India’s edtech paradigm has seen a massive shift in the past 18 months with headwinds across the industry and the widely-publicised troubles for BYJU’S. Will 2024 bring some relief?
As startups expand their offline bases to smaller cities and towns, adoption is set to be driven by students and learners from Tier 2 and Tier 3 India, as well as affordable edtech courses
Several edtech startups are leveraging AI for content, and adoption is only set to grow through 2024 as companies look to cut expensive human resource costs. But there’s a lot more that edtech investors and founders foresee for the year ahead
India’s edtech paradigm has seen a massive shift in the past 18 months, with tech-first startups turning into hybrid players. Online learning has taken a backseat as physical centres and offline coaching have come to the fore.
After the peak of VC funding in the edtech sector in 2020 and 2021, the funding winter has so far been an unsparing one for Indian edtech giants. From the record $4.8 Bn raised in 2021, startups have seen funding wither away in the edtech realm. In 2022, the tally declined to $2.4 Bn and further to $267 Mn in 2023, as per Inc42 data.
Looking ahead to 2024, the edtech story is set to take another turn.
There are a number of factors that are proving to be influential for edtech startups towards the end of 2023, and these are likely to shape the course of edtech in India in the next year.
9 Trends That Will Shape Indian Edtech In 2024
Despite the slowdown of the past year, the edtech opportunity in India is set to breach the $10 Bn mark by 2025. As startups expand their offline bases to smaller cities and towns, adoption is set to be driven by students and learners from Tier 2 and Tier 3 India.
In turn, this is set to propel the use of regional languages in edtech content and modules and introduce affordability in the sector.
Speaking of content, generative AI and machine learning are set to change the game here. Many startups have already turned to AI to generate content, and this adoption is only set to grow.
And of course, one cannot ignore the BYJU’S-sized elephant in the room. The company’s many troubles — with investors, lenders, vendors, government and employees — is set to cause some pain for other edtech startups. As one Bengaluru-based edtech unicorn cofounder told Inc42 last month, “More and more VCs are asking questions and probing founders on revenue recognition and financials because of the opacity around BYJU’s.”
Indeed, the broader problems and headwinds in online learning are likely to bring in a wave of mergers and acquisitions (M&As) in the next year, as per edtech investors and founders.
But there are segments in edtech that have remained relatively untouched by the slowdown. Higher education startups, tech certification, skill development and B2B startups (learning management systems, SaaS) are some of the brighter spots in an otherwise gloomy landscape.
This overview, however, hides many of the nuances of what we can expect for edtech in 2024. So here’s what investors, founders and analysts expect from the sector in the year ahead.
Regional Languages Come To The Fore
Affordable smartphones and low-cost data propelled online learning, but most startups focussed primarily on learning in English. As more and more edtech companies look to go deeper into the market to find their growth wings, edtech is set to go beyond metros and Tier I cities.
Tarun Saini, cofounder and CEO of Vidyakul, believes that regional language content and course modules will play an important role in further expanding reach of online learning — particularly in the context of test prep, skill development and K-12 courses.
According to the 2001 census, just over 10% of Indians declared that they speak English as a second language. While this number has very likely grown in the past two decades, the fact is that regional languages are still the most widely spoken.
If anything, English literacy is a category of edtech that has gained prominence in the past few years. So clearly, many edtech startups realise that students and learners are more comfortable in their native tongues.
“Online only has already become a passe and in 2024, we will see more companies embrace the hybrid approach to learning. Within this, edtech startups will focus on Tier 2, which means building accessible products and that means focussing on regional language content,” Saini said.
Saini added that even VCs are interested in startups focussing on regional language content, as this has the bigger potential to penetrate the market, thanks to linguistic diversity and culturally resonant learning material.
Affordability Will Become Edtech’s Siren Song
Another pain point that has become increasingly clearer over the past year has been the lack of affordable edtech courses. While the likes of Khan Academy, Josh Skills and PW (PhysicsWallah) have looked to disrupt this space, the majority of the market has gone for premium pricing.
The rationale here is that Indian families will not compromise on spending for education, but this has been called into question amid the bearish market conditions, decrease in discretionary spending and a general downturn in household expenditures.
Reaching non-English speakers in Tier 2 and 3 means also compromising on pricing to some extent. Mukul Rustagi, CEO and cofounder of Classplus, believes that the use of recorded digital content can enhance affordability and minimise expenses. Plus, the growing adoption of content automation can also contribute to reducing resource costs for companies, which could be passed on to students, learners and parents.
“Due to the affordability of recorded lessons, expenses can be minimised, leading to lower costs. Creators could record their live content and package them as courses without investing any extra time. They can also tailor their content to the language preferences of their audience,” Classplus’ Rustagi added
Many startups have also introduced scholarship programmes to reduce the pricing friction in course prices. But the real need of the hour is a platform that can offer courses at scale at affordable prices, and across segments such as test prep, skilling and K-12.
Generative AI Will Reset Edtech
There’s little doubt that 2023 was the year of generative AI, and edtech startups looking to offer affordable courses are leveraging this revolution to streamline costs — particularly people costs.
