IPO Gold Rush in Edtech Worrying, It’s Not Easy Capital: Screwvala
The edtech sector has been experiencing a surge in Initial Public Offerings (IPOs) in recent times, with many companies racing to go public. However, Ronnie Screwvala, Co-founder of upGrad, has sounded a note of caution, calling this “gold rush” in the edtech sector worrisome. In an interview, Screwvala emphasized that many companies are mistaken in thinking that going public is an easy route to securing capital.
The edtech sector has witnessed significant growth in recent years, driven by the increasing adoption of online learning and the need for digital transformation in the education space. This growth has led to a surge in funding for edtech startups, with many companies receiving significant investments from venture capital firms and private equity investors. However, with the sector’s growth comes the temptation to go public, and many edtech companies are now looking to list on the stock exchange.
However, Screwvala is not convinced that this is the right approach for every edtech company. “There’s a lot of FOMO (fear of missing out)…but the worst time to go is when everyone else is going, especially [for] a sector…which is still evolving,” he said. Screwvala’s concerns are twofold. Firstly, he believes that the edtech sector is still evolving and that many companies are not yet ready for the rigors of being a publicly listed entity. Secondly, he is worried that the rush to go public is being driven by a desire to secure capital rather than a genuine need to raise funds.
Screwvala’s comments are significant, as upGrad is one of the most successful edtech companies in India. Founded in 2015, upGrad has grown rapidly and has received significant funding from investors such as Temasek and Bertelsmann. However, Screwvala’s views are not limited to upGrad alone. He believes that many edtech companies are making the same mistake of thinking that going public is an easy route to securing capital.
The temptation to go public is understandable. Going public provides a company with access to a vast pool of capital, which can be used to fuel growth and expansion. Additionally, being a publicly listed company can also provide a company with increased visibility and credibility, which can be beneficial for attracting talent and customers. However, Screwvala believes that this temptation is being driven by a desire to join the “IPO gold rush” rather than a genuine need to raise funds.
This is not the first time that Screwvala has expressed concerns about the edtech sector. In a recent interview, he had warned that the edtech sector was facing a “bubble” and that many companies were overvalued. His concerns are echoed by other experts in the sector, who believe that the edtech sector is experiencing a bubble driven by excessive valuations and a lack of profitability.
The edtech sector is not the only sector that is experiencing an IPO gold rush. In recent times, we have seen a surge in IPOs across various sectors, including fintech, healthcare, and consumer goods. However, Screwvala’s concerns are specific to the edtech sector, which he believes is still evolving and not yet ready for the rigors of being a publicly listed entity.
So, what does Screwvala recommend for edtech companies that are considering going public? Firstly, he believes that companies should only go public when they have a clear need to raise funds and not just because they want to join the “IPO gold rush”. Secondly, he believes that companies should have a clear strategy for how they plan to use the capital raised through an IPO. Finally, he believes that companies should be prepared for the increased scrutiny and accountability that comes with being a publicly listed entity.
In conclusion, Ronnie Screwvala’s comments are a reminder that going public is not an easy route to securing capital, and that many edtech companies are mistaken in thinking that it is. The edtech sector is still evolving, and many companies are not yet ready for the rigors of being a publicly listed entity. As Screwvala said, “The worst time to go is when everyone else is going, especially [for] a sector…which is still evolving.” Edtech companies should take heed of Screwvala’s warnings and only go public when they have a clear need to raise funds and are prepared for the increased scrutiny and accountability that comes with being a publicly listed entity.
