Talat Rais – Dutch Uncles

Leap Finance: A Springboard Making Educational Dreams a Reality

Talat Rais — Thu, 10 Jun 2021 12:35:04 +0000

In the middle of every difficulty lies an opportunity – Albert Einstein.

Two men brought this quote to life when faced with obstacles during their professional careers. Working with Non-Banking Financial Company (NBFC) Incred, Vaibhav Singh discovered major loopholes in the foreign lending market, while Arnav Kumar’s personal experience suggested that availing a loan without a collateral was next to impossible, during his stint at Capital Float.

Exploring new models, the duo took it upon themselves to fix the systemic inefficiencies in the lending market through innovation and decided to start – Leap Finance – in 2019.

Leap finance, as the name suggests, is a fintech start-up based in San Francisco, California, with offices in Bengaluru. The aim is to provide loans to Indian students studying abroad without collateral, at a 5% lower interest rate as compared to foreign banks. The start-up also helps students shortlisted courses, interact with experts, provide test preps, professional help desk and education counselling.

Taking the Leap to Success

In their early days, the duo aimed at building a product that suited a diversified audience. This required them to travel for six months, “living out of a suitcase”. Their first product was designed primarily for Indian students studying in the United States, with an interest rate of 8-10%. Later on, they planned to diversify the product in countries such as the UK, Canada and Indonesia.

Leap Finance tackles the problem of Indian students paying loans at as high as 13% , while their American counterparts avail it at almost half their rate, owing to the lack of credit scores of the former in the foreign countries. The company bridges the gap by assessing secondary documents and the potential income of students bringing down the interest rate, gauging the risk associated with the loan and providing excellent financial products. Thus, Leap Finance in essence, takes a smart and a calculated ‘leap of faith’ based on the alternative data points derived from the students.

“We finance your dreams to study abroad” – The start-up ardently believes in putting the focus on the future of the customer rather than their current or past situation. In simple words, they essentially take into consideration the GRE/TOEFL/IELTS scores, along with degree certificates to assess the potential income of the student. The team states clearly that the economic background of the student has got nothing to do with their ability to avail the loan.

All that the student needs is a strong cosigner to share the burden of the loan. Cosigner is a person whose credit report and income would serve as an added security to the loan sanctioned. This is in contrast with the traditional model of extending student loans.

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The start-up ardently believes in putting the focus on the future of the customer rather than their current or past situation

The Market Play

Indian education industry has been undergoing a revolutionary phase owing to digitisation with the eruption of edtech platforms such as Byju’s and Unacademy, eventually broadening the spectrum of students’ aspirations.

With overseas education being a dream of most Indians, being a fintech cum edtech start-up, Leap Finance is able to cash in on these changing dynamics of the education industry. The share of students wanting to study abroad has increased multifold over the years due to the pro-immigration policies of countries such as Australia and Canada. With the Biden administration in place, the US’s immigration policies have also taken a diplomatic stance for the Indian students.

In the United States alone, Indian students constitute 25% of top US graduate programmes.

That being said, there has always existed a growing need for one stop solution for counselling, guidance, finance among Indian students. There are students called “value maximisers” belonging to the lower middle income group. They are the ones who aspire to have a global career but can’t afford a degree abroad. Alongside them not being able to afford the hefty tuition fee and the expenses of accommodation, their main aim remains to gain the most lucrative option out of the plethora of offers they have at their disposal. Such students most often lack collateral, thus their chances to avail a loan minimizes along with their aspirations. The market thus provided a fertile ground for a business offering for these services to flourish.

Leap Finance offers not just loans on nil collateral but also assisting overseas students to open bank accounts in countries of USA and Canada along with a credit card. Customer satisfaction remains their sole priority, hence, along with assisting students through their Youtube channel called Leap Scholar, the start-up also helps students avail credit card services, provide them with Visa assistance, IELTS and GRE counselling, internship advice etc.

Gaining Investors’ Trust

In March 2020, the company raised its seed funding for $5.5 million led by Sequoia Capital, with participation of Bhupinder Singh of Incred and Kunal Shah, founder of CRED. The principal investor at Sequoia, Ashish Agarwal, cited the strong need for approximately $15 billion credit as the reason for market’s attractiveness, which is amplified by Leap’s mission-driven team, that made the investors place their bet on the start-up.

The capital was used to expand the company’s user base, focus on product development essentially with plans to expand the service to countries like Vietnam and Indonesia.

In March 2021, the start-up raised a whopping sum of $17 millions in the investing round led by Jungle Ventures. At the time they had a user base of 5 lakhs registered international students and 2 lakhs active users on the platform.

