Unacademy’s founder, Gaurav Munjal, made an admission this week after his once-celebrated edtech unicorn, valued at $3.5 billion just three years ago during the pandemic boom, now trades for less than $500 million. That represents an 85 percent valuation collapse, making it a cautionary tale for founders, investors, and anyone betting that software can disrupt education profitably.​

The admission came via a post on X, in which Munjal acknowledged what industry insiders have whispered for months as India’s edtech business model is fundamentally broken. And Unacademy, despite aggressively cutting losses, remains unable to turn a profit at scale.

“We got complacent,” Munjal wrote this week. “We created the playbook, but we failed to innovate on pricing.”​ What’s striking is not just Unacademy’s struggles. Instead, the entire Indian edtech profitability crisis reveals structural flaws in how these companies were built, funded, and scaled.​

https://twitter.com/gauravmunjal/status/1998691842263757019

This collapse stems from structural business model challenges, unsustainable pandemic-driven growth assumptions, and brutal competitive dynamics. However, unlike peers such as Byju’s, Unacademy has managed to narrow losses through disciplined cost reduction and is pivoting toward a hybrid offline-online model that shows potential for stabilization.

The Numbers Tell an Uncomfortable Story

Unacademy’s financial trajectory paints a picture of desperation masked by cost-cutting discipline. The company’s operating revenue collapsed 16.5 percent year over year to INR 826 crore (approximately $99 million USD) in FY25, down from INR 840 crore in FY24. This revenue decline contradicts venture capital’s growth-at-all-costs playbook. The company still loses money every year, though losses have narrowed from INR 1,678 crore in FY23 to INR 436 crore in FY25.​

The cost reductions tell the real story. Employee benefit expenses dropped 58 percent to INR 271 crore. Marketing spend fell 34 percent to INR 244 crore. Annual cash burn plummeted from INR 1,400 crore in 2022 to INR 175 crore or less in 2025. Munjal says the company is now “default alive”, meaning it can operate indefinitely without additional funding, though profitability remains elusive.​

Yet Unacademy’s struggles pale in comparison to its competitors’. While Unacademy stumbles, PhysicsWallah, a bootstrapped rival, just delivered a successful IPO, valuing the company at INR 31,526 crore and delivering 31.28 percent listing gains. PhysicsWallah reported INR 2,887 crore in FY25 revenue, 3.5 times Unacademy’s haul, while actually generating profits.​

Meanwhile, industry colossus Byju’s, once valued at $22 billion and widely considered the edtech winner, now sits in insolvency proceedings after years of mounting losses and failed acquisitions.

The company’s aggressive 2021 acquisition of Aakash Institute for $1 billion became the proverbial albatross. Byju’s lost control of Aakash after failing to meet the acquisition terms, writing off the entire $1 billion investment.​

Why Every EdTech Customer Acquisition Cost Model Broke Down

The edtech profitability crisis traces to a single culprit. It is the broken unit economics masked by venture capital’s cheap money.

Before the pandemic, acquiring an online test-prep student cost roughly 20-25 percent of annual revenue. During lockdowns, when students flooded online platforms, customer acquisition costs skyrocketed to 70-80 percent of revenue. Companies that could afford expensive marketing continued spending, but others exited the industry entirely.​

Unacademy’s unit economics ranged from INR 12,000 to INR 18,000 per learner acquisition, while annual revenue per student averaged just INR 8,000 to INR 15,000. This inverted economics, spending more to acquire customers than they generate in lifetime revenue, created an unsustainable model. Industry standards require a 3:1 ratio of customer lifetime value to acquisition cost; Unacademy’s ratio fell to 0.5:1 in many cohorts.​

This mathematics worked only when venture capital flowed freely. When funding dried up in 2023, the model’s fiction became obvious.

“Any edtech that goes after multiple acquisitions to grow is bound to fail,” Munjal now says, acknowledging Unacademy’s failed buys of Mastree and SwiftLearn. “It just doesn’t work in this market.”​

The Pandemic Was a Profitable Lie

The Indian edtech profitability industry misunderstood what the pandemic revealed. As schools closed, students migrated online, and venture capitalists interpreted this as permanent behavioral change. Unacademy, Byju’s, PhysicsWallah, and dozens of others raced to capture market share, spending billions on advertising and celebrity educator salaries.​

Then schools reopened. Students returned to offline. The online learning time that had spiked to 100 percent during lockdowns dropped 40-60 percent within months of reopening.​

Unacademy didn’t adjust. Neither did Byju’s. PhysicsWallah, by contrast, had built profitable operations before scaling offline; when the pandemic demand spike reversed, it survived.​

“We didn’t realize the market had shifted,” Munjal acknowledged this week. “We became preoccupied while a competitor came in and utilized our own strategy against us, outperforming us at our own game while we charged premium prices.”​

Munjal is referring to PhysicsWallah, which adopted a YouTube-centric content delivery model, Unacademy’s original strategy, and slashed prices by up to 90 percent. PhysicsWallah’s willingness to operate at razor-thin margins while building sustainable subscriber bases proved devastating to Unacademy’s premium positioning.​

The Broader Sector Collapse, an $854 Million Bet Unravels

Unacademy’s crisis reflects sector-wide dysfunction. Between 2020 and 2024, 2,150 Indian edtech startups shut down, nearly 77 percent of total edtech company closures in a decade compressed into four years.

