Edtech business model: how it works in India after the bust

From about 2019 to 2021, school closures and cheap data sent millions of students to learning apps. Investors poured money into companies that sold video courses, tutoring and test preparation, and several became unicorns. Companies spent heavily on advertising and field sales to win students, often more than they earned from each one.

That worked while funding was easy. Learners were also asked to pay large sums upfront, sometimes through loans. When demand slowed after schools reopened and funding dried up in 2022, many firms cut staff, closed products or were bought. The business models that survived looked quite different.

Most Indian edtech income comes from fees paid by learners or their families, with a smaller part from institutions that buy tools for schools and colleges. The fee can be a one-time course price, a subscription for a year or two, or a fee tied to a programme such as a bootcamp.

The main earning models today are:

Most of these lines depend on trust. A learner will pay more for a brand with clear results and a visible refund policy, which is why public reporting of outcomes has become a selling point.

• Test preparation for entrance exams such as JEE, NEET, UPSC and CAT, sold as online batches, hybrid courses and test series
• Offline or hybrid centres, where classes run in physical branches with app-based practice and tracking
• Upskilling and career programmes for working adults, in areas such as data, software and finance, sometimes with placement support
• Higher education and degree programmes offered with universities, where the platform handles marketing and delivery for a share of fees
• School and college software, sold to institutions as a licence, closer to a business-to-business SaaS model

Several causes added up. Demand that had been pulled forward by lockdowns fell back. Customer acquisition cost, the spend needed to win one paying student, stayed high while repeat purchases stayed low. Free content on video platforms and cheaper rivals pressed on prices.

A learner who finishes a course has no need to buy again, unlike a subscriber to a streaming app. The gap between what it cost to win a student and what the student paid over time left many firms unprofitable. Read the guide on CAC and LTV for how that gap is measured. At the same time, investors who had funded growth began to ask for profit, and the cash ran short.

Not always, but offline and hybrid centres have some advantages. Parents tend to trust a physical classroom for high-stakes exams. Students attend regularly, which improves results and helps renewals. A branch can also be a sales point, lowering advertising costs.

It has costs, though. Rent, teachers and local managers are fixed, and a branch needs enough students in a city to cover them. An online batch can serve many more students with the same teacher. Several well-known test-prep companies now run both, using the app for practice and the centre for classes. Margins depend on the centre's occupancy, the fee level and teacher pay, not on whether the class is online.

Online test prep also has a free tier problem. Well-known teachers publish lectures on video platforms at no charge, so a paid product has to offer something that free content does not: structured test series, doubt-solving, rankings against peers or a mentor. The firms that grew in this period usually sold that structure rather than the lectures alone.

Sales-led means a large team of counsellors calls families to close a course sale, often a high-priced one. It can grow revenue fast, but it raises refund disputes and complaints when promises are not met. Hybrid models mix lower-priced content sold online with a smaller sales team that handles premium programmes.

Many firms now lead with a free trial, a low-cost test series or a short course, and then offer the larger programme to students who are already using the product. This brings the cost of winning a student down and gives the company data on who is serious. Subscription pricing, covered in a linked guide, helps spread payment over time.

Payment plans matter as well. Many large course sales were financed through education loans or no-cost EMI offered by lenders, and the company received the money upfront while the student owed the lender. When students dropped out or complained, refund and loan disputes followed. Newer models favour shorter courses and monthly instalments with the company itself bearing some of the risk, which lowers disputes but delays cash.

Two sets of rules matter. In January 2024 the Ministry of Education issued guidelines for coaching centres. As reported, they say centres should not enrol students below 16 and should enrol only after the secondary school examination, should not make false promises about ranks or results, and should give a pro-rata refund if a student leaves midway. They are guidelines for states to adopt, not a single central law, so how far they bind a given centre depends on its state.

In November 2024 the Central Consumer Protection Authority (CCPA) issued guidelines on misleading advertisements in the coaching sector. These target unverified claims about success rates, ranks and placements, and misleading terms on refunds, and they cover endorsers as well. As of November 2026, the CCPA has been reported to act against a number of coaching institutes. GST is charged on most private coaching and online courses, while some formal education services are exempt. Check the exact position with a tax adviser.

When an edtech firm announces a result, check the basics. Is the revenue from fees collected, or from the full value of courses sold, part of which is recognised later? Is a loss narrowing because spending is cut, or because each student is now more profitable? How many students renew or buy a second course?

Also look at the mix. A company with 70% of revenue from offline centres is a different business from one that relies on app subscriptions. Layoffs, closures and mergers in the sector, tracked by StopDown in its startup news, are part of the same story: the market is paying for outcomes now, not for user counts. This guide is general information. Check any specific case with a professional.

Upskilling programmes that promise a job deserve special care. Placement claims fall under the advertising guidelines above, so a reader should look for how many learners were placed, in what roles, at what pay and over what period, and who verified the figure. A vague placement claim is a warning sign, and a firm that reports the number, the method and the cohort is easier to trust.