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Why venture capital firms are flocking to education start-ups

Better bandwidth and cheaper hardware allows edutech firms to provide high-quality education to consumers

K Rajani Kanth  |  Hyderabad 

Edureka, a Bengaluru-based online education marketplace, is a bootstrapped venture started with a of Rs 1.5 crore in 2011. Edureka's steady growth has not demanded external funding so far. However, with an ambitious plan to touch Rs 100 crore in the next two years, the company might seek external funding.

Hyderabad-based start-up Edutor Technologies, which develops and markets Ignitor learning platform for tablets, is also gearing up to raise additional money to fund expansion. The five-year-old start-up had earlier raised Rs 5 crore from SRI Capital and Hyderabad Angels.


These two firms are unlikely to face any major problem to raise funds. Reason: funds are queuing up to invest in education

"Globally, the quality of education has traditionally been proportional to the quality of teachers imparting the course. With the advent of technology, that equation is being questioned. Better bandwidth and cheaper hardware allows edutech (education technology) to provide high-quality education to consumers in a democratic manner," says Rahul Chowdhri, partner at Helion Venture Partners.

Helion Venture Partners, an early to mid-stage, India-focused venture fund, has several focused on education space in its portfolio. These include online subject-learning platform for middle and high school schools Toppr.com, which recently raised $10 million led by Fidelity Growth Partners India, SAIF Partners, and Helion.

Earlier, Toppr.com had raised its first round of funding from Powai Lake Ventures led by Kashyap Deorah and Abhishek Jain. In May 2014, SAIF Partners and Helion Ventures had invested $2 million in Toppr.com.

According to Chowdhri, Helion as a fund would invest $20 million over a life of an education start-up. "The fund is looking to invest in more education that make use of technology. We expect to take advantage of trends like mobility, gamification, user-generated content and adaptive platforms. This will likely span across K5, K10, test prep, higher education and working professional space."

IDG Ventures, too, is actively looking at education and other allied areas as part of its investment strategy. The global network of funds with $3.6 billion under management has a couple of education-focused in its portfolio, including Bengaluru-based online test preparation platform SuperProfs, and iProf, a New Delhi-based tablet PC-based education content delivery company.

"Education is one of the largest markets in the country and one of the least penetrated by technology in absolute terms. The potential disruption and far-reaching impact that education can have on India's overall development has only been seen in small doses till date. As venture investors, we look at segments of education for potential investments that can be better served and leveraged via technology," says Karan Mohla, executive director, IDG Ventures.

IDG looks at disruptive models when evaluating education Mohla says the crucial aspect while evaluating is identifying those led by passionate entrepreneurs.

"Edutech are continuously finding newer solutions to make education more accessible and affordable to all. The education industry space is set to grow to $40 billion by 2017. There is huge scope for opportunities to expand. Any sector that offers an affirmative growth prospect is a definite win-win for VCs and entrepreneuers themselves," says Piyush Agrawal, co-founder and CEO of SuperProfs.com.

SuperProfs, which raised $3 million from Kalaari Capital and IDG Ventures in December 2014, is focusing on using these funds to acquire more users and offer new courses. The company will be looking to raise the next round of funding within this financial year to reach one million users.

According to Pradeep Mittal, president of Hyderabad Angels, which has also invested in education startups like ScienceAdda, the biggest factor that makes education startups attractive and lucrative for investors is execution and penetration in the industry. "Being a social sector, every member of the network is keen to invest in this sector. Though there is no time-frame defined, as we get the deals and approved by the members, we will invest," he adds.

First Published: Thu, August 27 2015. 00:21 IST
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