Securing funding at a time when the global pandemic has dampened students’ ambitions, did prove a challenge to the Leap team. However, they held their grounds. According to Amit Anand of Jungle Ventures, it was the sheer motivation and patience of the student community, especially the ones who held back their admissions at foreign universities, that encouraged hundreds more students to pursue education abroad.

In an interview, Vaibhav in fact talked about Covid-19 being a boost to their business to the extent that 2021 might even turn out to be a breakout year. Agarwal of Sequoia Capital, being impressed at the company’s approach towards tackling the pandemic, was particularly in awe with Leap Scholar – a counselling service provided by the start-up – which helped the start-up strengthen its foothold in the market. Amidst the lockdown hiccup, the company cashed on their online property.

The team aims at using the capital from Series B funding to expand their product portfolio into creating non-lending products in order to dive deeper into new markets.

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Securing funding at a time when the global pandemic has dampened students’ ambitions, did prove a challenge to the Leap team.

Democratisation of Finance

The start-up has come a long in a short span of two years. Alongside them serving as a one-stop solution for students looking to study abroad, they are also bringing in much needed change in the finance industry of the country, particularly in terms of financial literacy and financial assistance through the digital space.

India has the second largest unbanked population in the world, that amounts to 190 million people. Many people do not have access to loan services owing to documentation and collateral issues. This population ends up getting informal credit at an exorbitant rate of interest by moneylenders, often leading to a huge chunk of the population being rendered landless/assetless. Simultaneously those who can avail bank services face a crippled technological system, something that the leading banks of the country are yet to catch up with.

Current situation calls for a revolution in the lending space as the pandemic has taken a huge toll on the financial condition of many. Although NBFCs did solve the problem of collateral to some extent, however, that came with rendering security to banks through a high interest rate. It is more about affordability than availability.

Leap Finance through actively improving accessibility of credit through incentives such as no collateral, has in essence been working towards democratisation of financial services. They solve documentation problems through a requirement of minimum details such as pan card, Aadhar card and credit report of the student.

Through a thorough comparison of various loan options on its website, it offers clarity on the best loan option available via visual representation and interactive interface. This eases the job of students, particularly value maximisers and the ones with less agency, rendering them a one-stop solution in an otherwise fragmented value chain industry.

Creating a Uniqueness

There are multiple players in the edtech industry offering similar services as Leap Finance. One of them is Avanse Financial Services, an NBFC acquired by Warburg Pincus, which stands at a valuation of $66 million. Offering education loans, it has a strong competitive advantage against Leap Finances, owing to its full stack model.

The term ‘full stack’ was coined by Chris Dixon, suggesting it as a company which provided its customer with an end product. In essence, Avanse provides skill development courses and loans to educational institutions besides financial services.

At the current valuation of $22 million, Leap has a long way to go with regards to securing fundings and developing its revenue model. The start-up, in essence, is focussing on diversifying its services in the fields of counselling, customer-driven/tailor-made solutions to issues related to pursuing education abroad, and extending banking services to customers as well.

Going Beyond Loans: Monetisation the User Base

Leap through its Graduate Loan product has built a customer base of 234 crore as of now, i.e. sanctioned 234 crore loans.

At the same time, they are also focussing a great deal on their Youtube channel Leap Scholar. In an interview, the team confirmed plans to expand their services to become a neobank – a smart/digital bank that has no physical branch, but functions to cater to all the services that any physical bank does. Some of the examples of neobanks are Razorpay X and Insta Pay, that help individuals to open a bank account, make payments, request refunds etc.

While these banks essentially offer these services to businesses, Leap Finance aims at becoming the neobank in the international students community, offering full-fledged banking services to its customers.

Earlier it restricted its services to underwriting loans based on students’ future income, which slowly progressed into offering bank account services in the USA and Canada. With the new proposition, it would start earning like a typical bank but with a much more sophisticated and advanced digitised system.

The start-up’s future plans may also include offering courses and tie ups with educational institutions, similar to its competitor Avanse. Leap has been building a strong user base through offering free of cost counselling services through its Youtube platform and comparison of university programmes through its blog. There is a huge possibility in future for the company to start offering international educational courses through its amassed online user base, hence adding another revenue stream.

The post Leap Finance: A Springboard Making Educational Dreams a Reality appeared first on Dutch Uncles.

Unacademy’s Move from a Hobby to a $2 Billion Edtech Empire

Talat Rais — Tue, 18 May 2021 10:35:04 +0000

It is ironic that a company that seeks to distribute knowledge is named Unacademy. [Un (Not)-academy].

Gaurav Munjal had come across a concept of ‘Unconference’ during his college days. Unconference is everything that a conference isn’t. No specific agenda, anyone can attend, anyone can talk about anything interesting, you can wear whatever you want, you can attend whatever talk you want. This particular term remained embedded in the back of Munjal’s mind and was unearthed in 2010. This time it was not a college conference but the education industry.

