The Business Year Special Report
Classroom Disruption
• Focus: Edtech & VCs
❱ A CONCATENATION of factors explain the rise and rise of India’s edtech universe. Notable is the high premium traditionally given to education—especially science, technology, engineering, art and math (STEAM). India also has the world’s largest young population with over 50% under the age of 25—that’s 600 million people. And meanwhile, the rising availability of high-speed internet connection with all of the above compounded by social impact of COVID-19 has sparked an educational quantum leap for India. The new-now, and future is edtech.
NUMBERS TO LEARN FROM
The effects of COVID are patently obvious by now. And while Zoom has largely been the way to go for much of remote learning, many families are investigating alternative and supplementary educational routes. Sector data puts India’s total education spend at close to USD120 billion, spanning pre-school, primary, secondary and higher education, but also supplementary education. And from this already impressive base, with a 14% Compounded Annual Growth Rate over FY20-25 the education market is poised for no less than a doubling to USD225 billion by FY25. In the digital education arena global EdTech venture capital—at just USD500 million in 2010—reached a vertiginous USD16.1 billion in 2020, having soared 32x over the period.
The government, too, has kept pace with the pandemic, emphasizing the digitization of education and training in its National Education Policy (NEP) 2020. With familiar curricula redrawn, this is a policy responsive to tomorrow’s economic realities. And now India’s pupils, students, and indeed adults getting on the job training do so remotely with a plethora of advantages ranging from greater individual attention to personalization of content material.
NOTHING VENTURED NOTHING GAINED
2020, a paradigm shift, proved to be the year of the epic deal for edtech, namely of contracts worth between USD100 million and one billion plus. China accounted for over half of the so-called ‘unicorns’ deals, but India has not been remiss in striking while the iron is hot. Among the roughly 1,500 edtech VC deals inked globally in 2020, Workforce (Vocational, Corporate Training and Professional UpSkilling) accounted for almost half and K12 almost one-third. The dominant position of the former group perfectly illustrates the altered nature of the working world that many argue to be the new normal for much of employment.
Aside from the earlier global edtech giants of China and the US we note the ascendency of the third digital behemoth, India. In fact, unsurprisingly, Asia accounts for almost 80% of global VC dollars invested in edtech amid universal growth. For the past five years, India’s edtech investments have orbited between USD200 million and USD800 million, having scaled the USD2 billion mark in 2020.
India boasts over 4,450 EdTech start-ups in a sector awash with investments of USD2.22 billion mark in 2020 (USD553 million in 2019), by local Private Equity and Venture Capital Association and PGA Lab data.
CAPITAL THINKING
According to research of Indian Private Equity & Venture Capital Association (IVCA), Indian online education platforms mopped up USD4 billion in the 2016-2020 period. By size, the lion’s share went to businesses catering to K-12 education and Test Preparation (USD1.98 billion). They were trailed by Continued Learning (USD142 million), Higher Education (USD84 million), Pre-K (USD12 million) and B2B EdTech firms (USD7 million).
As of January 3, 2021, the world is home to 19 EdTech "Unicorns"— valued at over USD1 billion. These have collectively raised over USD13.7 billion in funding over a single decade. Their collective value is north of USD64 billion. Two of these mythical beasts, Unacademy and By-Ju’s, are Indian, the former being India’s preeminent learning platform. In terms of funding Byju's and Unacademy have hoovered up the greatest amount over venture capital the past five years, respectively at USD2.32 billion—it has a company valuation of USD12 billion, and USD354 million—with a valuation of USD2 billion.
DataLabs research identifies Blume Ventures as the most vibrant VC in the Indian edtech arena of recent years, with 11 deals in 2019. Sequoia Capital and Omidyar Network made up the top three with their respective nine deals apiece. More recently, local edtech exemplar Udayy in January raised USD2.5 million in a seed funding round. It delivers mathematics and English training to the six-11-year-old group in an interactive classroom setting of three to five children—remarkable when compared to bricks and mortar schooling opportunities. It duly boasts of a close to 100% retention rate.
In conclusion let’s consider an old adage that springs to cautious minds when markets inflate. What goes up, must surely go down. Cue sound of popping bubble. But is that close to being the case for India’s edtech market? The demographics plus the extraordinary flexibility afforded by remote learning say no. Indeed, growth seems assured for years to come as affordability kicks in, and with game changers such as AI and VR continuing to shrink geography creatively.