Covid-19 opens a new chapter of investment in edtech start-up space

The sector has seen eight investments alone in April from VCs and angel investors

Even as the start-up ecosystem is reeling under job losses, pay cuts and furloughs due to the Covid-19 outbreak, the pandemic has opened a new chapter for the edtech segment, prompting many of them to raise funds to support their expansion plans. During the past one month, over half a dozen of them have gone for funding rounds as the demand for their services peaks during the lockdown period, with schools and colleges remaining shut. 

“Those VCs who have missed out on the fast-growing edtech start-ups have got interested in this space and we have already got 2-3 such enquiries,” says Sajith Pai, Director at Blume Ventures, an early-stage venture capital firm, which has invested in four edtech start-ups including Unacademy, Classplus, Leverage Edu and Mastree, an AI-powered one-to-few online learning play. The Bengaluru-based VC said it may invest in one more firm if it finds something truly differentiated.

Pai says, the Covid-19 event has proved to be a time machine for edtech start-ups, especially those who are making a pure digital play, and has catapulted them 2-3 years into the future while increasing their customer base by at least 50 per cent. “What e-commerce is to China, education will be to India,” he adds.

The Covid situation has clearly added new tailwinds to the sector with consumer preferences changing rapidly. “Education was already at an inflection point even pre-Covid and we had accelerated our investments in edtech last year with six investments in the past 12 months,” said Rajat Agarwal, Director at Matrix India. “We expect this fundamental shift towards technology adoption will sustain beyond the trial phase and edtech start-ups will see demand and supply attain a new normal post Covid. Hence, we continue to remain bullish on the segment and make multiple investments.” 

Another Bengaluru-based VC, Prime Venture Partners, which has bet on start-ups such as Sunstone Eduversity and Quizziz says, edtech is an area that is going to see massive tailwinds. “We are actively looking for opportunities to add to our edtech portfolio,” says Shripati Acharya, Managing Partner at Prime Venture Partners. It is a demonetisation moment for education where both teachers and students have been forced to go online, he adds.

Its portfolio company Quizizz has seen over 400 per cent increase in usage in the last few weeks. Several other edtech start-ups are reporting huge surges in their revenue and customer base. While Facebook-backed Unacademy claims to have had an 82 per cent rise in revenue in April over the previous month, Tiger Global-funded unicorn Byju’s claims it has added smillion students on its platform post Covid-19. Bengaluru-based Unacademy has seen a 150 per cent surge in registrations for its free classes and a 110 per cent rise in subscriber base, per week. 

“Given the lack of offline interactions, students have looked up to video lessons, online practice tests and studying from digitised material as the alternate method to keep their preparation on track. This has spurred strong trends across student engagement metrics. For example, consumption of online tests grew 2x within a few weeks on our platform. Teachers are conducting 50 per cent more sessions than they used to do earlier,” says Mukul Rustagi, co-founder and CEO of Classplus, aB2B startup, which recently raised $9 million in funding led by RTP Global.

Though there is an exponential rise in users opting for online classes and the market is expected to grow 83 per cent this year, a correction is expected after schools and colleges reopen.

“Data suggests when restrictions open up, 40 per cent of the users would stop using the edtech platforms. It doesn't affect paid users significantly because the surge that has happened is primarily because of free users. Paid users have locked in with multi-year subscriptions,” said a spokesperson of Redseer.

Great Learning, which over the past couple of weeks, has witnessed a 3x increase in content consumption across it platform however says retention won’t be a concern for them as their course completion rates are consistent at 90 per cent.  

“Our registrations have grown three-fold in the last few weeks. We have witnessed maximum demand for programmes like Python for Machine Learning followed by Introduction to Neural Networks and Deep Learning and Digital Marketing courses,” said Hari Krishnan Nair, co-founder, Great Learning.

Growth expected in 2020: 83%

User-base growth

Before Covid: 49% 

During Covid: 100%

Edtech is expected to reach $3.5 billion by 2022, from the current $0.7 billion 

Source: Redseer, Note: Data for K12

VC Investments in Edtech Start-ups (April 2020)

Company  Investors Amount ($ mn)

Classplus 

Spiral Ventures, Strive VC, RTP Global, Blume Ventures, Sequoia Capital India, Others 10

Lido Learning 

BAce Capital, Picus Capital  8 Camp K12  SAIF, Matrix Partners India  4 Pentester Academy  Sequoia Capital India*  N.A

*Surge Program; Source: Venture Intelligence

Angel Investments in Edtech Startups (April 2020)

Company  Investors Pedagogy   IP Ventures, Abhinav Singhvi Qin1   Venture Catalysts Angels, Ankit Bhati, Mitesh Shah, Sundeep Sahni

Pariksha  

Gautam Khanna, INSEAD Angels Asia, Gurinder Ratra, Venture Catalysts Angels, Sitanshu Shah, Deepa Bhatia, Saahil Bhatia, Sheetal Birla, Swati Mehra, Akshat Birla, IIT Kanpur Angels, Ameya Chandavarkar, Nikhil Vora SoME  Uday Singh

Source: Venture Intelligence