This Binny Bansal-backed firm is making a hard reset in edtech downturn

This transition, along with other measures, is aimed at steering the company out of mounting losses during a challenging period for the Indian edtech sector, particularly in the kindergarten-to-grade 12, or K-12, space.

“We realised that the demand in this segment (working professionals) is growing much faster," Kunal Malik, co-founder of PlanetSpark, told Mint during a virtual interaction earlier this week.

PlanetSpark raised $13.5 million from prominent investors including former Flipkart founder Binny Bansal and venture capital firm Prime Ventures in December 2021, when startups offering vocational courses were gaining popularity and companies like WhiteHat Jr., which Byju’s acquired, attracting significant interest.

However, as funding for the edtech sector declined following the pandemic as students returned to traditional classrooms, many companies struggled to cope with the slowing demand. 

Vocational training startups such as WhiteHat Jr, FrontRow, and BrightChamps have either struggled or taken significant measures to survive. In contrast, startups focused on upskilling, such as Eruditus and UpGrad, have managed to sustain and even thrive amid the broader edtech sector’s challenges.

Founded in 2017 by Malik and Manish Dhooper, PlanetSpark initially offered live one-on-one classes in public speaking, creative writing, debating, and other soft skills for the K-8 segment. Now, the extended segment covering students of grades 9 to 12 and working professionals has contributed about 30% of its revenue in the past two years.

To be sure, the company gets 70% of its revenue from the K8 segments, and focuses most of its digital marketing efforts towards students of ages 7-14 in tier 2 cities. PlanetSpark says its K-12 business is thriving despite the struggles in the broader edtech sector.

PlanetSpark started experimenting with upskilling courses in 2022-23, and began seeing an impact on its revenue the following financial year, Malik said.

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Costs trimmed

Alongside this diversification, the company has made significant cost-cutting efforts, particularly in administrative expenses. Malik shared that PlanetSpark trimmed almost 80% of its expenses on software vendors and is now investing in building these systems in-house.

“We have developed our own solutions for teacher hiring, HR management, and finance functions. Now, only 15 of the original 80 SaaS (software-as-a-service) vendors continue working with us," Malik said.

PlanetSpark, which allocated about 7% of its revenue to product development in FY23, increased this figure to 15% as its revenue has been on an upward trajectory.

This comes after a particularly tough period for PlanetSpark as its overall expenses surged 11.3 times in FY22, far outpacing revenue growth and leading to substantial losses. PlanetSpark’s losses ballooned 14.2 times to ₹109.4 crore in FY22, while its revenue multiplied 6.5 times to ₹30 crore.

While the company managed to narrow its losses to ₹89.5 crore in FY23, it was still more than twice its revenue of ₹42.4 crore that fiscal year.

PlanetSpark said its strategic shift in business model has helped it reduce losses by 64% in FY24, with revenue growing by 50% over the year prior. The company is yet to file its financials with the ministry of corporate affairs.

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The cash-burn era

During the height of the Covid-19 pandemic Malik and co-founder Manish Dhooper believed they had struck gold with PlanetSpark. The company’s monthly revenue skyrocketed as demand for online learning surgedsurged in FY21, especially as students had more time to focus on soft skills like communication, a key offering of PlanetSpark.

With this sudden success, the founders aggressively pursued growth. Capital was not a constraint following its 2021 fundraise. “At that moment, the goal was to grow as fast as we could. We wanted to raise significant investments and see if PlanetSpark could capture the market," Malik explained.

Three to four new startups entered the segment, spurring PlanetSpark to ramp up its investments in a bid to maintain its early lead. But this rapid growth came at a cost as its losses mounted. “We realised it was crucial to fix our unit economics as we scaled. For the long-term sustainability of the business, we had to closely monitor costs and improve efficiency," Malik said.

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A turnaround in the making?

Malik is aiming for PlanetSpark to close FY25 profitably. “We’ve been profitable on a monthly basis since April 2024. Our goal is to end this year in the green," he said.

Profitability is critical for PlanetSpark, especially since it has been over two-and-a-half years since its last equity funding round.

“Over the past year, many companies have had to cut down on unprofitable segments and focus on scaling sustainable ones. The edtech sector has gone through cycles over the past 7-8 years, going from cold to warm, then hot, and now back to cold again," said an edtech investor who requested anonymity.

This has also led to the downfall of companies like Frontrow, which operated in an adjacent segment offering skill-based online courses taught by celebrities and influencers. The company shut down in 2023. Another startup, BrightChamps, pivoted from a consumer-focused model to an enterprise-focused approach to better align with domestic demand for such courses for school students.

An edtech operator pointed out that one reason models in this segment often fail is the difficulty in converting free users to paid subscribers. “When users do pay, they often expect a placement guarantee, which is why these companies struggle," he explained.

He added that many edtech companies switch to an enterprise-focused model because customer acquisition costs otherwise are prohibitively high.