Funnel Vision #19
Edtech space in India and the impact of reopening of schools
Over the last decade, edtech has been recognized as an essential tool to solve problems present in education systems around the world. The increasing dependence of the latest generation on technology is not just a coincidence with the rising edtech industry. The final push given to the rising edtech industry was pandemic, which pushed even the most conservative and rigid sectors and institutions to explore this catastrophic journey using technology as a tool.
Indian edtech space – Growth and Funding spree
Edtech’s sensational rise during the pandemic can be seen by the rise in the number of registered students on various platforms which also helped several startups in the sector attract fresh investments – Global EdTech started the last decade with $500m of Venture Capital invested in 2010 and finished 32x higher at $16.1B in 2020, nearly 2x the previous investment record in 2018. Historic powerhouses China and US continued to grow and India emerged as a new powerhouse. The momentum has continued in 2021 too. In India, Edtech startups have secured $1.9B across 80 deals since January, with BYJU’S and Unacademy pocketing a whopping $1.44B.
School reopening – What is edtech doing about it?
Of the 92 startups that received funding in 2020, 61 were seed-level funding. These old and new players have made the Indian edtech space crowded, due to which quality has taken a hit. With schools reopening, edtech startups would have to differentiate themselves and would have to go beyond the conventional to make their position strong. They would have to ensure that the new users who signed up during the pandemic do not churn out. Hence, we see some startups adopt innovative ways to keep the customers glued one of which is online players moving the opposite way – i.e into brick and mortar. Byju’s acquisition of Aakash Educational Services for nearly $1 billion, in a bid to enter the test prep space, is a case in point.
Byju’s, which started its journey as a digital learning platform has eventually adopted the omnichannel approach by acquiring the brick-and-mortar coaching center (Aakash). It understands the importance of physical coaching centers well. Much like you have the omnichannel phenomenon in the retail space, where e-commerce companies have realized that only digital offerings won’t work and that they need a combination of both online and offline, similar is the case with edtech too. This deal reflects the reality of the omnichannel model.
Another such trend to sustain growth in the post-pandemic world is entering into some solid segments which are poised to grow – test prep, after-school tuitions and upskilling. Byju’s deal with Akash was a strong entry in the test prep category. They expect to scale up Akash’s business by 50-60% CAGR over the next 3-4 years; which makes it a billion-dollar revenue opportunity in the next three years. The $300M acquisition of White Hat Jr (coding startup) is a move into the skill development segment. This is a strong market with 400M knowledge workers. It is also an online first segment where workers find it hard to find good offline upskilling options. Byju’s believes that its core business which had 17 percent margins will continue to remain the major segment of their business over the next few years since there is no slowdown here and the mid-term impact of the pandemic is huge. And its move into new segments will help it gain a competitive advantage over the new and old entrants in edtech.
Consolidation in the Indian market – Two schools of thought
India’s edtech industry, of late, has become fiercely competitive, especially with the entry of e-commerce behemoth Amazon into the space. Experts argue that the industry, although still in its nascent stage, is slowly moving towards a position of consolidation. “The edtech industry is one of those rare instances where consolidation has started to happen, and that too very soon, before the space has even fully matured,” says Harminder Sahni, founder and managing director, Wazir Advisors.
Some analysts believe that it is becoming a winner-takes-all market. Edtech is in this peculiar situation where a lot of money from venture capitalists has flowed into very few firms; it is not evenly distributed. So, the push from the investors is naturally to consolidate in favor of the few big organizations. At the end of the day, there are only so many apps one person can use for education. Eventually, there will be two or three winners in every category, and everyone else will die down.
However, another school of thought advocates that winner-takes it all isn’t possible in the Indian edtech scenario. They believe India’s coaching centers are too many, too diverse, and very hyperlocal. In the test prep segment – dominated by engineering, medical and civil services – India has a phenomenon of coaching center clusters. Like Agra is one cluster, Kota is one, Nagpur is another, etc. We have countless such cash-rich enterprises dotting every nook and cranny of India. So, a winner takes it all scenario is difficult to attain. This can be seen similar to big e-commerce firms competing with your mom-and-pop grocery stores. The informal setup may suffer, but not too much. Today, offering online classes has also become easier with the availability of software like Zoom, so traditional test prep center isn’t really threatened even in the pandemic scenario.
We believe that purely online tech-focused players can thrive in the supplementary skills/education market. However, technology cannot replace or substitute teachers in the primary learning market (what schools provide). In this market, it is not “teachers vs technology”, rather it is “teaching with technology”. Hence, we see the trend of schools partnering with edtech startups and startups entering brick and mortar space in segments like test prep.
Policy Architecture
One thing is certain - the imperative now is to reimagine education and align it with the unprecedented technological transformation. India’s new National Education Policy (NEP) 2020 is responsive to the clarion call to integrate technology at every level of instruction. It envisions the establishment of an autonomous body, the National Education Technology Forum (NETF), to spearhead efforts towards providing a strategic thrust to the deployment and use of technology.
India is well-poised to take this leap forward with increasing access to tech-based infrastructure, electricity, and affordable internet connectivity, fueled by flagship programmes such as Digital India and the Ministry of Education’s initiatives, including the Digital Infrastructure for School Education (DIKSHA), open-source learning platform and UDISE+ — one of the largest education management information systems in the world.
A comprehensive ed-tech policy architecture must focus on four key elements — providing access to learning, especially to disadvantaged groups; enabling processes of teaching, learning, and evaluation; facilitating teacher training and continuous professional development; improving governance systems including planning, management, and monitoring processes.
Future Outlook
Various edtech firms have used different strategies to strengthen their presence so that they can survive in a post COVID world. The Indian edtech market is showcasing an interesting trait of early consolidation – whether it becomes a winner takes all market or not is yet to be seen. The policy infrastructure needs to combine the boons of edtech with the traditional learning methods. The imperative now is to reimagine education and align it with the unprecedented technological transformation.
Meet the Author
This issue of Funnel Vision has been authored by Jahnvi Singh.
Around the web in 5 stories
Some media reports have suggested that Amazon is foraying into the agri-tech space. Although Amazon has been dabbling with the fresh food category for a while, this new development seems to be a bit different.
Nas Daily, the famous Facebook and Youtube channel, recently raised upwards of $10 million for their edtech platform which teaches people “to be successful online”. The Ken has written an interesting piece about it, highlighting the changing outlook of the online content industry.
Another story about edtech - The Ken talks about Byju’s partnership with Disney and how it has been a confused offering.
Tech-giant Apple has been asked to open its app store to competition by allowing developers to bypass its payment system after Epic Games filed an anti-trust case against Apple.
After the exit of General Motors and Harley Davidson, another American auto giant has shut shop in India. This time, it’s the iconic brand Ford.
That’s all for this edition!
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