‘Edtech is the darling of the day’
The edtech sector has emerged, globally, as the darling of investors, founders, teachers, schools, parents and students. India has been no different. In 2020, investors poured in $2.2 billion into existing edtech players and start-ups (up from $550 million in 2019). By 2025, estimates indicate the sector will touch $12 billion. Last year saw a higher amount of total investments in the sector compared to investment of $1.7 billion in the last 10 years combined.
In the giddy excitement that broke out, it’s hard to make sense of what’s really happening. SANDEEP ANEJA, co-founder of Kaizen Private Equity, spoke to Anjuli Bhargava from Singapore on how he sees the sector shaping up post Covid. Edited excerpts:
Edtech in India seems like a wild, frenzied beast that has been let out of its cage. What in your view is happening? I think everyone is going to look back at 2020 as the year everything changed for education as we knew it, in India and globally. The resistance to online learning has gone. Online learning was perceived as entertainment, a joke or to keep things interesting but was unsubstantiated as a method of delivered learning. In the pandemic, parents — in particular of young kids —took to the medium so that their children’s learning would be uninterrupted. Professionals and older children, who had access, took to this space to enhance their knowledge and skills. This is the demand side.
Plenty changed on the supply side, too. Companies started to innovate to grab the attention of students and retain them. They forayed into previously unexplored territory: Innovation in pedagogy, hiring, openness to mixed platforms, blending of online with real, live
classes, live remedial question and answer sessions with teachers, what have you.
Teachers, too, have evolved and are far more comfortable with online engagement. I know a few teachers who have resigned from their offline, full-time jobs and have decided to earn their entire living through online teaching. There’s a lifestyle shift occurring.
Lastly, this whole question of what is more effective. As it is, we know that only a small percentage of students is selfmotivated; the rest have to be pushed by parents or teachers, or both. This is not going to change with online. The bigger worry is for students who don’t have access to online learning and will be left behind, a fairly large cohort both in India and globally. There’s a lot of trial and error going on. But overall, online learning has been more impactful than people imagined.
What about the frenzy in companies targeting the top of the pyramid? Is there a method to this madness?
Now everyone is looking at being the “largest school in the sky in the world”. That is the ambition of companies like Byju’s, most of whom have global plans. Companies in our portfolio (Kaizen Equity has raised two funds amounting to $150 million invested in 16 companies, besides a small debt fund, in India and Asia) are also undergoing consolidation and some announcements are expected soon.
The valuations you are seeing right now are a reflection of future possibilities and expectations. For instance, Byju’s valuation can only be justified today by how investors perceive their future ability to dominate the market and their global ambitions.
In your view, does the Aakash buy makes sense for Byju’s?
Yes, the Aakash acquisition makes sense because while Byju’s created a big brand name, the cost of acquiring a student is pretty high for it — anywhere between $120 and $250 per student (other companies in the space have similar numbers). The cost of acquisition of a new student for a test prep network like Aakash is likely to be far lower. Byju’s will have a strategic advantage now as it acquires many more users at a lower cost and puts its name on it.
The two companies it has or is acquiring — Whitehat Jr and Aakash — present real value to it. It gains a new product to sell to its existing customers and acquire new customers through the purchase. Whitehat Jr has also given Byju’s deeper access to the US market. Any weaknesses Byju’s perceives in its own platform can be plugged by similar acquisitions.
Are we seeing a repeat of the earlier Educomp and other edtech start-ups, which were chased by investors but subsequently failed?
History has told us that we find a way to mess things up every once in a while, and I have no doubt only a few winners will emerge from this as well. But from an investor point of view, edtech is the darling of the day and the money flowing in is understandable. Investors have not seen students giving up on learning even as they give up on many other things (social life, eating out, entertainment, sports and so on due to the lockdown), and they perceive this to be a longterm shift. It’s like a brain rewiring is happening.