Indian firm Physics Wallah raises $210 million at $2.8 billion valuation, even as education technology funding remains tight

Physics Wallah, an Indian education technology startup, has raised $210 million in fresh funding amid a financial crunch for education technology companies in the country following the collapse of Byju’s, once the largest company in the space.

Physics Wallah said Friday that the Series B round was led by hedge fund Hornbill Capital, a venture of China’s Orchid Asia and India’s Hornbill, with Lightspeed Ventures Partners participating “significantly,” alongside existing investors WestBridge and GSV. The round values ​​Physics Wallah at $2.8 billion, a significant increase from the previous valuation of $1.1 billion it received in June 2022.

The startup has raised over $310 million to date. The new funding, the largest in the Indian edtech sector since 2022, included a secondary transaction of around $35 million in which founders and employees sold some of their shares.

Physics Wallah began its journey as a YouTube channel in 2016, where co-founder and teacher Alakh Pandey would post his lectures for free to help students who — like him — didn’t have the financial means to enroll in premium coaching classes. By 2020, Physics Wallah had become India’s largest educational community on YouTube, prompting Pandey to formalize his efforts into a company that now serves 46 million students in five native languages.

“He always thought he would fail in the IIT entrance exam because he did not have access to a good education,” said Prateek Maheshwari, co-founder of Physics Wallah, explaining the motivation behind the startup’s mission.

India, the world’s most populous country, boasts one of the world’s largest education markets. Each year, some 250 million students attend schools, and about 4 million take entrance exams for engineering and medical schools.

Physics Wallah serves a broad spectrum of this market, catering to students from third grade to those preparing for competitive entrance exams for engineering, medical school, and government jobs. It even offers live classes that typically draw tens of thousands of participants at a time.

The startup, which also runs about 180 brick-and-mortar centers, employs teaching assistants and artificial intelligence to answer students’ questions and has developed an app called AI Guru that helps students solve problems in educational material. Physics Wallah trained the AI ​​on its own data, Maheshwari said.

One of the key advantages of Physics Wallah is the affordability of its courses, which start at just $50 for a full year. More than 5.5 million students are paying subscribers, the startup said.

“We cover almost all exams in India and in all special exams – JEE, NEET, GATE, UPSC and CAT – we are number one in terms of revenue and size of student base served,” said Maheshwari.

This trend has served Physics Wallah well: The company reported revenue of $96.2 million in the fiscal year ending in March 2023, and the startup told TechCrunch that revenue grew 2.5-fold between March of last year and March 2024. The company expects its fiscal year ending in March 2025 to be its most profitable in terms of EBITDA.

Dev Khare, a partner at Lightspeed and an early investor in Indian edtech startups, told TechCrunch that a number of trends have converged to help Physics Wallah grow. “When you lower the price, things become much more accessible,” he said, pointing to budget hotel chain Oyo, quick-commerce startup Zepto and storytelling platform PocketFM as other examples of startups in Lightspeed’s portfolio that are pursuing similar strategies.

Maheshwari said Physics Wallah will explore inorganic growth opportunities with fresh funds, but added that the company largely raised capital because the funding was available and investors saw value in it. The company, which has acquired around 10 companies in the past three years, is considering an IPO, but cautioned that it would not take any immediate action anytime soon.

The new funding comes as India’s edtech sector faces significant headwinds. Online learning startups, which saw rapid growth during the COVID-19 pandemic when schools were closed, have since seen a sharp decline in usage.

Unacademy, a major Bengaluru-based edtech firm, has laid off around 2,000 employees from 2022. The company had laid off another 250 people in July this year, citing the need for restructuring to boost profitability.

Byju’s, once India’s most valuable startup at $22 billion, has seen its stock decline dramatically over the past two years. The company now faces the prospect of bankruptcy proceedings.

Maheshwari said recent industry developments have not affected the market opportunities. “From a student’s perspective, not much has changed post COVID-19. The market is completely hybrid and students are getting the best of both worlds to strengthen their preparation,” he said.

Physics Wallah is “a rare combination of vision, execution, and impact with an evolving 3C model—Content, Community, and Commerce,” Manoj Thakur, founder of Hornbill Capital, said in a statement. “We’re excited to see how PW leverages AI to not only improve student outcomes, but also their emotional well-being.”

No investment bank was appointed to execute the transaction.