Exclusive: Classplus buys out Matrix and Pivot Ventures' stake in Testbook

B2B edtech company Classplus has made its maiden investment by acquiring a minority stake in Testbook via a secondary transaction. With this deal, Classplus has bought out shares of the Mumbai-based company’s current investors Matrix and Pivot Ventures.

The board at Classplus has passed a special resolution to allot 1,695 Series E preference shares to Matrix Partners and Pivot Ventures at an issue price of Rs 4,00,013 per share aggregating up to Rs 67.80 crore against 7,867 shares of Testbook held by them, according to the company’s regulatory filing with the RoC.

Following this transaction, Matrix Partners will own a 1.65% stake in Classplus. According to Fintrackr’s estimates, Matrix owned about 34% stake in Testbook until its last financing round.

Eight-year-old Testbook helps students from smaller cities prepare for government exams through live classes, mock tests and quizzes while Classplus is a software platform that allows educators and content creators to build their online presence, digitise their offline tuition centers and sell their courses online.

According to Entrackr sources, the investment is strategic in nature and Classplus may fold-up Testbook completely into the company in the future. “Classplus will evaluate to acquire more stakes in Testbook if the company demonstrates desired performance. It’s also likely to put some primary capital in Testbook in the coming months,” said one of the sources requesting anonymity as this person isn’t authorized to speak to the media.

It’s worth noting that Testbook requires primary capital to grow further as it has been finding it tough to raise external capital. It’s one of the rare VC-backed edtech startups which didn’t raise capital in the last two-and-a-half years. So far, it has raised around $13 million from Iron Pillar, Matrix and a clutch of angel investors.

Queries sent to Classplus and Testbook didn’t elicit any immediate response. We will update the story as and when they respond.

Testbook primarily makes money from selling online courses and mock test papers for competitive exams. While the company is yet to file FY22 financial numbers, its revenue from operations surged 85.8% to Rs 22.3 crore in FY21 from Rs 12 crore in FY20, as per Fintrackr’s analysis. Significantly, the company’s losses soared 2X to Rs 32.5 crore in FY21 from Rs 15.3 crore in the preceding fiscal year (FY20).

As of now, Classplus has raised $160 million across several rounds and was valued at around $600 million in its last round. Its investors include Alpha Wave, Tiger Global, Sequoia Capital’s Surge, Times Internet, Blume and GSV Ventures.

Given the ongoing layoffs and shutdowns, especially in the edtech space, the startup ecosystem may see more such deals in the coming months. As per media reports, almost all edtech startups have fired a significant number of employees in the past few months. The list includes Byju’s, WhiteHat Jr, Toppr, Unacademy, Vedantu, LEAD, and Eruditus, while Ronnie Screwvala-backed Lido and Alpha Wave-backed Udayy shut down their operations due to lack of funds.