New innovative edtech startups likely to bloom amid pandemic: Experts

Also, with offline schools and colleges opening up, learning will now evolve to a more nuanced blended delivery model with a mix of online and offline

The edtech sector has been witnessing consolidation like mergers and acquisitions led by top companies such as Byju’s, Simplilearn, Unacademy, upGrad and Vedantu over the last 12 months amid the pandemic,according to industry experts and edtech founders.They said the sector is expected to see a lot of younger companies emerging in the space and the market pivoting to foster innovation across all micro levels.

“As the larger companies in this space are considering opportunities to inorganically grow market share, they will continue investing in developing their own delivery channels and platforms to expand across geographies and enter into adjacent and associated markets,” said Phalgun Kompalli, co-founder of edtech firm upGrad. “In my opinion, capital inflows will chase the existing winners to invest heavily in platform development and global expansion. I also expect to see increased international partnerships and associations over the next 12-24 months.”

Last year in November, Ronnie Screwvala-led edtech unicorn upGrad initiated a merger of its entities, to create one main company in India, to drive its vision for an integrated strategy. Upon the consolidation of the subsidiaries, upGrad became an integrated higher edtech global player, offering short-form courses, campus programmes and government test preparation courses. Last year in December, upGrad entered into an exclusive agreement to acquire Talentedge (Arrina Education Services, the Holding Company of Talentedge Education Ventures Private Limited), one of India's largest online higher education companies. This was one of the largest consolidations in the Indian Higher education space, in a deal pegged at Rs 400-500 crore in size. Last year, upGrad  also acquired video-enabled learning solutions platform Impartus and committed over Rs 150 crore for the buyout and for investing in its growth.

Online has also been the primary mode of education delivery during the pandemic induced lockdowns.With offline schools and colleges opening up, learning will now evolve to a more nuanced blended delivery model with a mix of online and offline. Industry experts said the strategy for both small and large edtech firms should be to focus on creating the right infrastructure and tools to offer learners and institutions the flexibility to seamlessly move between online and offline modes of delivery. “The option of choosing a '100% online' or a '100% offline' as the two extremes should also be made available for both learners and institutions, depending on their needs,” said Kompalli of upGrad.

This year, Byju’s, the leading edtech company, said it will invest upwards of $200 million to open brick and morter tuition centres in the next 12-18 months. With positive feedback from the first 80 centres launched as part of the pilot programme since December, the company has decided to launch 500 centres in 200 cities this year.Mrinal Mohit, chief operating officer of Byju’s had said the tuition centres will combine digital with physical as the classes will have two teachers – one present in the class and another who will instruct through a screen in the classroom. Mohit had said the tuition classes will be available for students from classes IV to X and carry an average price tag of Rs 3,000- 3,500 per month. The company expects to enroll over 1 million students in its tuition centres over the next two years, with a batch size of 25 students in each class.

“None of the edtech businesses are alternatives to schools. So I don’t see this (opening of offline schools) impacting their business. Infact,  it may help them,” said Krishna Kumar, founder and CEO, Simplilearn. “Many parents were concerned about too much online time being spent in front of the monitor. Offline school will reduce that.”

Last year, private equity giant Blackstone invested $250 million in Simplilearn, which is a leading online learning ‘bootcamp’ based in India offering digital skills training and courses to working professionals all over the world.

Vaibhav Tamrakar, senior vice president, PGA Labs, a business research and market intelligence firm, said as a vertical, edtech in India has seen the largest number of deals with 31 acquisitions in 2021 – second only to the house-of-brands e-commerce roll-up business models.Tamrakar said with a large amount of money spent on marketing and promotions edtech startups collectively have reached to the total addressable audience already at least once. “In this context where net-new customer acquisition is difficult and expensive, market leaders are consolidating diverse offerings in an attempt to create an integrated learning experience on a single platform across the student learning lifecycle,” said Tamrakar. “We expect this trend to continue and further blur the boundaries between edTech (online) and education (offline) models into a more hybrid learning experience for the student.”

Last year India got three new edtech unicorns, or startups with valuations of at least $1 billion. These included Vedantu, Eruditus and upGrad, taking the total number of edtech unicorns in the country to five. These startups have cumulatively acquired 21 companies in 2021, spending a total of about $3 billion, according to the sources.  

According to the analysts, edtech startups raised about $4.7 billion in 2021, making the space,  third most funded Indian startup category, only behind e-commerce ($10.7 billion) and fintech ($8 billion).

This trend is continuing. Early this year, edtech startup LEAD  raised $100 million to enter the unicorn club at a $1.1 bn valuation.Smita Deorah, co-founder of LEAD had said that a child spends 6 hours in school and only 1 hour in tuition classes. Deorah had said that transforming schools, when done right, has massive potential to alter the country’s future and LEAD, with its integrated school system, has broken new ground in this direction.

However experts said that edtech is still a very nascent market with a lot of room for innovation and significant headroom for increased access, across the country.

“But, just replicating an already existing solution, business model or product will not really cut it to maintain competitive advantage. Edtech has been a very competitive market, especially when taking into account customer acquisition,” said Kompalli, upGrad. “Therefore, if you do not introduce a differentiated innovative offering which delivers concrete outcomes for learners, it will be difficult to sustain the acquisition costs and unit economics in the long run.”

Analysts also said that scaled edtech startups are not optional but the need of the country. Tamrakar of PGA Labs said players with strong value propositions that truly uplift and upgrade the student experience will continue to scale even when traditional schools start opening up. “While monetization continues to be one of the major challenges, especially for long-duration, large-ticket size programs, at the same time, we are seeing early signs of adoption and spending in micro-courses and short-term programs that are focussed towards upskilling and employability,” said Tamrakar.