This was a 2,000-word feature for AVCJ focusing on India’s burgeoning edtech sector in the middle of 2020 shortly before Byju’s acquisition of WhiteHat Jr.
With millions of Indian students facing the possibility of an academic year conducted entirely online, educational technology start-ups have an opportunity for business model validation
It is likely 2020 will come to be regarded as an inflection point for the industry. For example, earlier this the month, live tutoring platform Vedantu became only the third start-up to raise more than $100 million in a single funding round. The others are Byju’s and Unacademy.
As for what the future might hold, industry observers suggest looking to China where $100 million- plus checks are fairly common in online education. That said, the two ecosystems are not easily comparable. Given lower income levels and a wider diversity of languages, it’s debatable whether an Indian edtech start-up could ever target the country’s entire addressable market of students seeking online educational services.
Nevertheless, the leading players now have sufficient users and brand recognition to build defensible positions. Industry consolidation, though inevitable, is expected to be delayed as start- ups tinker with their product offerings to find the winning formula. Increased revenues have naturally extended their cash runways.
“In China, many online tutoring platforms that are now profitable offer classes for 30 students or more,” says Liu Fang, a China-based associate director at Deloitte. “One-on-one education remains difficult while there are also start-ups offering language, niche and well-rounded education services. Industry leaders have also tried to diminish the halo of star tutors and standardized learning materials to ensure easier retention of staff.”
In India, many edtech start-ups offer classes to large student cohorts. There can be more than 200 students participating in a class with a single tutor.
Liu adds that TAL Education, one of China’s longtime market leaders, switched from video-based lessons to live tuition in 2016. Not only is customer retention low for video, it is difficult to achieve exponential growth in revenue due to low prices, though this format remains a good customer acquisition tool. Similarly, Byju’s began to offer live tutoring classes for the first time in its nine-year history last month. This is already a feature of the Unacademy and Vedantu offerings.
Malpani believes that, in the long run, start-ups must move away from a cookie cutter approach if they are to make an impact on educational outcomes. This will likely involve smaller class sizes and flexible pricing. “They are mercenaries,” he notes. “Everyone says the same thing about improving learning, but they haven’t walked the talk. India needs mission-oriented institutions like Montessori with a technology component.”
However, the COVID-19 pandemic has laid bare the country’s poor educational infrastructure. Standardization is a pipe dream, given how spending varies by state. That said, it is only in the last three years that a majority of India has come online. The proliferation of low-cost internet plans and affordable smart phones means millions can now access internet services that were previously unreachable.
“Imagine a student hailing from a family of farmers or where the father has a low-income job. They cannot afford a laptop even if it costs just INR30,000 ($400). Smart phone affordability has improved penetration a lot,” explains Testbook’s Kumar. “We shifted our approach from a desktop-first to a mobile-first approach 18 months back.”
Finding the formula
It implies immense room for growth, but start-ups must recognize the challenges related to pricing and computer literacy to truly serve India’s hinterlands. They might also need to go offline to reach and convert such users – as some of their Chinese peers have done.
“They could eventually become national brands as online education leaders. Will they need to have an offline presence to achieve this? Yes, definitely,” says KPMG’s Ramaswamy. “But that alone is not reason enough for creating a branch network. At that age, kids need counseling and face-to-face tutoring. Even for regular fulfillment, they might need brick-and-mortar centers eventually.”
Start-ups have at least a year to experiment given uncertainty over the continued spread of COVID- 19 and what this means for in-class education. Rustogi of Classplus observes that “the worst is far from over,” but draws some positives from the opportunity it presents for online specialists. “We’ve hardly scratched the surface of the problem,” he says. “There is no reason for us to stop dreaming and stop building.”