Sunday, December 22

Problem & Solution of India’s Next Unicorn

Recent Global News Highlights Report:

  • TutorGroup, a Shanghai-based online language learning provider, raised nearly $200M in Series C round, led by Singaporean sovereign fund, GIC and Goldman Sachs bringing its valuation to over $1B
  • Varsity Tutors, an online platform connecting students with tutors for in-person and online sessions, raised $50M in Series B round led by Technology Crossover Ventures.
  • Instructure, a cloud-based learning management system provider, went public on 13 Dec, 2015.
  • Apple acquired Education Startup LearnSprout

 

Is EdTech today an increasingly attractive business for venture funding?

According to Tracxn global EdTech report (Mar 2016), over $9.9B has been invested in the sector in the last 10 years with more than one third of the amount invested in 2015 alone. Online courses have seen most activity with 60+ companies formed in 2016. Tutoring and Technology are close behind with 50+ each. The number of companies founded in last 10 years has seen an upward trend with over 653 companies founded in 2014- 2016. The total funding in the sector has seen an average of ~75% YoY increase in the past 2 years. Acquisition have been on a rise with over 450 M&A’s in the past year.

Sphero, AltSchool, Minerva Project have been some disruptive models which have gained attention through their unique educational approaches. These firms have gained funding from the likes of Mark Zuckerberg, Bill & Melinda Gates Foundation, and Walt Disney. Of the new sectors that might see increased VC interest, use of Artificial Intelligence and Virtual Reality are seen to be on the rise.

 

The current situation in India:

According to estimates from IBEF, the Indian education market is worth $100B and the online education market itself is expected to reach $40B by 2017. A report recently released by UNSECO on Global Education said that India has made striking progress towards reaching its “education for all” goals. Even now it is relatively easy apply for JEE Main 2020 Registration, something that may not have been possible in years prior. The report states that “India has reduced it’s out of school children by over 90% and Universal Primary Education has been achieved.” But before we rejoice, a more sobering fact is reflected in the Annual Status of Education Report (ASER), 2014. The report says: “In 2009, 60.2% of children in Class 8 could read simple sentences in English but in 2014, this figure was 46.8%.”

That’s just a snapshot of the key issues being faced in India’s education sector today. India faces the issue of not just reach of education but also quality of education. Can technology play a role in plugging this gap? The last decade has also seen a surge in edupreneurs who are leveraging the growth in digital technology to address the challenges of availability, accessibility and affordability of quality education thereby transforming fundamental building blocks of the sector. According to Venture Intelligence, 40 education deals got funded in 2015 (table below), with a high focus on technology-enabled education.

 

Not all is that rosy:

According to many experts, key initiatives aimed at improving Education such as “The Right to Education Act” by the Government of India have not really succeeded well. Coupled with that, the need for higher focus on improving teacher effectiveness has become an important need to improve the quality of education. Do we see enough startups focusing on solving the real challenges in the sector or are many of them just attacking the easier and more peripheral problems?

Currently, we don’t see disruption as yet in a large way in Indian education startups because solutions have to fit into the existing education system. Stakeholders only invest in must-haves and not good-to-haves leading to need for solutions which can prove efficacious and measure learning outcomes. While we have seen sectors such as test-prep, assessment, supplementary education and tutoring seeing more action, we would like to see more innovation in areas such as teacher training, focus on basic skills such as language, reading, writing as well as providing Education as a Service.

 

Education Unicorn, a reality or an oxymoron?

Globally, 11 EdTech start-ups founded since 1996 have achieved $1 billion valuations. EdTech Unicorns have taken a median of 14 years from their founding to achieve scaled exits.

 

Learnings from growth stories of 2 EdTech Unicorns:

Pluralsight (a firm that aims to make professional software developer training better by providing online professional training)

Pluralsight online learning library began with 10 courses based on Microsoft technologies. As of 2016, it has more than 600 authors and over 3,500 courses. Users pay from $29 a month for unlimited access, while enterprises can buy subscriptions from $299 per user per year. PluralSight has revenues over $100m currently.

The product really took off when the company shifted to a monthly plan. Initially, they had three plans: from $500 to $1500 a year but no monthly plan. The thesis was that the product was equivalent to professional corporate training that people spend thousands on a year. But it was the monthly plan that really worked wonders. Pluralsight also ensured that the authors of their training material were rewarded fairly by paying them a royalty fee based on the popularity of the titles. The model was accepted by the trainers and helped Pluralsight’s content library take off. The other three big issues they needed to address in their journey to growth were around privacy of information, ability to generate enough quality content, quickly and being able to onboard the right tutors/authors.

 

Tutorgroup: Language Learning Platform

Over 60% of students in Asia receive tutoring outside of the mainstream education system. Tutoring platforms like Tutor Group are becoming increasingly common and target every age group. TutorGroup is gaining huge traction by focusing their services on English language learners. Their strong technology platform is their scaling proposition. There are 300 million people learning English in China and English language aptitude correlates with a 30–50% higher income levels. In China alone, the company expects sales to experience a triple-digit annual growth rate in the next few years.

 

What does this mean for India?

The point probably is not about just building a Unicorn. But solving the real education needs of the country, with sensitivity, with quality, with scale. And that will need not just great technology but a proper understanding of the complex Education ecosystem, innovation in smart distribution models, a relentless focus on execution, an ability to move away from the predominant non-profit approach to the sector by building sustainability in the businesses and most importantly by incorporating help from the broader ecosystem including Education focused Incubators and Accelerators, mentors and Venture Capital firms who really understand the challenges and complexities of the sector and can help companies overcome them.

 

Unitus Portfolio and the Education Focus:

Unitus Seed Fund strongly believes in the power of Education to create real impact in India. Our portfolio has 5 Education companies that are all creating impact in different ways across education segments. While Hippocampus aims to bring quality pre-school solutions to hinterlands of India, iStar focuses on providing skill development training for non-Science graduates by getting them job-ready. CueLearn focuses on affordable after school education through high-quality content delivered by micro-entrepreneurs. Curiositi provides syllabus driven, affordable activity based learning for schools. LabInApp is trying to redefine secondary school science learning through 3D virtual graphics.

Over 40% of the companies evaluated in our pipeline in 2015 have been in the Education sector. Given our seriousness about creating a difference in the sector, we have just announced the fourth edition of our StartEdu program in partnership with Sylvant. Over 250 companies applied in the last three editions of this program. This edition of StartEdu will provide entrepreneurs with a chance to go through a structured boot camp to validate their growth strategies, get expert mentoring from industry experts including S.Chand Publishers, Pearson Affordable Education Fund, and a chance for the shortlisted finalists to pitch for investment up to INR 3 crores. Applications are open now. Apply here: https://goo.gl/rdgHrm



About Author-

Debleena RoyDebleena Roy is the Director at Unitus Seed Fund. She is looking for new ways of self-expression and learning. Sometimes through a song, sometimes through a story, sometimes by teaching. In the words of the great Einstein “striving not to be a success, but rather to be of value.” I research and analyze, probably a bit too much. I dream, I learn, I teach, I learn again.