The funding winter was brutal, as edtech profitability challenges emerged when funding peaked at $2.9 billion in 2022, then collapsed to $712 million in 2023 (a 76 percent decline) and to just $22 million in H1 2024 (a devastating 97 percent decline).​

The numbers expose how venture capital’s thesis, that edtech could be scaled to profitability using consumer tech playbooks, was fundamentally misguided. Education requires sustained customer engagement, ongoing content creation, and qualified educators.

Unlike software platforms that scale with marginal costs approaching zero, unit economics stabilize around 10-20 percent EBITDA at best. This stark gap between investor expectations (50-70 percent margins) and reality (10-20 percent margins) explains the capital destruction.​

GST Added Insult to Injury

Compounding these challenges, India’s 18 percent Goods and Services Tax on online courses and coaching centers simultaneously eroded customer affordability and margins. An INR 1,00,000 annual course becomes INR 1,18,000 after GST, an 18 percent price hike that depresses demand from price-sensitive students. From the provider’s perspective, margins shrink further as the tax burden falls on operators offering subsidized pricing to compete.​

This regulatory framework, designed for traditional goods and services, struggles to address digital education’s inherently low margins. Unacademy’s repeated price cuts compete directly against GST-inflated costs, further compressing unit economics profitability.

Meanwhile, PhysicsWallah’s ascendance holds lessons that Unacademy ignored. The platform built profitability first, scaling second. Founders Alakh Pandey and Prateek Boob (Maheshwari) maintained founder-led discipline around unit economics while competitors chased valuation.

PhysicsWallah deliberately expanded offline, with 303 physical centers by June 2025, after proving that center-level unit economics worked.​

Unacademy opened offline centers hastily, as a defensive move after online demand evaporated. The results have been mixed. While Munjal claims 70 percent of centers turned profitable by FY25, independent verification is sparse, and occupancy rates remain challenging in non-traditional coaching hubs.​

PhysicsWallah’s IPO success, 31.28 percent listing gains despite market skepticism about edtech valuations, proves that disciplined growth trumps aggressive expansion. The contrast matters: Unacademy raised INR 854.3 crore across 13 funding rounds and is now worth less than $500 million; PhysicsWallah bootstrapped to a market cap of INR 31,526 crore.​

The Acquisition Endgame, Is Unacademy Worth Saving?

As this month began, Unacademy explored multiple acquisition scenarios. Allen Career Institute valued the company at approximately $800 million, a 75 percent discount from its 2021 peak. Those talks ultimately failed over valuation disagreements, reflecting the extent of the distress.​

UpGrad, another struggling edtech platform, has since initiated discussions to acquire Unacademy for $300-320 million—a 90 percent discount from the $3.4 billion peak valuation and an admission that even acquisition buyers see limited interactions.​

Munjal’s pivot to Airlearn, a Duolingo-style language learning app with 70,000 daily active users and close to $2 million in monthly recurring revenue, signals where his confidence now lies. He’s effectively acknowledging that the Indian test-preparation edtech profitability market, the very market Unacademy pioneered, has limited upside.​

The Larger Lesson Learnt, When Growth Becomes a Liability

India’s edtech crisis exposes a fundamental venture capital miscalculation: that tech’s scaling playbook applies universally. But education differs categorially. Students complete exams or finish courses, then stop using the platform.

Retention rates plummet. This creates an acquisition treadmill in which you must constantly spend to acquire new cohorts, each with lower customer acquisition costs and effectiveness than previous cohorts.​

Unacademy’s founders believed subscription models would offset this. They were wrong. PhysicsWallah proved that accepting lower growth rates while maintaining unit economics beats explosive growth that destroys capital.​

For investors and founders, the playbook is clear. Unit economics precede scale. In edtech, especially, sustainable margins matter more than TAM size. The companies that will survive India’s edtech consolidation phase will be those that operate profitably at their current scale before attempting expansion.​

Unacademy remains in play. With INR 1,238 crore in cash reserves and a clear path to profitability next year, the company could stabilize on its own if management maintains discipline. But the window is narrowing, and every month of continued losses erodes credibility with potential acquirers.​

The pandemic boom that made Unacademy a unicorn was an anomaly, not validation. That realization, arriving years too late, may be the sector’s most expensive lesson.

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