Unacademy.in is supposed to be everything that a traditional academy isn’t and more, explains Munjal, who turned this vision into business in 2010 with two other co-founders – Roman Saini and Hemesh Singh.

Tapping Business Opportunity Behind Hobby

Unacademy had started out as a Youtube channel. Munjal, a college student, was no alien to the world of ‘Youtubing’, both for leisure and business. During his college days itself, he started posting educational videos about computer programming on the channel.

As time progressed he started his own real estate company, Flatchat, which later got sold to Common Floor in the year 2014. In the same year, Munjal began observing the niche of digital education, owing to the popularity of his videos, and decided to go full time with his channel.

To understand the potential of digital education better, he shared the start-up idea with his peer Roman Saini, who was at the time serving as an Assistant Collector of Jabalpur in Madhya Pradesh. Saini, who himself had once taken a loan from a friend to pay for his hefty coaching centre fee, was moved by the idea of learning from the comfort of home at much lesser fees.

Thus with the mission to make education accessible, break the restrictive classroom-learning structure and augment the teaching and learning process, he came on board. It soon became a trio as Hemesh Singh, who had been with Munjal since his Flatchat days, joined in as Chief Technical Officer (CTO).

Unacademy started out as a humble YouTube education channel, focussing on preparation of competitive exams. Seeing the massive popularity of the channel within a short span, the founders decided to officially register Unacademy as an e-learning platform under its parent company Sorting Hat Pvt. Ltd. in 2015.

Gradually, it was joined by 36 new educators comprising IITians, CAs, IAS officers, teachers who contributed in making 500 free lessons on a wide range of subjects. Within a year, the start-up received its first round of funding of total $500K from Blume Ventures, Rajan Anandan of Google, Sumit Jain of CommonFloor, among others.

“The big money is not in the buying or selling, but in the waiting” – Charlie Munger, American businessman and investor.

When investors put in their money in a start-up, especially the one that initially does not have a very solid revenue model, it’s evident that they don’t do it for the short term returns. Rather, they see a long-term potential. Unacademy was on the right track. The main reason being it wasn’t trying to replace the traditional classroom teaching model or a teacher per se. Rather, augment the same with technology. The investors knew that the future was virtual and Unacademy’s product offering was in the right books.

By the end of 2016, they had about 100 educators providing 1,500 lessons. The start-up quickly managed to raise its Series A of $ 4.5 million by the start of 2017. The line of investors included – Blume Ventures, Sachin Bansal, Binny Bansal, Kunal Shah, Stanford Angels India, Nexus Venture Partners among others.

What upped Unacademy’s game was the unique idea of providing tailored courses in the competitive-test-prep market, which has a huge potential owing to its popularity. With investors flogging in, the company came up with “Unacademy Educator” – an app for educators to help them create videos from the comforts of their homes. From time management lessons to motivational talks, the start-up managed to get personalities like Kiran Bedi, famous cricketers Brian Lara, Brett Lee and Jonty Rhodes, Congress MP Shashi Tharoor and the star couple Virat Kohli and Anushka Sharma, as its official educators, increasing its credibility as an e-learning platform.

Today, Unacademy has as many as twelve platforms in the market ranging from the Unacademy Learning App to test prep app Graphy, with a monthly visit of 6,295,259 users.

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What upped Unacademy’s game was the unique idea of providing tailored courses in the competitive-test-prep market, which has a huge potential.

From Freemium to Subscription: Finding PMF

Initially, Unacademy distributed their content in the form of mini courses for free. This approach was quite similar to the one adopted by Jio – Free internet for all. This Freemium Model is generally adopted by companies to amass a user base and gain popularity in the industry. Unacademy followed the Jio suit and allowed people to have access to their videos for free. However, they kept a certain category of premium videos saleable. This strategy worked well for the start-up as they were able to garner around 15 million views, with more than 52K registered users within a few months of start-up’s official registration.

The start-up was pumping its user base each month, reaching different regions and delivering personalised content. During the entire course of its journey, Unacademy made sure that it comes up with new products/apps/content to retain that user base and keep the quality at check. This is extremely important for a start-up which is in a space of aggressive competition, with everyone wanting a share in the billion dollar pie.

At an early stage of their venture, Unacademy had identified their target audience, especially in Tier 2 and Tier 3 regions. Since a significant fraction of its learners were based in remote towns and villages, the team started to optimise its lessons to load on low bandwidth connections and mobile data. The start-up smartly turned the challenge into an opportunity with technological prowess.

Unacademy achieved a turnover of 1.8 Crores in December 2018, with seven times higher revenue compared to the previous year.

Every start-up reaches a point where they question themselves – What next? In one of his blogs, Munjal shared, even though they had great revenue, growing month-on-month, something was missing – Product Market Fit (PMF).

