India’s Edtech Landscape
All you need to know about India’s booming Edtech sector and the dismal education sector.
In the year 2020, we’ve seen Edtech go huge within and outside India. As schools and colleges struggled to keep the formal education going. Students struggled to keep up with their studies. In this cocktail of uncertainties, cash-strapped households, students, and educators fixed the system with glue and bandages and kept running it.
The trend of education going remote and virtual accelerated but it left millions of students out of school. And thousands of schools on the verge of shutting their doors. Amidst this, Indian Edtech companies in Q1–21 raised a huge amount of $560.8M. Plus the two big acquisitions by BYJUs of WhiteHat Jr (at $300M) and Aakash Institute (at $1B) in 2020. Aakash Institute’s acquisition brings major offline play in the game.
Other than that, we’ve got Unacademy. While BYJUs hands and legs are in a lot of places. Unacademy does one thing well, that is live online classes. They have a pure-play tech product against the army of sales culture BYJUs. Reliance Industries entered this segment with their $180M investment in Embibe. The other big players are Upgrad, Vedantu, ClassPlus, Toppr, etc, and of course Microsoft, Google, and Zoom’s infrastructure that’s there. Everyone’s competing for India’s Edtech market.
In this blog, I’ll talk about what makes Edtech so lucrative in India, some numbers, categories of products/startups, market conditions, and the journey of a student. And try to derive a few takeaways on where’s the scope of innovation and competition for new startups and ideas in this segment.
World’s Biggest Student Population
India has 325 million+ students, the highest in any country in the world. Among these, students in the age range of 0–4 are 10 million+ and 3.5 million+ are above 30 years old. Everyone else is in between. Schools, Colleges, Post Grads, and Others. Surprisingly, given India’s second rank in the most populated country, we have a bigger student population in comparison to China. These numbers are among one (and a major) factor that says India’s market is huge by all means.
These students need access to books, mobile phones, the Internet, teachers, infrastructure that supports their studies, money, jobs, gadgets, and a lot more. These young students also influence the expense their parents make. They have deep networks in their schools, colleges, and hometowns. And with a poor welfare infrastructure, students have their minds made up on investing time and money in building their careers.
The other factor that fuels optimism and growth is the comparatively higher (and growing) GDP per capita from the past. The families who’ve first-hand experienced their incomes rise highly credit it to formal education and jobs. Parents with their kids in the age range of 5 to 25 were born in the 60s, 70s, and 80s. And anyone can tell why they are ready to spend huge for their’s children’s education. Not tech-savvy and prone to FOMO, they go all-in on the first and second movers in the Edtech with a highly promising value proposition.
But most students during or after their college become aware and smart enough to consider factors on which they should judge a product and offerings in the market. And as we move up the age of students, we get to see products targeted to them with better experience and value. People studying to get jobs or upskill to grow in their professional careers are also ready and capable of spending more. Thus, we see products with higher ticket sizes. The opportunities for Edtech startups lie in all demographics.
But Not All Students Can Afford Education
The default rate in education loans is the highest in the retail segment. The outstanding loans, as of November 2019, fell to Rs 66,902 crore compared with Rs 71,975 crore in September 2017. This is directly linked with the economy and job.
With unemployment at a 45-year high and the economy slowing every passing quarter, NPAs from this segment are likely to rise further.
Journey of Students + Their Interaction With Tech At Each Stage
The journey of a student in India depends majorly on the financial health of their families. Sajith Pai’s categorization of Indian consumer space into India 1A, India 1, 2, and 3 based on per capita income can give us an idea of what a journey of students from each segment will be like. But that is not all, we do hear the stories of people who did great coming from various backgrounds. And that’s been the story of new emerging India. But for now, we’ll focus on an average journey and not an outlier event.
Pre-school or nursery:
The majority of pre-schools are condensed in the metro cities. The concept of nursery and pre-school is new to rural and tier-3 India. Mostly, working parents and well-educated parents prefer these for their kids. At this stage, tech plays no role in the lives of the kid. But as Edtech is looking for a newer target group with new offerings, they are coming after this segment. YouTube for Kids, BYJUs partnership with Disney for kids content, products targeted to parents, SaaS products to manage pre-schools, and DIY Kits for parents, etc can be seen in this space.
