Unacademy, once a prominent name in India's edtech sector, has seen its valuation plunge by over 85% from its pandemic-era peak, now estimated at less than $500 million. CEO Gaurav Munjal confirmed the significant drop and revealed the company is actively exploring merger and acquisition (M&A) opportunities.

In a detailed note posted on X on Wednesday, marking the startup's 10th anniversary, Munjal stated that Unacademy's valuation has fallen sharply from its $3.5 billion peak three years ago. This substantial reset comes as the Indian edtech landscape navigates a challenging period.

The Shifting Edtech Landscape in India

The Indian edtech sector experienced a boom during the pandemic lockdowns, with companies like Unacademy and Byju's raising billions, expanding rapidly, and investing heavily in marketing. However, growth stalled significantly as lockdowns eased and students returned to traditional offline classes.

The downturn has hit even the largest players. Byju's, which was India's most valuable startup just three years ago, has seen its valuation effectively reduced to zero and entered insolvency proceedings last September. Furthermore, a U.S. bankruptcy court ordered Byju's founder, Byju Raveendran, to pay over $1.07 billion for non-compliance and "evasive, incomplete" responses regarding a $533 million transfer by the startup's U.S. unit.

In contrast, Physics Wallah, long considered an underdog, has achieved profitability and continued its expansion, culminating in a strong public-market debut last month.

Unacademy's Internal Struggles and Strategic Shifts

Munjal's note detailed the past three years as a period marked by shrinking demand, heightened competition, and internal turmoil for Unacademy. The startup faced significant losses and had to abandon aggressive expansion plans.

"Personally, for us founders, this was the most difficult three years that we had ever seen in our lives because until 2021, we had not seen a single month of degrowth," Munjal wrote. "But in the last three years, we saw losing market share in the game that we literally invented and it hurt."

Munjal attributes the slump to a rapid shift in market dynamics post-pandemic. As students returned to offline learning and competitors introduced lower-priced offerings, Unacademy experienced declining demand and stagnant growth. He admitted, "We got complacent," acknowledging the firm's failure to innovate on pricing while rivals undercut its services.

Recently, Munjal has increasingly focused on AirLearn, his new AI-first language learning app, which employs a gamified approach similar to Duolingo. This shift has reportedly caused friction with some Unacademy investors, who are concerned that the core edtech business is being neglected during a critical phase, according to sources familiar with the matter.

Financial Overhaul and Future Outlook

Founded in 2015, Unacademy has raised approximately $854.3 million across 13 funding rounds, with notable backers including SoftBank, Tiger Global, General Atlantic, and Peak XV Partners.

Munjal highlighted that Unacademy has spent the last two years implementing a comprehensive operational overhaul. The company has drastically reduced its annual burn rate from ₹14 billion (around $155.7 million) in 2022 to less than ₹1.75 billion (approximately $19.5 million) this year. This was achieved through significant headcount reductions via layoffs, cuts in marketing expenses, and a renewed focus on its core subscription business.

Amidst these changes, recent reports suggest that rival edtech firm UpGrad has been in discussions to acquire Unacademy for an estimated $300 to $400 million.