A Superior Opportunity: Indian Ed-Tech Sector
On the Rise of Ed-Tech Startups During the Pandemic
The ongoing pandemic shows no signs of slowing down and the Indian entrepreneurial ecosystem has not been immune to it as well. Along with causing widespread loss of lives and exposing the chinks in India’s healthcare system, the pandemic has caused significant damage livelihoods of people. A recent survey by NASSCOM on the impact of Covid-19 on Indian startups found that 40 percent of startups have either temporarily shut down operations, or are on the verge of shutting down. But if there’s one sector that continues to see extraordinary growth during these unprecedented times, it is online education. Covid-19 prompted schools and colleges around the world to close down. By the end of March 2020, over 180 countries had closed down schools, affecting over 1.5 billion ( 87.4%) learners. With Covid-19 locking down Indian cities since the end of March, online education and e-learning platforms have seen astonishing adoption and exponential growth.
(Credits: CB Insights)
A report by RedSeer and Omidyar Network India has mapped the growth in usage from 2019 to 2020. It revealed that ed-tech users — both paid and free unique users — in K12 and post-K12 segments have seen an increase, with the user base doubling from 45 million to 90 million. According to the report, online education offerings across Classes 1 to 12 are projected to increase 6.3 times by 2022, to create a $1.7 billion market. The post-K12 market is set to grow 3.7 times to touch $1.8 billion. This has created meaningful opportunities for incumbent players and space for multiple new startups.
Fund-raising Extravaganza
The coronavirus pandemic has been a watershed moment for India’s ed-tech sector. The rapidly rising graph of the ed-tech sector has seen an increased interest from investors. Over 14 ed-tech startups have raised funding since March 2020. In the first quarter of 2020, ed-tech emerged as the hot sector with Byju’s raising $400 million and Unacademy raising $100 million in a round led by Facebook. Byju’s is continuing its hot streak and is set to raise another round for a massive $10 billion valuation. Its last reported valuation was $8.2 billion. Another startup Lido, which raised funds in March, was looking to hire over 500 tutors across the country as it was doubling down during the ed-tech boom.
Ed-tech startups are seeing their numbers grow by the minute. In March alone, Byju’s saw 6 million new students access free lessons on its platform, while Unacademy recorded 1 billion watch minutes. Another ed-tech app Toppr saw 100% growth in free user engagement in March. According to the data by SimilarWeb, ed-tech startup Brainly registered the maximum website traffic in April with approximately 25.05 million visits constituting 4.19 per cent of the Indian ed-tech traffic. SimilarWeb data compared Indian e-learning platforms including Udemy, Jagranjosh, Byju’s, and Coursera, among others. Brainly has also registered an increase in its Indian user base to 25 million.
From an M&A perspective, the ed-tech startup has seen some significant developments as well. According to a report by Entrackr, Byju’s is in late-stage talks to acquire Doubtnut in an all-cash deal. The transaction will value the two-year-old Doubtnut at just north of $100 million. Incidentally, both Byju’s and Doubtnut have marquee investors Tencent and Sequoia on their respective cap tables.
While online education has been a massive boost since lockdown, it will not be wrong to say that ed-tech is yet to gain mass traction. Despite the launch of 4,450 ed-tech startups in the country, India has only one unicorn in the sector, BYJU’s. BYJU’s also had to spend a good ten years to reach the valuation. The startup worked in stealth mode from 2011 to 2015 and the app was launched only in 2015.
But nonetheless, ed-tech has been a hotbed for VC activity. Blume Ventures has made six investments in ed-tech at pre-series A and seed stage. The investments have been in an array of segments within ed-tech including online test-prep, gamified learning, B2B white label apps for coaching classes and others. Known to be very active in the fin-tech segment, with 13 deals in 2019, Sequoia grabbed 10 deals in the ed-tech sector in 2019. Venture fund Nexus Venture Partners has backed startups such as Unacademy, Quizizz, WhiteHat Jr among others. Other than the mentioned, Omidyar Network, SAIF Partners, Accel Partners, InnoVen Capital, Helion Venture Partners, Indian Angel Network (IAN) and India Educational Investment Fund are some of the prominent funds in the sector as well.
A Deeper Look: UpGrad
Like all other Indian companies and startups, UpGrad had also decided to go for a cost-cutting from April to cope with financial uncertainties in the aftermath of the coronavirus. The Mumbai headquartered company had announced a salary reduction of up to 30% for its employees, albeit the pay cut was subjected to seniority and designation of the employees. But UpGrad has recently announced that it will revoke the salary cut decision that was initiated earlier and that it will pay back 100 percent pay cut to its employees in the July Salary, following a good performance in the months of April and June, since the lockdown has actually helped in propelling the growth of the online education industry. Separately, the Ronnie Screwvala-backed company has announced that it has extended its work from home policy till December 31. UpGrad is probably the first company to revoke the pay cut decision amid the challenging economic situation.
In a first mover’s advantage, UpGrad had announced access of its proprietary tech platform to all colleges and universities, at the very onset of COVID-19 pandemic, before Lockdown 1.0. Over 100 colleges and universities so far are using upGrad’s platform to replicate their offline classes, online. Institutes include Jamia Hamdard University, Lovely Professional University, who are amongst the MHRD’s NIRF Top 100 universities, with the former being recommended as an Institute of Eminence by the Government of India.
UpGrad reported Gross Student Revenue of ₹50 Crore/month for the month of June’20 that will grow to ₹100 Crore/month by September’20 and will close at ₹200 Crore/month by March’21, thereby crossing a ₹1200 crore annual run rate by end of this fiscal year. The company also informed that while it reported a nominal loss in Q1 of this year due to its high investments for their upcoming launches, they would be profitable from the 2nd quarter of this financial year.
2020 is a turning point for ed-tech in India, with digital offerings leading the democratization of education, new-age learning models, bridging gaps in access to quality education and addressing key student pain points. For incumbent players, the time is opportune to seize the market and for new players, it is time to go from ‘zero to one’.
Gautam Marwah is the founder of Indianaut, a platform showcasing and strengthening India's next best analytical and creative minds.