Through the use of APIs and large language models offered by the likes of OpenAI, Google (Bard+Gemini) and Facebook (LLaMa), edtech startups have begun taking baby steps in the GenAI world.
Despite its widely-publicised troubles in the year, BYJU’S has not shied away from talking about how it employs ChatGPT. In June, the beleaguered edtech giant announced the launch of BYJU’S WIZ, a suite of three artificial intelligence (AI) transformer models — BADRI, MathGPT, and TeacherGPT.
However, it’s unclear how exactly this has come into the operations at BYJU’s. In other cases, edtech startups have roped in large language models to create AI tutors.
According to Surya Mantha, managing partner of Capria Ventures, ChatGPT-like models are already being implemented by some of its portfolio companies in edtech.
“Masai processes several tens of thousands of resumes every month. The use of GenAI has brought tremendous efficiencies to the point where the admission process is almost entirely automated. Similarly, Cuemath is testing an AI-based model and a teacher co-pilot, which allows educators to give individualised attention and encourage critical thinking,” said Mantha.
Perhaps towards the end of the year, edtech startups might also dive into immersive learning with devices such as Apple Vision Pro and other mixed reality devices coming into the market.
“The integration of AI and ML will empower edtech platforms to customise educational content to individual needs, creating tailored learning paths that accommodate students with different learning styles and paces,” said Anil Nagar, founder and CEO, Adda247.
Nagar believes these formats will drive user engagement and reshape how students engage with content. This could be something edtech startups leverage to justify premium pricing, and go against the grain of affordability. But again, a lot depends on how these immersive learning environments are developed and how quickly compatible devices are adopted.
Role Of Edtech Saas To Grow Bigger
While K-12 has withered away and test prep is going through the hybrid transition, the future of learning management systems (LMS) and ERPs looks promising, according to Vidyakul’s Saini.
“SaaS products have become a part of the schooling ecosystem and are being used for attendance and maintaining the progress of students. This also helps parents track their child’s progress on their phones,” he added.
Generative AI and machine learning are also playing a role in this space. Jaideep Kewalramani, head of employability and COO at TeamLease EdTech, said that learning management systems (LMS) and edtech SaaS are moving towards AI-augmented models. The power of AI allows companies to develop personalised solutions for each school or class of institute.
AI algorithms can analyse learning patterns, rate of knowledge acquisition, create progressive learning pathways and augment the tutoring support. Hyper personalisation, where the learning environment will behave specifically to a learner’s needs, is another development that will help improve engagement.
“We can also expect some pilots that use Metaverse technologies for complex or immersive learning like engineering and history. On the business front, pricing pressures will continue forcing providers to be innovative and create models that will appeal for scale,” Kewalramani added.
In fact, we expect more and more edtech startups to leverage LMS and SaaS solutions for their own hybrid operations, instead of developing tools from scratch. This ties into the next point about M&As and the scaling back of people-led operations at edtech startups.
M&A Wave Will Take Over
Where there’s a slowdown, consolidation is not far behind. Smaller edtech startups are realising that the way out of the logjam is to enter into M&As and acquihire deals with larger operations. If PW has dominated the M&A space in edtech, the year ahead will likely see more and more players coming to the table and acquiring smaller companies.
Already, we are seeing offline giants such as Allen Career Institute acquiring distressed startups such as Doubtnut. Expect more of this in 2024.
Founders such as Adda247’s Nagar anticipate strategic collaborations and acquisitions that will allow companies to rope in talent at a lower cost than direct hiring. Plus there is the possibility that edtech startups with sound fundamentals will look to venture into new areas through acquisitions. Again, the case in point is PW, which acquired Knowledge Planet and Xylem this year.
Dipanjan Basu, cofounder and partner at consumer-focussed VC Fireside Ventures believes that edtech is already going through a consolidation phase. Profitable businesses built with omnichannel coaching models and those catering to the growing reskilling needs of individuals will be the most active players in this space.
Meanwhile, Teamlease’s Kewalramani observed that the post-Covid realignment towards hybrid models means that edtechs with pureplay online learning models could face more headwinds. Some such as FrontRow, for example, had to shut down this year.
The corporate governance misadventures in edtech (BYJU’S in particular) could lead to a drop in general valuations. But the accumulated dry powder of the past two years is expected to drive a positive wave of fresh edtech investments, particularly in the latter half of 2024, he added.
It’s hard to imagine that companies that had several thousands of employees (like BYJU’S, Unacademy, PhysicsWallah among others) will continue to employ these many people with the emergence of AI-powered modules and content.
Layoffs are not being ruled out, despite the already sizeable number of employees let go by edtech startups since 2022. AI-driven content, learning systems and more and going to reduce dependency on human resources, as is widely expected in any domain where text-based content is key. Even profitable ventures such as PW are not immune to layoffs.
And as for shutdowns, analysts expect more startups to wind up their businesses particularly those that are not able to crack product pricing or product-market fit in this new hybrid reality.