In India 3, kids go to Anganwadi. Anganwadi is a type of rural child care center. Nowadays, the state and the central government have launched their apps to communicate with Anganwadi workers. But this segment is completely untouched by tech.
School
In India 3, students go to government schools for lower primary and upper primary education. From class 1 to class 8.
These are the kids of farmers, daily wage workers, and people with blue-collar jobs. These schools lack infrastructure, teachers, and capital. Parents can’t afford anything else. And so it runs. Indian government’s policy of not to fail students till class 8 keeps them in the count of the literate population but away from all the opportunities. These students are slowly getting access to mobile phones. And tech plays no role here.
Private schools in tier-2 (India 2) and especially in tier-1 (India 1 and 1A) are cash cows. Government schools in these regions play catchup. But across the country, it is common knowledge that private schools are better. I remember how Educomp (now bankrupt) partnered with the School I was in and we were excited to see huge screens in our classrooms. Educomp was on a roll and was doing well (so it seems from the outside).
For students in India, preparation at each phase of the journey to get to the next stage plays a major role. Students now use Google and YouTube to copy assignments and find answers to their questions. They enroll in offline coaching classes to prepare for the Navodaya entrance exam, board exams, JEE, NEET, and various state-level exams. Big Edtech startups in India are after these students and pitch them a better learning experience. This is a very crucial state and students go the extra mile to prepare the best and secure a seat in a good college or school. In India, scoring higher percentages in the class is also a thing of pride for the parents. They are likely to make expenses on education without even consulting their children.
Diploma or Graduation
Now that students have done their hard work and spent money to get into a college (medical, engineering, Art, Humanities, etc.), they have some time to relax. And students take relaxation very seriously.
Students from top engineering colleges like IITs, NITs, IIITs, and some prestigious private colleges get good placements. Others struggle from here onwards. According to a report, 80% of Engineers in India are unemployable. And they need assistance from upskilling programs to secure a job. The same applies to the students who are into arts, humanities, commerce, and medical. As per the government’s all India survey (2016–18), the highest number of students were in the BA program, with B.Sc and B.com on 2nd and 3rd. India has a shortage of doctors with 0.8 to 1.3 doctors per 1000 of population. The current infrastructure does not produce enough healthcare professionals. Here’s a gap that can be filled.
College students also go for coaching classes to prepare for GATE, CAT, and other exams to qualify higher-level entrance exams.
Post Graduation
Only ~13% of graduates go to post-graduation (masters). This could be for various reasons. One, students want to quickly get into a job and start earning. Poor financial condition to afford higher studies. Or lack of awareness and resources. But those who go higher studies within or outside India are looking to spend $25k to $50k in two years. Their capacity to spend more on education makes them an ideal TG for high ticket Edtech products belonging to preparation for Jobs, tools that help with research, etc.
Doctorate
Very few reach this stage. It takes passion and determination to go for Ph.D. program. People in any background at this stage use multiple tools and platforms that help them with research, collaboration, and learning.
Upskilling for Jobs
I kept this too in the list because students at any stage of their journey can voluntarily or due to circumstances slip out. And start looking for jobs. Not only students, but the working professionals also need to continuously learn new things to relevant and grow in the Industry.
Categorization of Edtech Products
There are two ways to categories them, the TG/problem specific segment and the product-specific segment. In the above infographic, the categorization is problem/TG specific. Looking from that lens, we see Class 1 to 12 education, Test Prep, tech learning, apps for kids, portals, and Finance. But since I am a product person, I’d like to broadly categorize them into marketplaces, SaaS, and niche Learning platforms.
Marketplaces
Edtech marketplaces have globally proven success with Udemy, Coursera, Skillshare, etc. These platforms provide individuals with the tools to host online courses and manage the community of their students. Marketplaces gravitate towards becoming broad learning platforms. Where millions of users (students) can find all kinds of courses.
