Education-obsessed India: Do EdTech Funding continue to soar?

With the commencement of the Covid-19 pandemic in 2020, businesses worldwide were forced to use digital technologies and innovative methods of reaching out to and engaging with clients. Like all other industries, the education sector in India was hammered by Covid-induced shutdowns, only to be revolutionized in a matter of weeks by its tech-powered equivalent – the EdTech ecosystem. In India, nearly 250 million young people aged 5 to 24 are enrolled in brick-and-mortar educational institutions. EdTech businesses in India received more than $4.7 billion in 2021, and four achieved unicorn status between 2021 and 2022. In a world concerned with customer personas, it is critical to remember that kids and their parents are part of the conversion and growth cycle. According to a customer engagement platform, building a strong brand and creating client loyalty is the next obstacle.

Growth Drivers

(The influx of investors for startups, acquisitions, product upgrades, and rapidly increasing students are speeding the digital learning movement in India)

The tech business in India is predicted to reach $30 billion in the next 10 years, thanks to an increase in smartphone users and a shift to digital-learning models. The sector was already gaining traction, but with the COVID-pandemic-led lockdown, the EdTech industry has grown exponentially. Because of its expansion, the EdTech business has piqued the interest of investors all around the world. Only in 2020, the EdTech sector received $16.1 billion in venture capital funding, which was nearly 32 times higher than the $500 million received in 2010. Online education is less expensive than traditional education (school, college). Several e-learning platforms are accessible for students to get quality education at the lowest possible cost. Students from all economic levels and social classes can benefit from quality education with appealing visuals and competent lecturers because of the affordability aspect. As of February 2022, India had over 630 million active internet users. These active users represent a massive opportunity for EdTech stakeholders. Online tuition and competitive exam preparation, in particular, have the potential for rapid expansion in Tier 3/4 cities.

According to Tracxn, a startup and private company tracking tool, India has around 6,950+ EdTech startups. Startups in the education sector or EdTechs offer tech-driven human-enabled smart classroom programs and solutions, adaptive learning tools, efficient management processes, and cohesive collaborations with other stakeholders. All of these elements, together with the influx of angel investors for startups, acquisitions, product upgrades, and more players rapidly shifting and adding students, are speeding the digital learning movement in our country.

Inciting Investors

(The EdTech industry’s growth potential with rising remand and new business models is inciting investors. The sector is predicted to grow to $30 billion in the next 10 years)

The Indian EdTech business is rapidly expanding and is expected to reach angel and seed funding of $10.4 billion by 2025, with 37 million paying EdTech users. This surge, I've found, is being pushed by the growing need for non-academic courses in second and third-tier cities, as well as the EdTech industry's demand for personalization. Over the last five years, the sector has received over seed funding of $4 billion in private investment, attracting global EdTech heavyweights like Byju's, valued at $15 billion. Market leaders have also emerged, including Byju's, Unacademy, upGrad, Vedantu, and others. With a market size of $700 million to $800 million in 2021, the EdTech industry is predicted to grow to $30 billion in the next ten years, driven by rising demand and new business models.

Recognizing the enormous potential, many businesses are joining the Indian EdTech market. Exact figures vary depending on the source, but various estimates imply that there will be many startups in education businesses in India by 2022. So, when entering the industry, it's critical to demonstrate rapid growth and how you plan to compete with the major Indian EdTech firms. When meeting with investors, clarify how you intend to accomplish this.

There is nothing you can do without trust—you can't develop a good team or attract clients. So make sure to detail your company's details and develop your startup on an open and transparent foundation. For example, generate information about the product and team regularly, hold webinar sessions, discuss successful student instances, and offer free consultations to everyone. This transparency was extremely useful to long-term Asian business strategy. To attract angel investors, founders should meet them in person instead of sending emails to present the startup in great depth. They should ensure a local presence, revenue, and a growth strategy. Even if possible investors decline to invest in you, don't stop communicating. Attracting investment in the Indian market can take up to six months. The clearer founders design their procedures for angel investors in India, the stronger their positioning will be.

Focus on Adult-EdTechs

(For adults, the notion of the economy is changing, the workforce is changing, and in order to remain competitive, and relevant, they have to be reskilled and upskilled)

Adult education and upskilling firms, test software, and children's learning programmes garnered the most funding last year. One subsector that appears to be increasing is an adult online education, which includes Coursera and Udemy. Coursera has also recognized this, with CEO Jeff Maggioncalda stating in a recent earnings call with investors that skill development is a key rising trend. Governments are also looking to train public sector employees while initiating national and statewide development projects to create egalitarian workforces that generate long-term economic success. Campuses are aware that they must improve the quality of their offerings to compete with alternative credentials. And the substitution effect of a vibrant labour market pushes them to provide better employability results at a lower cost. For adults, the notion of the economy is changing, the workforce is changing, and in order to remain competitive, and relevant, they have to be reskilled and upskilled.

Future of Ed-Tech

(Startups and companies with sound business concepts will continue to thrive)

According to a Matrix analysis, customer pain points are real, and long-term EdTech models can revolutionize the Indian education system. EdTech expansion is unavoidable: there are 300 million K-12 students in India, 90 million have internet access, and all EdTech companies combined serve 5% of this consumer base (similar to early e-com days). 70-80% of India struggles to find qualified teachers at a reasonable price. The current situation is a natural adjustment following the Covid tailwind, not a crash. Startups and companies with sound business concepts continue to thrive. Building organic assets (such as YouTube videos, student tools, and communities), product innovation for ARPU expansion, offline acquisition, and brand (WOM/referrals) all require an initial investment but result in lower acquisition costs in the long run.

Offline expansion is crucial for specific consumer segments/business models since it aids in the development of trust and credibility. It may not always result in a lower acquisition cost, but it can significantly impact overall conversion. International expansion is a natural progression; ideally, a good instructor should be able to teach abroad. EdTech companies must achieve a delicate balance between product and distribution. Great businesses die without good distribution, but no great firm can be formed without a great product. The next phase of EdTech will feature products with well-defined, consistent outputs - EdTech will have its own "Indigo". To achieve this, incentives must be well aligned, and firms must constantly measure their success in terms of outcomes rather than top-line/margins.

Despite tremendous user growth in the EdTech sector, infrastructural challenges remain due to poor connectivity and low-end devices. Startups and companies, with support from key stakeholders, need to address this challenge. Addressing the demand for affordable EdTech offerings in order to increase EdTech adoption is equally important. Furthermore, EdTech businesses must develop better-optimized solutions to these difficulties. Through improved technologies and innovative solutions, EdTechs need to focus more on improving learning outcomes results and student engagement alongside their onboarding.

JC Team Capital - Jani Venture is a capital fund firm in Canada investing into the early- stage startups to get their business to take off.