Eruditus learns to grow
How the 11-year-old start-up has carved a distinct niche for itself in the ed-tech landscape
Earlier this month, Eruditus — commonly mistaken for Emeritus, one of its brands — shot ahead of many of its rivals across the globe in value when it raised $650 million ($430 million primary and $220 million secondary), taking its valuation to $3.2 billion.
Ever since Covid-19 gripped the world, investor interest in ed-tech has risen to stratospheric levels globally. Raising a large round of funds is one of the few things that Eruditus has done that puts it in the same bracket as many other players in the space. Otherwise, Ashwin Damera, 43, and cofounder Chaitanya Kalipatnapu, 40, have been doing very different things, and also doing them differently from anyone else in the industry.
After Damera sold his first start-up Travelguru to Travelocity back in 2008-09 at a price much lower than it was commanding before the 2008 financial crisis, he decided to get into sectors that were less susceptible to economic shocks such as healthcare and education. Education resonated after he finished his degree at Harvard Business School, and some financial support from his peers set him off on this path.
Even as Damera was mulling his options, he met Kalipatnapu, who had studied and then worked at INSEAD, a private management school near Paris. With home markets saturating, INSEAD was keen to increase its engagement with India. The duo put together a customised part-online, part-campus INSEAD certificate course at a fraction of the cost of the regular MBA (~20 lakh versus ~1 crore-plus) and offered students INSEAD alumni status. The programme got 55 students in its first cohort in August 2010, exceeding all expectations.
This programme got noticed by Wharton, which started a similar programme in 2011 with Eruditus. In the next few years, the Mumbai-based ed-tech started offering courses with MIT, Columbia Business School, Kellogg and the Harvard Business School. Each programme had around 50 students, was priced 60-70 per cent lower than the equivalent on-campus course and offered certificates and alumni status. By 2015 or so, Eruditus’ revenue was $7 million.
But two things struck the founders. One, the model they had in place could scale up only so much. “It was fun to be teaching 50 students in a class and offering them access to the best in the business but we were not changing the world,” Damera explained. Moreover, their students wanted a broader mix of peers. Although Eruditus had opened offices in Singapore and Dubai, most students taking their courses were Indian.
Damera and his co-founder were convinced that the “lonely” experience of Massive Online Open Courses (MOOC) such as Coursera and edx didn’t work and that students needed a peer set to stay the course. So they introduced SPOCS (small private online courses) that allowed more interaction. SPOCS was pitched through a subbrand called Emeritus to their existing schools in 2015 — MIT, Columbia, Wharton, Dartmouth, INSEAD — and three of them came on board.
Simultaneously, the founders also realised that they had never thought of the business as a global one; it had been Indiafocused till then. This was a pivotal moment. At the time, Eruditus had around 30 employees, five or six partner schools and had not raised much capital. In their view, the moment a start-up enters the market to raise capital, many me-toos come in, reducing the business to a game of who raises more capital rather than building a highquality institution. “We always wanted to remain under the radar and do our thing quietly,” says Damera.
But once the company acquired its global ambitions, it could no longer afford to not raise capital. In 2015-16, the company spoke to nearly 20 venture capital funds, all of which refused funding since Eruditus had been in existence for almost five years and not raised any funding.
In 2017, Bertelsmann, which had earlier said no, raised a term sheet for $8 million and Eruditus’ founders decided to go for it since the former is more a balance sheet investor with a longer term focus than a fund. Bertelsmann was also very global in its DNA and since Eruditus was now thinking global, it saw a good fit.
Till January 2020, the company had raised around $60 million and had investors such as Sequoia. The online business accounted for almost 80 per cent of revenues and classroom learning the rest, a circumstance that, Damera said, was sheer luck, otherwise they would have been “toast in the pandemic”. Also, the company had opened offices in Mexico City, San Francisco, Boston, Shanghai and was offering courses in Portuguese, Spanish and Mandarin. The business had grown to about $90 million pre-pandemic.
It was in 2020 with the pandemic that things took off. The year ended with a revenue of $170 million and this year (end July) the company will touch a revenue of $450500 million with 15-20 per cent accruing from India. Three months ago, Eruditus acquired id Tech, a Us-based company, for $200 million, which allows it to add to what it believes is its core competency: “skills for the future”. Seventy per cent of Eruditus’ offerings are in the future skills space — data science, Python, machine learning, cryptocurrency and so on; 30 per cent is leadership, finance, management and more traditional courses.
Many rivals have jumped in — upgrad, Great Learning, Simplilearn, for instance — but several are working with less well-known American universities. In terms of range, breadth and brand names, Eruditus leads this pack, working with 500 universities and 300 courses. Rivals and industry observers argue that the company may face long-term profitability issues as its revenue share with university partners is quite high.
For now, though, investors are in. In the past 12 months, it has touched around 100,000 students and the aim is to get it up to a million, ideally scattered all over the globe with personalised learning and 8590 per cent completion rates. With its latest fundraise, the founders are working towards building a global company headquartered and led out of India. That’s when the whole effort will be truly worth it for Damera and Kalipatnapu.
Last year ended with a revenue of $170 million and this year (end July) the company will touch a revenue of $450-500 million with 15-20 per cent accruing from India