Edtech Marketplaces that have become globally huge keep attracting the demand size with their infinite content catalog. And are also lucrative for educators because of the demand and user base they command. But all-purpose marketplaces come with limitations too, like native content competing with others, lack of quality control on educators, and rigid pricing models.
Niche Upskilling/Marketplaces
Second, comes the platform that focuses on a particular niche. It could be programming, design, learning languages, or specific career path (like product management, UI/UX designer), etc. The niche platforms can either be crowdsourced (marketplaces) that are open for all educators. Or companies run them with native content operations for quality control. In these two cases, the value proposition of the platform changes. For a niche marketplace, the value proposition is narrowed TG on the demand and supply-side which allows them to build specific tools for those students. For content-driven niche learning platforms, the course structure is their key value for which they can charge a premium.
We’ve recently started seeing more niche upskilling platforms which drive their own content. This is primarily for quality control and to give them leverage on the pricing model (Masterclass, MindValley, are examples of that).
SaaS Platforms
Self-serve softwares that make schools, colleges, and individuals more productive and bring their usual work online is the 3d category. Platforms that bring schools and offline teaching setup online within minutes. And allow them to manage students, tech online, share resources, conduct tests, send results, communicate with parents, collect fees, hire teachers, train teachers, payroll management, etc.
The problems and opportunities in this domain are endless. We’ve seen a few startups helping schools go online and take all their processes remote in the last year. Then some platforms that help in doing live classes, Zoom and Google Meet are ruling this segment. But that won’t stay for long as powerful Edtech startups build their own live streaming for cost-cutting and more control over features.
Students, academics, parents, and administration who go through the hassle of broken online education platforms can list hundreds of problems they face. Also, for some product’s purpose might not end as the students graduate. Form their starts the alumni network, collecting donations, managing online presence, etc. SaaS in Edtech doesn’t have a natural network effect. And given the high number of schools and colleges, there’s an opportunity for lots of products in this category.
Tech-Enabling Schools, Colleges, Teachers, and Students
Then come the products and apps that help their users achieve a certain task. It could be: doubt solving platforms, aggregators of schools/colleges, educational gaming apps for kids, financing apps (lending), etc.
This segment also carries the apps that do one part of a bigger SaaS platform and does it seamlessly. The problem with holistic SaaS is that its big-ticket subscription plan makes way for smaller tools that do a couple of things at an affordable price. These apps could be for conducting online quizzes or exams, portals for declaring results, online attendance, etc. These tools also do not have a network effect thus making many players can exist in the same space.
Scope For New Ideas and Innovation
Education is a huge market in India and globally. And we can comfortably say that the “One Stop For All” kind of marketplaces for online courses are not saturated. Udacity, Udemy, Coursera, Skillshare, Lynda, and platforms of similar size and capital took almost a decade and more to dominate in their segment and come out on top globally and in India.
While the segment of online courses got saturated, it didn’t solve India’s unique needs and we got to see Unacademy and BYJUs building their dominance in the last 10 years. Even taking on the brick and mortar education industry by surprise. The exam prep industry for K12, entrance exams, and competitive exams for government jobs is well dominated.
Now we see a new crop of Edtech that are focused on niches, like programming, specific career paths, job oriented, and passion-driven. But these niche platforms are not going to be marketplaces. Instead, they will likely start as content-driven startups who provide better quality education and later open up the supply side with moderation. And there’s a deficit of great content in various segments, like vocational training that directly leads to employment or domain with hands-on learning approach (like medical).
The other new opportunities are for tech tools and SaaS that bring ease and efficiency in schools and colleges. And communication tools that compete with Slack and Discord-like platforms but only for the specific use case of classrooms. Conducting exams online, communicating with students and parents, getting financial support as students, and finding the right resources is still a challenge. Another huge challenge and unsolved problem are in career guidance. AI-powered platforms that assess multiple factors and help individuals in figuring out their careers. These could also start in the form of a marketplace or platforms that connect students with career experts. No space is empty and also none of these spaces are won by any players.
As the 240+ well-funded Edtech startups in India grow and innovate with their products, we’ll see new business models and solutions aimed at helping all the stakeholders in the system.