They (team) knew live classes were working and learners were loving it but somehow they were hating the idea of buying different Plus Courses. The company needed a simple solution: One-stop-solution for cracking the exam. A solution where users could access the live classes in a structured manner by the best educators.

Following intensive brainstorming, the team decided to launch a subscription model, which would provide a structured and streamlined downloadable courses accessible to paid users.

The team started working on the subscription product on January 3 and made it live on January 29. The company had to build the entire framework, product and align 400 educators to launch subscriptions in 12 exam categories.

The revenue soured by 7x in 11 months. By the end of 2019, Unacademy was attracting a greater number of investors. However, an orbital shift in the start-up’s investment and numbers came after the pandemic, which brought in a tectonic shift in the online education industry. Edutech became a natural gainer as online learning moved towards becoming a necessity.

In May 2020, Unacademy touched an all time high with 3,50,000 subscribers. The start-up hit the iron when it was piping hot! Following the worldwide lockdown, Unacademy came out with blazing guns of intensive recruitment, scale up, fundings and new products to retain its position at the top of the Edtech space.

This gave the company the key to the billion dollar club. Unacademy hit the unicorn status in September 2020 after raising $150 Million from SoftBank Vision Fund.

Under my Umbrella!

As Edtech startups build a war chest amidst the fading galore, the natural course of action was acquisition to strengthen the product. In 2000 alone, Unacademy acquired six start-ups – Kreatryx, CodeChef, PrepLadder, Mastree, Coursavy and NeoStencil – in various sectors to solidify its position against its biggest competitor BYJU’S. Other deals included TapChief and e-learning site Handa Ka Funda.

Unacademy expanded its umbrella to accommodate a diverse user base, increase its market share and cashed in on the popularity of the acquired companies. Unacademy had been focusing on preparation for competitive exams (JEE, UPSC, NEET, CAT, etc.) and strengthened the same with smart acquisitions and tie-ups. There is also an advent advantage in this kind of content – scalability and wider adoption. The nature of the content (competitive exams) is easily replicable and scalable to be rechristened as multiple offerings.

Interestingly, in the second half of 2020, they started looking at the K-12 segment as well. Unacademy had started out with focusing on recorded content and creating tools for educators to create content. As interest for live learning space picks up pace, the start-up is also looking to venture into the segment.

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The start-up had started to optimise its lessons to load on low bandwidth connections and mobile data.

Acing Exams!

No start-up has smooth sailing. When Unacademy started out, the industry saw less than 1% venture capital flow in India. A lot of experiments were ongoing – some developing, some sailing smooth while some crashing.

One of the biggest reasons why Unacademy has managed to survive and thrive to date is its ideation.

The reason why Unacademy didn’t fail like other edtech startups or aced its exam of revenue generation, was the idea behind it. This holds true for all the test-taking/preparation platforms. They didn’t aim to replace the teacher but to augment the teaching process.

Second, they picked up the aggressively popular ‘parallel education system’ as their core sector. Plus, they picked up courses/exams which need relearning like UPSC, which is an high-value intensive course.

The start-up faced stiff competition initially from BYJU’S, Toppr and Khan Academy, which at some point were also delivering free content. However Unacademy’s USP was the convenience with which educators delivered content. They kept bringing in more educators as collaborators with an exclusive app meant for educators, as popularity increased.

This provided content to be generated at the pace of its consumption, at the same time ensuring dynamism, something its competitors lacked. It is a very smart model where educators become the influencers and marketers for the company.

This makes Unacademy an extremely asset-light company. The educators app is the game changer. No need for fancy studios or attention capturing content. The app is unique as the – ‘Student is tutor, tutor is student’. Most of the educators are young pass-outs or teachers who have recently completed the same exams successfully. Unacademy is proud of its uniqueness and ability in making education accessible to the extent that people who earlier were its students have now turned into educators on the same platform.

The agility of the company in shifting its users to an app from Youtube channel is also commendable. This way they have been able to monetise the freemium model they had initially launched with the app-based subscription model.

Netflix of Education

What does Netflix do? It’s a single platform for all kinds of streaming services available to users on subscription basis. Unacademy aims to curate the same, but in education. It is already in that direction and briningin in new products to build it up.

The company gets top educators from different spaces together on one platform and optimises them together. The learner can choose the course and the educator he is the most comfortable with.

It is set to increase its product base in fields that are yet untouched such as courses on chess, judiciary exam preparations, Chartered Accountancy etc. They are aiming to bring K-12 subscription for school students as well.

Amidst the ongoing Covid-19 wave, there are little chances of colleges and educational institutions reopening this year as well. That being said, there stands a high chance of universities tying up with Unacademy and its likes and providing degrees or the start-up bringing its own degree courses in association with UGC.

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