide any further details. PW will continue to invest more money and time on AI, he said. It is pertinent to note that PW was net profitable in FY23 even as its top edtech competitors, like Unacademy and Vedantu have been struggling on that front. However, its net profit narrowed over 90% year-on-year (YoY) in FY23 to INR 8.9 Cr. Meanwhile, PW's operating revenue increased 234% YoY to INR 779.3 Cr that year. Maheshwari told Inc42 that the startup clocked a revenue of INR 1,975 Cr in FY24, adding it expects the revenue to jump over 50% in the current fiscal year (FY25). However, PW slipped into loss at a group level in FY24 and aims to turn PAT positive in FY25. Maheshwari said that the company was profitable in Q1 of the current fiscal and will post the highest EBITDA numbers in the history of the company in FY25. "As a strategy, we are focusing on growth and student experience, we are not much worried about profitability. We believe in sustainable growth, (and) when the competition is weak, we should go out and capture the maximum market to maintain the student experience... Breakeven is a good thing for us, (though) we will generate good EBITDA this year," Maheshwari said. Meanwhile, differentiating PW from BYJU'S, Maheshwari said that PW's cash allocations have been around 30-40X lower than the embattled company and all the acquisitions have helped the company grow. "There has to be some fundamental synergies with the businesses when you choose inorganic growth, and a good amount of effort goes into integration. If you look at all the large businesses within the group, they have been built in-house. Be it Vidyapeeth, which has turned profitable this year, be it Pathshala... we are number one in all these categories not only in terms of students but also revenue," Maheshwari concluded.