Edtech startups need to take stock of the VC view of the ecosystem and keep pace with the trends they expect in the new year.
Venture capital is about capturing the value between the startup phase and the public company phase. — Fred Wilson, co-founder of Union Square Ventures
India, being one of the youngest countries in the world and boasting a rapidly-growing startup ecosystem, offers a widely untapped opportunity for many sectors, both locally and globally. Venture capitalists have gravitated to the Indian market in great numbers in the past decade to pour capital into this opportunity, pushing startups towards scalability in every sector. Edtech is no different, and in recent years, this sector has become one of the biggest opportunities for tech startups in the Indian context.
As Unitus Ventures’ senior associate Sunitha Viswanathan told Inc42, the large market of close to 250 Mn students in the K-12 segment and over 10 Mn youth graduating every year mean that India is the land of massive potential for edtech disruption.
“Given the huge lopsided teacher: student ratio, this can only be solved by using tech. Hence, there is a necessity more than a choice. And rightly so,” she added.
While we spoke to edtech startups about the trends they expect to observe in 2020, we also wanted to take the VC view and what they expect from the ecosystem in the new year. What will be the factors that make or break edtech startups in 2020.
Factors For Success In Edtech
Indians spend tens of billions on education every year. With disposable incomes continuing to rise, there is a massive prize for the startups that achieve success in this space. According to Anirudh Damani, managing partner, Artha Venture Fund, the key to success for an edtech startup will be to sell directly, thereby keeping a short feedback loop.
“That will allow them to innovate faster, adapt, and cater to their end-user requirements quicker. Therefore, in my opinion, selling directly to end-users is the key to creating success in the edtech space,” he added.
Sajith Pai, director, Blume Ventures further said that the increased focus on regional language learning and data analytics will play an important role in the success of edtech startups in 2020, just like it did in 2019.
Edtech’s Focus On Increasing User Adoption In 2020
Omkar Kulkarni, the head of GMC Calibrator (Gray Matters Capital’s Digital Accelerator Program, suggests four areas that edtech startups in India need to focus on in the near future:
- Gain engagement by learning insights through user behaviour analytics
- Highlighting common user patterns to improve product and monetisation at early stage
- Cut reliance on digital marketing to reach out to users
- Deliver content through a human-centric design process to increase engagement
Blume’s Pai further added that products that teach with a mix of technology and human intervention will be able to generate faster adoption while keeping costs low and scalability high.
“Also, 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,” Pai told Inc42.
Pranjal Kumar, CFO and head of Education Fund at Bertelsmann, believes that being outcome focussed i.e. credentials, test results, job placements etc will deliver a higher chance of success for edtech startups. “High-quality product with high average-order-value and the right balance of online and offline, depending on the target learner and segment of education should be the focus in the near future for edtech startups.”
7 Trends For Indian VCs In Edtech In 2020
Indian edtech startups are currently focussing on all fronts — B2B, B2C, B2B-B2C and C2C. The most prominent sub-sectors have been test preparation, online certification, skill development, online discovery, STEAM kits, and enterprise solution among others.
According to Datalabs by Inc42, in terms of the number of unique edtech businesses funded between January 2014 and September 2019, skill development-focused startups have been the most preferred. However, capital inflows into the test preparation and online certification segments are comparatively higher. Together, these two sub-sectors make up for 91% of the total funding in edtech startups. This shows an imbalance in terms of business models in the Indian edtech ecosystem.
However, according to Bertelsmann’s Kumar, a few more models are expected to see a lot of innovation in the near future. He said bootcamps with or without job assurance, higher education, online programme management models, K-12 tutoring will be huge markets and are currently starved of quality teaching both in curricular as well as co-curricular subject.
Here’s what VCs told us to expect in 2020.
The pace of change in technology continues to accelerate. Therefore, education is no longer just the standard 12+4+2 experience. There’s a need for continuous education that will re-skill or up-skill the workers of today for the challenges of tomorrow. Startups that provide platforms to teach, train, and engage the working population to improve their skills will do very well.
AI in edtech can help understand better how learning actually happens. If we can understand how one learns the steps in quadratic equations, then this can be used in classrooms by teachers to deliver it more effectively. This will help define pedagogy more tightly
Even though we hear a lot of buzzwords like artificial intelligence, virtual reality and blockchain, it is the exponential increase in viewership of the likes of TikTok, YouTube and other OTT platforms that will see a trend of content creators delivering educational content on OTT platforms to improve discoverability, reach and scale.
Parents To Invest More
Another challenge for edtech platforms is the cost aspect for families. As far as high school education is concerned, VCs see parents getting more accustomed to spending on tech products for cognitive learning as well as a change in focus of parents from traditional curriculum to 21st-century skills.
Unbundling Of Education
Don’t hope for an edtech superapp. Venture capitalists see startups providing customers (students and teachers) specific standalone services (test prep, counselling, professional and vocational training among others) rather than a combined / bundled product which does it all.
Just over 10% of India’s population can speak English. To build large businesses that can capture greater value, incorporating vernacular learning is key. As seen in the OTT, media and entertainment space, regional language learning will be one of the biggest trends in 2020, according to the VCs that Inc42 spoke to.
Learning for ‘Yearning’
Learning programmes that cater to non-professional interests, or those that work with passion projects and hobbies will see an uptick according to investors. These may or may not lead to employment-related outcomes, but will be about holistic individual skill development, which will be critical for the edtech ecosystem as well as startups at large.