With The Largest Share Of Funding, Test Prep Startups Leading The Edtech Charge In India

The first wave of digital education in India started roughly two decades ago with the adoption of smartboards in classrooms. While initially, the revolution inclined towards the SaaS or B2B segment, by 2010-11, the growth of startups such as BYJU’S, Toppr, Meritnation, Simplilearn among others in India changed the way education was perceived in the country.

Education that was once limited to classrooms and notebooks is now open to new dimensions. Today, the edtech industry is primarily catering to five core subsectors including test preparation, online certification, skill development, online discovery, and STEAM kit and enterprise solutions.

While skill development might be considered the future and need of the hour, in the present scenario test preparation and online certification startups are holding the majority market share. According to DataLabs By Inc42’s The Future Of India’s $2 Bn Edtech Opportunity Report 2020, capital inflows into the test preparation and online certification segments are comparatively higher. Together, these two make up for 88% of the total funding in edtech startups.

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Online Test Preparation Segment: Key Trends Highlighted

Test prep startups earned a quarter of all funding in edtech sector in 2019. Together, K-12 and test preparation combined will make 66% ($1.3 Bn) of the total online education market size in 2021, as per DataLabs analysis.

Here are the other highlights from the edtech sector from the point of view of test prep startups:

• Rising Deal Count: In 2019, deal count in skill development startups made just 4% of the total funding deals the same year compared to 24% of test preparation
• Funding Share Domination: Between 2014 to 2019, the average share of test preparation startups to the total funding amount and the deal count was 69% and 25% respectively
• Rising Market Share: The average annual share of test preparation startups between 2014 to 2019 was 25% compared to 18% of skill development
• Capital Inflow Skewed: Out of the total $1.8 Bn poured in edtech startups (between 2014 – 2019), $1.4 Bn was invested in test preparation startups

The Burgeoning Opportunity In Test Prep

Considering that more than 15 Mn students in India prepare for competitive exams, there is a vast market for online test preparation startups. The reach of internet in Tier 2 and Tier 3 towns has increased scope for students to prepare for multiple entrance exams after K12 and graduation. The adoption of vernacular languages by edtech startups is another reason for the rising popularity of online test preparation segment in India.

“Only 10% of India’s population can speak English. To build large businesses that can capture greater value, incorporating vernacular learning is key,” said Sajith Pai, Director Blume Ventures.

Edtech startups today run on lower costs and bandwidth and are more technology-driven compared to traditional brick-and-mortar coaching centres. Many brick-and-mortar coaching institutes too are offering app- and web-based solutions in addition to core services to increase their online footprint. The presence of large tech companies such as Amazon India (JEE Ready app) in this area validates the innovation and developments in the test prep segment.

Further, as highlighted by Blume Ventures’ Pai, college admissions and employability are becoming highly competitive and thus big stress points for parents and students. Thus, education platforms that can create FOMO among students (or parents) either by having a large number of students on board or by having the best students onboard, attract more customer adoption faster.

As per DataLabs analysis, test prep and K-12 edtech startups combined are estimated to be worth $1.3 Bn by 2021, which means that the Indian edtech market will not be seeing any major changes in terms of the hottest sectors. More such predictions can be found in the latest report released by DataLabs — The Future Of India’s $2 Bn Edtech Opportunity Report 2020.

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