Education start-ups are making a comeback
They have had their ups and downs since they began in the late 1990s, but online education start-ups are now on a roll. The variety of their offerings has multiplied, as has that of private equity (PE) investors backing them. Renowned serial entrepreneurs such as Ronnie Screwvala and Vinod Dham have entered the sector, the former with UpGrad and the latter with AcadGild. There is no dearth of newcomers either, such as Bangalore-based Amruth Ravindranath, Co-founder & CEO of GuruG, whose app gives teachers different teaching options, or Mumbai-based Sukhada Tendulkar and Mandar Desai, Co-founders of Shirsa Labs, which provides online educational games, puzzles and videos. "The awareness that digital content has to be more integrated into the curriculum is at an all-time high," says Ravindranath.
"One year back, we had to call people and cajole them into taking our courses. Today, it is very different"
As for investors, total investment in the sector more than quadrupled from $10 million in 2012 to $44 million in 2014, according to VCCEdge. (2015 has seen a slight fall to $35.5 million: see Fund of Support.) "Barring a few like Kalaari Capital and Helion Ventures, no one was willing to invest in education start-ups five years ago," says Krishna Kumar, who founded Simplilearn, a Bangalore-based online certification firm, in 2010 and initially struggled to get funding. "Few understood this segment. But now there is much greater awareness." Simplilearn has since raised over $27 million in funding and hopes to close the current financial year with revenues of Rs 200 crore.
One of the biggest investors is Sylvant Advisors, which has backed 19 education start-ups since it began two years ago. It intends to support another 10 to 12 such start-ups in the next two years. "You cannot compare education start-ups with the likes of Flipkart or Ola, but these companies do have the numbers in terms of schools, colleges and students reached," says Anand Sudarshan, Co-founder and Director, Sylvant Advisors. The start-ups in Sylvant's portfolio are varied indeed, from Littlemore Innovation Labs - which has built an innovative tablet-based examination device for colleges and helped conduct more than 100,000 error-free exams - to EntLogics, which has created one of the world's first cloud and mobile app-based campus automation platforms and has 200 schools using it.
The first wave of education start-ups in the late 1990s, such as ClassTeacher, MeritNation and Educomp, catered only to school students. The next wave, across the 2000s, had companies such as iProf and TutorVista delivering digitised learning content across multiple platforms. While TutorVista made a splash, being acquired by global education giant Pearson for $217 million in 2011, a number of others were easily copied and foundered after early success. All these start-ups concentrated on just two areas - providing digital educational content that was already available, or building the digital infrastructure base in existing institutions. The current lot of start-ups is much more diverse in its offerings.
GuruG's app, for instance, delivers a variety of teaching options on every subject at the tap of a finger - text-based, audio visual or interactive. It can also provide, using student performance in tests, a comparison of how well (or badly) they learn when different methodologies are used to teach the same concepts. GuruG charges a licence fee ranging from Rs 3,000 to Rs 6,000 a year per teacher, working mostly through NGOs, foundations or publishers already engaged in teacher or school development programmes. Apart from memory games, math games and problem-solving games, Shirsa Labs also aggregates content from providers such as Discovery, Storybots and Nat Geo. It has even created a virtual currency, the geeko, values of which children win by successfully solving problems, and which they can redeem for discounts at stores like Crossword. Shirsa reaches out to families directly, instead of using intermediaries as GuruG does. Similar to Shirsa is the Mangalore-based Callystro, set up in 2012 by three former Infosys employees - Rajeev Gopalakrishnan, Sampath Shetty and Sampath Menon - which provides a catalogue of 250 games.
Unlike GuruG, many of the new education tech companies prefer to sell directly to customers rather than work through schools or NGOs. "Selling to schools was a battle," says Tendulkar. "We had to convince the management, the principal, the teachers and often we were asked to demonstrate the product at parent-teacher meetings where, at times, we were given barely five minutes." Noida-based ConveGenius, which also aggregates interesting content for children, has so far been selling to NGOs, but is actively considering retail sales of a content-packed tablet. "We are learning from our customers what works and what does not," says Jairaj Bhattacharya, Founder and CEO, ConveGenius.
The start-ups offering conventional content such as test preparation material or online tutoring in different subjects - especially those for which university courses are few - are, however, growing the fastest. Best known in the former segment are Toppr, Embibe and Testbook, all of which have obtained PE funding and offer content that helps crack various entrance tests - such as the Common Admission Test (CAT) for the IIMs, the Joint Entrance Examination for the IITs, the GRE and GMAT examinations to enroll in US institutions, and more. Toppr, founded in 2013 by angel investor Zishaan Hayath, providing over 45,000 questions and answers for 20 competitive tests, has more than 170,000 students currently enrolled. The test preparation market, online and offline - coaching classes - taken together, is estimated at $3 billion, and chances are the former may well start offering stiff competition to the latter.
In the second category is Srewvala's Upgrad, started in mid-2015, with courses on subjects such as managing digital business, data analytics and entrepreneurship. "For traditional investors in education, the motive was often partly vanity," Screwvala told Business Today at the launch of Upgrad. "You wanted to put your name on the gate of a university and drive through between its two pillars. I think that is an old fashioned way of looking at things. I think online is a much better way of creating a large impact on many more people." The opportunity is huge. "In the next three to five years, about 600,000 to a million people will be joining data analytics and digital businesses. That is the kind of need we are talking about," says Mayank Kumar, Co-founder, Upgrad.
"The awareness that digital content has to be more integrated into the curriculum is at an alltime high"
Dham's AcadGild, begun in September 2014, also provides about a dozen courses in subjects such as android app development and digital marketing. "Many colleges and universities are not doing a good job," says Dham. "Online education can help students who have to put up with them." Dham's reputation, as the inventor of the Pentium chip, no doubt, also helps. "This is the last innings of my life," he adds. If competition in this sector has grown, it has also fuelled awareness. "One year back, we had to call people and cajole them into taking our courses," says Vikalp Jain, AcadGild's Co-founder. "Today, it is very different." AcadGild, with courses priced between Rs 15,000 and Rs 49,000, has around 3,000 students.
But even these conventional education start-ups are different from education portals of the past in that they are interactive. AcadGild enables conversations between teachers and students, as does Bangalore-based Vedantu, using a two-way communication technology and white board equipment that allows students to raise queries as they follow the lectures. The technology has been optimised to suit different bandwidth conditions. Launched in November 2014, Vedantu now has about 30,000 registered students and 200 teachers.
Overall, these start-ups are helped by the growing pressure on schools to display they are using technology, in order to remain attractive to students and parents. But it is also a tough business and is slow to scale. Getting customers to pay is difficult, as is convincing them that online can be the primary source of education rather than an add-on to offline courses they are taking. The plethora of education start-ups that rose and burnt out in the past two decades has also created some resistance among consumers. "Education is a long-term business," says Kumar of Simplilearn. "You need to stand for quality and establish your brand."
