India’s ‘Ed-Tech’ Startups Face Opportunities – And A Few Challenges by [email protected]
Seven-year-old Rahul is not sure whether he wants to join KleverKid or not. His mother took him to one of the outlets of this “one-stop shop to find the best possible program, afterschool activity, tutor, or coach for your kid” to survey what they had on offer. “What will they teach me?” asks Rahul. “They don’t even know how to spell clever.”
KleverKid is among a spate of newly emerging companies addressing India’s primary and secondary school sector. Given the poor state of available facilities, there aren’t two ways to look at market demand. “Everyone is enamored of the large size of the market,” says T.V. Mohandas Pai, chairman of Manipal Global Education Services.
In highly populated emerging markets such as India, the real need is for primary and secondary education, or what the U.S. refers to as K-12. But most of the attention seems to be focused on higher education; even the Indian government is holding seminars on how to attract foreign students to Indian colleges. Quality pre-college education has been left to the non-governmental organizations. It doesn’t help that education has been declared a not-for-profit sector.
The statistics are disheartening. According to the latest Annual Status of Education Report (ASER) released last year, India is close to universal enrollment for the age group 6 to 14, with the percentage of children enrolled in school at 96% or above for six years in a row. That’s the good news. The bad news is that reading levels remain low: in Standard III, only a fourth of all children can read a Standard II text fluently. Math continues to be a serious and major source of concern. For example, the percentage of children in Std. II who still cannot recognize numbers up to nine has increased over time from 11.3% in 2009 to 19.5% in 2014. Notes ASER, which studies children in rural India: “Compared to similar figures in 2013, there has been an increase in private school enrollment in almost all states.”
Riding this wave, scores of entrepreneurs in India have emerged in the education space over the past few years. They have partly been spurred by the success of TutorVista, an India-based business targeting the U.S. market that was sold to Pearson for hundreds of millions of dollars. The current crop of entrepreneurs is concentrating more on the homefront. Their focus is not so much on formal schools but on adjuncts to learning.
“The total spending on education in India – both public and private – is around $150 billion. Of this, around $50 billion is in the K-12 space.” — T.V. Mohandas Pai
According to VCCEdge, a research platform for the Indian investment ecosystem, the angel, private equity and venture capital deals in the education sector rose from 27 (valued at $187 million) in 2010 to 49 ($248 million) in 2014. In 2015, there were 51 deals valued at $155 million. The largest was the $40 million invested by Sequoia and Aarin (in which Pai is a partner) in Byju’s Classes. Recently, Byju’s raised another $75 million from Sequoia and Sofina in the biggest 2016 deal in ed-tech in India.
The ticket size of the investments tend to be on the low side. Aside from Byju’s, other relatively big deals in recent years include more than $200 million from two separate deals in 2010 and 2014 by PI Opportunities Fund and Catamaran (owned by N.R. Narayana Murthy of Infosys) in Manipal, $25 million by Mayfield, Helion and Kalaari in Simplilearn, $15 million apiece in Meritnation (Info Edge), iProf (Norwest and IDG), Classteacher (Fidelity Growth) and UpGrad (serial entrepreneur Ronnie Screwvala).
A Big Market
“The education space in India presents a huge opportunity, primarily because it is largely unstructured,” says Pavan Chauhan, co-founder and managing director of Meritnation, an online learning and assessment solutions company in the K-12 segment. “India is an extremely large market for educational offerings. If we look at some stats, India has over 250 million students in schools and over 27 million students in higher education. The poor quality of education in the country coupled with the willingness among the Indian middle class to pay for a good education creates a wonderful opportunity for entrepreneurs to make an impact.”
“The total spending on education in India – both public and private – is around $150 billion,” adds Pai. “Of this, around $50 billion is in the K-12 space. There are two aspects in education. One is the regulatory aspect of running the school — curriculum, pedagogy, teachers. … The second is the process of learning.”
The learning process is a big market for startups to target, continues Pai. “Learning is getting disrupted in a huge way by technology startups. Content is being provided on a multimedia basis; tablets with preloaded contents are being sold; quizzes, tests, online tutoring, personalized tutoring, MOOCs (Massive Open Online Courses), certification courses, and all such things are being tried out.”
India — with its growing need for quality primary and secondary education, the ongoing creation of a technology-based digital nation, and the proper social environment (the Right to Education Act was passed by Parliament in 2009) — should have been a laboratory for such experimentation. But efforts to make improvements have been mixed.
“There is huge potential to use smartphones and tablets as learning devices. Technology is what brings flexibility to learning.” — Byju Raveendran
Byju’s Classes is an example of why it is so difficult to get a fix on the pre-college market. The company, which was started in 2011, entered the primary and secondary education segment in 2014. But it is not restricted to teaching kids how to go through school; it has coaching classes for competitive exams — the joint entrance examination (JEE) for the Indian Institutes of Technology (IITs), for instance.
Like many others of its ilk, Byju’s is hedging its bets. (The IIT entrance exam market is huge. Whole cities — such as Kota in the state of Rajasthan — specialize in coaching classes for the JEE. IIT aspirants spend two years plus there, studying for IIT and acquiring a school-leaving certificate from an affiliated school at the same time. The pressure is so high that every year sees several suicides.)
The pressure starts building up at a young age. The Kotas are the boarding schools of today, only they don’t believe in games or social graces. It’s a difficult choice: on the one side a substandard education (only a handful of private schools in urban areas escape that odium) and on the other, a crammer.
Says Byju’s Classes founder Byju Raveendran: “India is the largest K-12 education system in the world, but we consistently rank low in all global education assessments because of three core problems: Lack of access to good teachers; learning is not personalized — it’s a one-size-fits-all approach because of a 1:35 teacher-student ratio in India (as against 1:14 in the developed world); and, most importantly, memory-based learning driven by fear of exams rather than the love for learning.”
Driven by Technology
“There is huge potential to use smartphones and tablets as learning devices,” adds Raveendran. That, in fact, is the big difference today. The Internet, howsoever limited it is at present, has spread to the far reaches of the country. And smartphone penetration