With 3 New Unicorns, India’s Edtech Startups Raised $4.7 Bn In 2021

The education sector has undergone a profound transformation as Covid-19 spread across the world in the past two years. With technology coming to the forefront of imparting education in the wake of the pandemic, the Indian edtech space witnessed much action in 2021. 

Consistent fund flows and the resultant M&As marked the year. Edtech startups raised $4.7 Bn to emerge as the third most-funded sector in 2021. Only fancied ecommerce ($10.7 Bn) and fintech ($8 Bn) segments attracted more funds than edtech did. 

Prior to 2020, the education space had not found much favour with the investor community. This changed drastically in 2020, with the Covid-induced lockdowns directly benefiting edtech companies which in turn prompted investors to flock to the sector.

The rapid pace of growth in the sector is evident in the fact that BYJU’s alone raised about $1.9 Bn in 2021.

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Two Years Of Massive Edtech Adoption 

The chaos in the wake of the pandemic breaking out in 2020 prompted educators to quickly adopt video conferencing tools for teaching students remotely. Most of these tools were not specifically built for education, though. The use of technology in education has helped quality education penetrate to the tier-2 and tier-3 cities,  said Ujjwal Singh, CEO & President, Infinity Learn by Sri Chaitanya, a test preparatory startup.

Edtech empowered teachers to adopt a multi-modal form of learning — a combination of audio-visual along with textbooks and experiential kits.  

While digitisation of education remained a topmost priority for the government, the disparity in access to high-speed internet connectivity and mobile and computing devices across regions and classes remained a concern though.

Edtech companies helped democratise access to high-quality education and facilitate student engagement, said Singh. