EdTech, A Sector Which Needs Educated Integration With Legacy Universities

Online EdTech players have successfully developed B2B and B2C business models.


It was during the end of 2005 that a smart serial entrepreneur called K Ganesh started a company called TutorVista in a suburb of Bangalore. Ganesh had a simple solution statement. Indian citizens who have a decent hold of the English language will teach over the internet to the school students in the United States. The value proposition was that when high-end technology work can be outsourced to India, why education can’t be approached the same way? Ganesh sparked a revolution in the online education space by starting in a small way, but the digital education space in Indian is now the darling of global investors. Being the pioneer in the Indian context, Ganesh built and scaled TutorVista aggressively before selling it to United Kingdom-based international publishing major Pearson Inc., subsequently sold TutorVista to the hottest EdTech or education technology Company in India – Byjus.

Cut to 2020: A good 15 years after TutorVista started establishing roots, the Indian marketplace is riddled with scores of online education companies addressing a plethora of niches. Many are vertically focused on specialisations, be it Banking Services Exams or Railway Recruitment Board exams. Simultaneously, companies like Byjus and Vedantu are horizontally focused, having a presence right across from Kindergarten-12 to Civil Services coaching to what not.

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Goldman Sachs expects India’s economy to contract by 14.8% in the fiscal ending March 2021. In 2020-21, Indian unemployment rate touched 23% whereas the GDP has been projected to contract by 4.5%.

Evolving Business Models

Online EdTech players have successfully developed B2B and B2C business models. However, major hubs of EdTech companies are concentrated in a few countries, namely, USA, India and China. The growth of the sector has been phenomenal, a look at the VC investments reveal that every year approx. A phenomenal US$4 billion has been invested in the EdTech space in the recent past. Evidently, COVID-19 has given a positive boost to it, and there was a surge of investments in the first half of 2020, which saw a US$3 Billion global EdTech funding. Globally, EdTech attracted $500m of Venture Capital investments in 2010, with 14 times increase in investment at $7 billion in 2019.

Further, 30 of the listed education-based companies have market cap equivalent to $ 1 billion. Globally, EdTech industry growth is fuelled by increased connectivity and increased usage of digital devices in the classroom.

Asia Pacific region has also seen an increase in the spending on EdTech, which is growing at a rate of 54% since 2011. Increase in the Asia Pacific middle class is one of the key drivers of EdTech. Additionally, shortage of seats in the universities that deprives the qualified individuals to take up higher education triggers the need for online platforms for higher education. China clearly emerges as a clear leader in EdTech space in not only Asia Pacific but even globally with receiving more than 60% of VC investments in the sector. The top 20 list of unicorns of EdTech as of September 2020 had around nine large unicorns coming from China.

The Indian landscape is not distinct from the global scenario and has seen exponential growth. The online education industry of India stood at $ 250 million in 2018 and is poised to grow to $ 14.33 billion during 2020-2024 progressing at a CAGR of 21% during this period. Within a brief time of 15-16 years, the sector has emerged as the fastest-growing sector. India has been the top hub of EdTech enterprises and has also attracted huge investments from Global VC firms. The Foreign Direct Investment (FDI) inflow into the education sector in India from April 2000 to March 2020 stood at US$ 3.24 billion according to the data released by the Department for Promotion of Industry and Internal Trade.

Segments in Indian EdTech

In India, EdTech can be categorized into K12 segment catering to school students, higher education, upskilling, language and casual learning and test preparations. India is one of the world’s largest educational hubs and has a formal education sector comprising 1.5 million schools and 39,000 colleges. The informal sector primarily comprises supplement education catered by Coaching centres and tuitions.

Today, the Indian EdTech market has an estimated size of $700 million, and steering this growth are re/upskilling and test preparation (entrance exams) sub-segments. Online test preparation market majorly comprises undergraduate entrance exams and job-focused test preparation. It is fiercely competitive to get into professional and academic courses, with around 98% of students relying on coaching external to their school or college.

EdTech platforms today are capitalizing on this opportunity and are slowly preferred than offline coaching centres. The major reasons for this adoption are lower costs and convenience coupled with flexibility to start the course offered by these platforms.

Quantitatively, this sub-segment is expected to continue expanding at a CAGR of almost 51% during the 2019-2024 period. Similarly, a relatively matured market of online reskilling is expected to have a market size of $483 Million by 2021 at a CAGR of 38% during 2016-2021.

This market is growing majorly due to the constant demand for reskilling required by the industries coupled with the existence of huge skill gaps in most industries. Additionally, the online primary and secondary supplemental education segment is showing signs of early growth, a deeper analysis of this segment demonstrates that there is a rapid change in consumer behaviour towards detailed learning through quality content and a surge in demand from tier II and tier III cities. This segment was valued at close to Rs 12 Billion in 2018 and is expected to reach INR 123 billion by 2024, expanding at a CAGR of more than 46 percent during the 2019-2024 period.

Role of Start-ups and VC

Start-ups have played a key role in EdTech growth in India. There are close to 4450 start-ups in this space. Even though India’s EdTech journey started in 2004, there has been a visible thrust in the incorporated numbers from 2015.More than 1,000 start-ups raised a funding of over $125 million during that year. Increased awareness and disposable income led to the rise of the EdTech market and attracted large investments. However, the majority share of funding was concentrated in Bangalore, followed by Delhi and Mumbai.

Inarguably, the top Indian EdTech firms in the B2C category based on various parameters like funding raised by them, their app-based ranking (Google Play and AppStore), investor portfolio is Unacademy, Vedantu, Byju’s, and Diksha. Apart from these other international brands like Udemy, Coursera and Khan Academy have also made their mark in Indian EdTech space.

Byju’s became the first unicorn from the Indian EdTech, is valued at $ 10.8 billion followed by recently turned unicorn Unacademy. Few other emerging names apart from the established lot are Doubtnut, upgrade, Flinto Learning, Suraasa and iDream.

Doubt not has a unique concept where students and other individuals can clear their doubts online; the mobile app is highly popular, especially in Tier2 and Tier 3 cities, as it caters to the students in different languages. upGrad, founded by Mayank Kumar, PhalgunKompalli and Ronnie Screwvala is among the few players in a post K12 segment, the segment is likely to grow to $ 1.8 billion by 2022. The company provides student support with 1 on 1 mentorship and has varied courses like MBA from top universities of the world. With around 21,000 learners, the company is expecting to increase the revenue to Rs 1000 crore soon.

B2B EdTech

Contrarily, the B2B market, even though it plays a big role, gets overshadowed by the B2C EdTech companies. These firms might not be the direct competitors, but even the B2B firms have to work hard to establish a market for themselves. B2B firms come into the picture because of the various platforms required by the EdTech firms.

Additionally, the schools and universities also use these third-party tools to reach their online audience. The big players are Google Classroom, Cisco Webex, and Zoom. B2B platforms like WizIQ and entab even mobilise and provide solutions for administrative processes.

India has seen rapid growth in other EdTech stakeholder- online coaching centres or tutoring firms, which are part of the B2B ecosystem. Certainly, this tutoring B2B EdTech firms is not a new phenomenon. There exists a good number of players like Class plus, Proctor, Classpro, Eduzilla and more. As a matter of fact, Class plus, a SaaS start-up with its mobile setup, has been able to build a client base of more than 2000 coaching centres within a short span of 16 months. Additionally, the client base covers 50 plus Indian cities. It enables the tutors to easily move to an online platform for tutoring through the coaching centre. The company has raised more than $ 9 million funding post lockdown.

Goldman Sachs expects India’s economy to contract by 14.8% in the fiscal ending March 2021. In 2020-21, Indian unemployment rate touched 23% whereas the GDP has been projected to contract by 4.5%. Yet, the investments in EdTech start-ups have reached $795 million during January to July 2020, which is around 7 times from $108 million, a year ago. In addition, the existing players saw 3-5 times rise in free audiences and 50-100% growth in monthly revenues during this period, majorly due to COVID-19 situation.

The data of funding rounds in H12020 showcases that most of the VC investments were grabbed by well-known start-ups in the space – including Byjus, Vedantu and Unacademy. Analysis of top 10 companies that have received funding in H12020 clearly depicts that investor’s focus is skewed towards the less regulated segments like tutoring and test preparation. The top deals which took place in India in H12020, noticeably included Byjus Classes; the company raised a total of $500 million in 2020 in two tranches. Tiger Global invested $300 million in January and General Atlantic invested $200 million in February 2020, clearly showing the interest of VC firms in the EdTech sector existed even before the world was hit by Covid-19. Other top investments were $ 110 million in Unacademy followed by $ 100 million in Vedantu. Toppr, which focuses on students of grade 5 to 12 and other preparatory courses uses AI technology extensively, attracted $47 million investments by Foundation Holdings, Kaizen PE and others during the period of Jan 2020 and July 2020.

It is evident from these investments and many others that VC’s are playing a big role in the EdTech industry. As a matter of fact, approx. 41% of total investments in the year 2019 were backed by VCs. According to reports based on the previous year data – Blume Ventures, Sequoia Capital India, Omidyar Network, Nexus Venture, SAIF Partners and Accel Partners are top VCs as far as number of deals they were engaged in is concerned. The start-ups funded by them included Vedantu, Unacademy, Toppr and many more. 

