One summer morning nearly two years ago, 127,000 Indian teenagers thronged the internet not for an online rock concert, but a test-prep session.

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PW, as its commonly known, was a two-year-old platform when its first institutional fundraise $100 million from WestBridge Capital and GSV Ventures turned it into a unicorn with a $1.1 billion valuation. That was in 2022, when Byjus, another Indian startup, was the worlds most valuable educational technology business.

With creditors of an unpaid $1.2 billion loan trying to drag it it into bankruptcy, Raveendran has lined up a rights issue at a pre-money valuation of $25 million. Investors like Prosus NV and Peak XV are livid. Two years ago, Byjus was worth $22 billion. They and other backers, owning 30%, reckon that the startups only chance of survival lies in ejecting its eponymous founder. They want to put up the proposal to a shareholder vote.

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Yet, online education is still a viable proposition in the worlds most-populous nation, though its the test-prep market that has real demand, not K-12 or coding. India has a little over 100,000 medical and dentistry placements, with more than 1.5 million jostling to get in. The 23 Indian Institutes of Technology accept only 17,000, after a main test followed by an advanced exam.

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Byjus Raveendran had taken a similar bet on offline tutoring when he bought Aakash for about $1 billion in 2021. Before PWs entry, Unacademy, backed by Singapores state investor Temasek Holdings Pte among others, had also stormed Kota, poaching tutors from Allen Career Institute, the leader. The family-run Allen responded to the online threat by taking $600 million from an investment platform of media mogul James Murdoch and Uday Shankar, a former Asia-Pacific president of Walt Disney Co.

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Both approaches could work, provided companies dont seek to replicate Byjus hyper-aggressive sales machine or spend as lavishly as it did on unrelated acquisitions. PW now offers courses for 35 Indian exam categories, including civil services and army recruitment. Cofounder Maheshwari is opening one new offline center every five days. Annual sales have more than doubled in one year to 20 billion rupees ($240 million), supported by around $50 million from assorted acquisitions. About 54% of the remaining $190 million is from online tutoring, while another 43% comes from 50-plus physical locations, where more than 180,000 students shell out $500 apiece. A money-making core generates resources for expansion. The buzzwords are affordability and profitability.

The funding winter for edutech is real the shock from Byjus collapse is still playing out. The next big unknown is government policy. Nobody expects a Beijing-style showstopper, but New Delhi recently announced guidelines for the industry. State governments will make their own rules amid hectic lobbying to relax the proposed minimum age of 16 years for after-school tuitions. It will be almost impossible, however, to police online apps. The government is rightly worried about the stress on youngsters, often leading to self-harm. But as PWs Pandey says, many of Indias small villages got their first engineers and doctors because of the internet. That quest for upward mobility will be impossible to kill.

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The Netflix model may just save Indias online learning apps - The Economic Times