The BYJU’S Impact Will Continue To Hurt Edtech
It’s impossible to analyse the past year for edtech through a non-BYJU’S lens. The Byju Raveendran-led company has dominated the news cycle for all the wrong reasons, and this has basically complicated life for founders in the same categories.
Some are capitalising on white spaces left behind by BYJU’S — once the dominant force — in areas such as coding, early learning, K-12 and others. As BYJU’S looks to focus on hybrid models and expand its base there, many startups are zagging the other way.
Rajesh Sawhney, founder and CEO of GSF Accelerator, believes that BYJU’S has “single-handedly destroyed” investor confidence in the edtech sector. He added, “There are so many good founders and edtechs out there doing innovative and pioneering work, but struggling to raise money due to the overhang of Byju’s debacle.”
He blamed the overcapitalisation of BYJU’s for the misplaced optimism and bullishness in edtech.
Others such as Deepak Shenoy said the edtech sector has been rife with bad behaviour even in the past. But there is little doubt that this year’s BYJU’S drama has created problems anew.
Given that, today BYJU’S has seen a valuation dip by nearly 85% (at least for one investor), there is a belief that it is going to reset expectations for other investors in edtech. The wild growth projections of the past did not work out and all expectations are being rejigged for 2024. Kewalramani feels that funding challenges within major players can create a ripple effect, impacting industry sentiment.
Funding To Remain Slow, Except For Hybrid Models
We’ve already established that edtech funding has dried up in the past year, falling by nearly 90% YoY since 2022. But what about the year ahead?
A lot depends on how sustainable hybrid edtech models prove to be in the ongoing FY24 and the first two quarters of FY25. The edtech unicorn cofounder quoted earlier in the story believes that investors are unlikely to buy into revenue projections from 2021. “The goalposts have shifted. VCs have already discarded the growth-at-all-costs mentality, so funding will be hard to come by unless existing operations turn sustainable,” the founder added.
Hybrid is the name of the game and those startups that are able to turn individual centres profitable over the next few months stand the best chance of success when it comes to securing funding. Venture debt, which was once prevalent in the industry, has also dried up thanks to unstable revenue collection.
Where once revenue had a monthly run rate, hybrid operations are geared towards collecting revenue in the first quarter of the year i.e April to June when most courses begin. The revenue pipeline dries up after this to some extent unless there are additional streams tacked on to hybrid models.
In any case, the bulk of the revenue reliance will be on offline plays, where capital expenditure is high for expansion. So the focus for startups will be on improving unit economics (for individual centres and cities) before seeking funding.
Offline Players To Venture Into Edtech Arena In A Big Way
The likes of Vedantu and BYJU’S acquired offline coaching giants Deeksha and Aakash respectively in 2022, but the tables have turned. Now, giants such as Allen Career Institute are calling the shots.
Allen’s acquisition of Doubtnut and the appointment of a new CEO (Abha Maheshwari) and other leaders is a sign of things to come. Allen’s other recent hires include former Flipkart execs Ankit Khurana and Saurabh Tandon as chief product officer and chief technology officer respectively.
Allen has solidified its digital platform after the tussle with Unacademy in mid-2022, where the two companies clashed over alleged poaching of teachers. And while Unacademy has shed talent by the dozens in 2023, Allen has strengthened its play.
In a similar vein, PhysicsWallah is looking at a major investment to expand its offline base, since that is the flavour of the season. After starting out as a YouTube channel, the company plans to take its offline presence to 100 centres from the current 64 in 2024, with a planned outlay of INR 100 Cr for this spree.
The company has reinforced its offline identity in the past year too, having launched the PW Vidyapeeth chain of large coaching centres, which have become the lynchpin for its profitability.
Louder Calls For Edtech Regulation
Finally, we believe that the problems in edtech — high fees, dependency on loans, arbitrary course content, introduction of untested models and more — are likely to come under the regulatory scanner.
In 2021 and 2022, the Ministry of Education raised concerns about misleading edtech advertising and promotions, misselling and preying on the fears of parents. The high-profile cases against BYJU’S and WhiteHat Jr in 2021 brought these issues to light.
Plus, BYJU’S layoffs this year, closure of offices and its much-delayed financials also saw concerns raised in the Indian parliament.
Another major issue was the mushrooming of education-focussed lending startups. After surging in 2020 and 2021, their growth has been stymied after widespread concerns raised by parents about surreptitiously being trapped in loan repayment cycles without prior intimation.
In late 2023, there was a notice by the government urging platforms to rethink tie-ups with foreign universities, which was one growth area for edtech. The University Grants Commission (UGC) said it would take action against edtech companies that offer online courses in collaboration with foreign universities without obtaining its prior approval.
While India does not have an official edtech policy or regulatory framework, there is a growing call to streamline this sector as it affects Indians across classes and age groups.
The Indian government’s focus so far has been on skill development in association with edtech startups to improve the employability of talent, but clear regulations about advertising, pricing and course content would not be unexpected given the public outcry around these issues.
[With inputs from Nikhil Subramaniam. Edited by Shishir Parasher]