However, a deeper investigation into the data shows that although investors are more aligned towards big and already established players of EdTech, there are only a few venture capital firms targeting new and emerging start-ups, firms like Infoedge, Unitus ventures, Picus Capital, Inflection Point Ventures etc. In turn, these bigger and established players are on a spree to acquire the relatively smaller players. Putting it in perspective, during the year 2014 to 2019, a total of 35 EdTech start-ups underwent merger or acquisition. 54% of 28 active acquirers were from the education technology sector itself. This trend continues even in 2020 with Byju’s acquiring a two-year-old Mumbai based basic coding education start-up WhiteHat Jr for $300 million and Unacademy fueled by the funding it received from PrepLadder and CodeChef.

Favourable Policy Environment

While school education in modern India has become a fundamental right, Thanks to the Right to Education (RTE), school education till the age of 14 has become a fundamental right same cannot be said about higher education. The adult literacy rate in the country has gone up to 74% in 2018 from 61% in 2001. RTE has obviously shown positive results. However, the issues of quality of education delivered by schools and even college still persists.

Clearly two hottest sub-segments of test prep and K-12 EdTech are forecasted to be worth $1.3 Billion by 2021, the ticket size is expected to increase exponentially in these segments.

Moreover, the government policies and initiatives also seem to be favourable for the adoption of technology in education. The New Education Policy realizes the importance of the edge technology can provide in imparting education. NEP identifies the gravity of AI, VR, and blockchain technologies and how it is inevitable to integrate it in both government and private institutions.

As a matter of fact, the spending by the education sector on augmented and virtual reality technologies are likely to increase $6 Billion annually by 2023, with the market for augmented reality in the education sector is likely to stand at $5.3 Billion by 2023.

Additionally, EdTech can become a crucial link to fill the learning gap which exists in the Indian education system both at primary, secondary level in school and higher education level. Learning the Skills which can keep one relevant in today’s changing and demanding world can not only increase the chances of employability but can also result in job security, hence making the skill development a lucrative sub-segment for Indian start-up investors.

Of course, with the increase in the conventional segments like K-12, test prep and skill development, the B2B segment like classroom management, SaaS-based firms are likely to see a continuous surge in demand.

Meet Digital Pratik, a 31-year-old digital consultant and a social media influencer on Instagram with over 2 Lakh followers, who specialises in branding and marketing strategy. He claims to have made about INR 1 Lakh in 14 days by posting an exclusive piece of video content every day and making one-on-one video calls (15 minutes) with his audience.

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EdTech platforms today are capitalizing on this opportunity and are slowly preferred than offline coaching centres.

Opportunities for EdTech entrepreneurs

Although the future of EdTech looks promising but the road ahead isn’t that smooth, the recent times have exposed the infrastructural gaps in India. According to reports, only 15% of students during COVID-19 times when they were forced to go online had tech-readiness. Even today, India’s rural people have poor connectivity and devices. The EdTech companies also face a challenge in limiting the customer churn, which could be achieved through exceptional customer experience along with affordable prices.

The firms have to not only focus on retaining their existing customers but also enabling a wider customer base. The majority of rural Indian internet users prefer regional languages. It underlines the importance of content generation in local languages. EdTech does face a challenge in this dimension. The mobile usage and penetration in India is a lot higher than computers. Hence, the mobile-first approach in India could be a critical aspect for the growth of EdTech in the future.

Structuring a start-up in this space can be challenging given the constraints of how there are many players who are having a good lead in the landscape. Given that context, it is extremely better to ideate on the strategies and find the sweet spot on how to differentiate and slice the pie to finer focus which will give one the edge. Be it in B2B or B2C, online education space has more headroom for many sharply focused start-ups to operate.

Scores of colleges and universities are struggling to address the demand and need for quality education. One of the biggest opportunities latent is how EdTech start-ups can blend their offerings along with these legacy institutions to improve the reach of top-notch education to millions of students who are in dire need. Many forward thinkers in the established University space are willing to grow their institutions and smart entrepreneurs who align with them and ensure that the tide rises for the entire ecosystem.

Also read about topics like ‘9 Must-Have Qualities to Become a Successful Entrepreneur‘ and ‘Job Versus Entrepreneurship: Should You Be Your Own Boss?’ on our website.

DU Desk
DU Desk
Stories from DU Desk are the collective efforts of our in-house authors, guest authors and subject matter experts who collate and distill their ideas and thoughts to bring out actionable insights for our readers.

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