Gaja Capital Bets $25 Mn On Edtech Company Educational Initiatives

Mumbai-based mid-market private equity firm Gaja Capital has invested $25 Mn in Ahmedabad-headquartered edtech company Educational Initiatives from its third fund— $240 Mn Gaja III.

Educational Initiatives is expected to use the funding to further build its technology platforms, expand its product portfolio, and enter new markets, including the US.

Founded in 2001 by Srini Raghavan, Sridhar Rajagopalan, Sudhir Ghodke, and Venkat Krishnan, Educational Initiatives is an education research and assessments company. The company has been popular for its K-12 assessments and adaptive learning offerings in India.

Its flagship school assessment, ASSET, is suggested to be taken by more than 380K students each year in India and overseas. Another flagship learning product, Mindspark, is a computer-based, adaptive learning solution widely used by teachers and parents to help students learn Mathematics and English.

Educational Initiatives claims to have worked with more than 3,000 schools and 14 Mn students to improve their learning outcomes.

Gopal Jain, managing partner of Gaja Capital, confirmed the investment to ET but did not share details of the investment. He said, “Education is core to our investment strategy and we are long-term believers in the K-12 opportunity in India. Education is poised for its ‘cure moment’. The answer to improved learning outcomes is more a Google Maps of education than an Amazon or Netflix approach.”

An ET report cited people familiar with the development as saying that the deal, which was closed in the last few days, is a mix of primary and secondary components.

Gaja Capital will reportedly pick up a significant minority stake in the company. However, it is not clear whether the existing investors of Educational Initiatives — Footprint Ventures, IFMR, and Novak Biddle Venture Partners — will continue to hold their stakes, reduce them, or exit the company.

Equirus Capital acted as the sole financial advisor to Educational Initiatives for the transaction.

Ajit Deshmukh, Head of Investment Banking, Equirus Capital, said “EI with its in-depth research capabilities has done remarkable work in the area of tech-enabled education assessment and adaptive learning space. As Gaja brings in its vast experience in the education sector, the partnership will help EI achieve greater heights not only in India but also in the global arena.”

Gaja Capital has been focusing on education, financial services, consumer and healthcare sectors. This year itself, the company has marked two strong exits from its $180 Mn Gaja II fund — TeamLease and RBL Bank — in April and June, respectively.

It manages assets worth about $500 Mn across its three investment vehicles. The company has already invested in Chumbak, SportzVillage, EuroKids and CL Educate.

Edtech Space In India

The edtech space in India is getting increasingly competitive and has big players such as BYJU’S, Toppr, NeoStencil, Unacademy, and Englishleap, among others.

ByJU’S gained the status of a unicorn recently when a funding infusion — including one from China’s Tencent and BCCL — valued the startup at $1 Bn (INR 6,505 Cr), according to its company filings with the ministry of corporate affairs.

Also, Bengaluru-based edtech startup Unacademy raised $21 Mn in Series C funding from Sequoia India, SAIF Partners, and Nexus Venture Partners.

According to a report by Google and KPMG of May 2017, the edtech market is expected to have a significant impact on the online education sector, which has a potential to touch $1.96 Bn by 2021 from $247 Mn at present.

With an eye on this potential market, edtech startups are making their presence felt in the $100 Bn Indian education sector, according to the IBEF.

In 2017, edtech witnessed a 30% hike in terms of investments with international funding touching a new record of $9.52 Bn.

With Gaja Capital’s bet on Educational Initiatives, the edtech company can look at its next phase of growth in this hot sector.