The rise of India's latest edtech unicorn holds lessons for other startups
24 Ιουλ 2022
Alakh Pandey has produced astonishing results with no marketing spend, while his competitors burned billions of dollars. How did he do it?
Indian edtech company Physicswallah – which teaches all the sciences, not just physics – has come out of nowhere in a hugely competitive market and managed to pocket a cool $100 million in funding, valuing it at $1 billion.
For me, the reason for this instant stardom is easily discernible. The firm's founder Alakh Pandey has led his company in ways that have been strikingly dissimilar to the rest of the fray and offer some key lessons to entrepreneurs in any sector or discipline.
Growing up in Prayagraj (formerly Allahabad) in the state of Uttar Pradesh, Pandey was forced into tutoring students in lower grades when his father fell ill and wasn't able to provide for the family. As he describes it, he was in the 8th grade when he started teaching 4th grade and 6th grade students.
In the 11th grade, the response to his physics tutoring gave him the first real conviction that he could do it professionally. Meanwhile, he couldn't get into any of the vaunted engineering schools like IIT because attending a tutoring course geared to crack the entrance exam – de rigeur for any aspirant – was too expensive for his cash-strapped family.
Nevertheless, his own tutoring initiatives continued as the years went by. His light-bulb moment came when he managed to get into a local engineering college but discovered that the way they taught physics there was lacking in a few ways – and that he could do a much better job.
So, Pandey dropped out after the second year to start his own offline-tutoring centre and initially scraped by with an income of Rs 5,000 ($70) a month. He then parlayed this into a YouTube channel, which he had started in 2014 but only began to monetise in 2017.
The channel attracted around 10,000 subscribers in the first year but soon mushroomed to seven million subscribers and over 1.2 billion views and led to the making of the most-talked about edtech company today.
Pandey's lessons, in Hindi, are immensely popular not only because of his science chops but also because they are imbued with his own unique flavour – little asides on love and heartbreak, poems, anecdotes, as well as his life experiences. It doesn't hurt that he is also reputed to be able to distill complex topics into simple explanations that are easily digestible.
Approachable, hilarious and a bonafide science nut, he was so popular during the pandemic when schools were closed that his first live class caused servers to crash because of students stampeding to take his class.
While all of the other edtech biggies in India have been rocked by accusations that they forced underprivileged families into signing onto pricy multi-year contracts that they could neither afford nor get out of, Pandey instead offers courses at rock-bottom prices.
Some time back, when Pandey's star was rising, one of his competitors apparently offered him Rs 75 crores (over $10 million) per year to defect and teach on its platform, which he promptly refused, largely because of the bond forged between him and his students.
The standard operating procedure for Indian startups – and most global ones – is to detect a market opportunity, raise massive amounts of cash and then spend a big chunk of that on marketing and acquisitions in order to grab market share while bleeding money.
Therefore, profits are most often elusive. For instance, edtech unicorn Unacademy's consolidated loss in FY21 is Rs 1,474 crore ($185 million) with revenues Rs 337 crore ($42 million), in part thanks to Rs 411 crore ($52 million) in advertising.
Instead Physicswallah, eschewing acquisitions (competitor Byju's had over 10 in the last few years, half of them global companies), was able to find a modest profit Rs 7 crore (around $1 million) in FY21 out of Rs 25 crore ($3 million) in revenues.
Full financials for the recent year ended in April will be disclosed by companies in September, but we do know this much: the company says it has posted nine times that revenue for FY22 at Rs 350 crore ($45 Mn). With zero in marketing or ad spends for that period, profits would have also grown in tandem.
"Till six months back, unicorn for me meant the mythical creature. It was only when we started to talk about raising funds that I came across the other meaning. If a business cannot make profit, then it's not a good one," Pandey said to Business Standard newspaper.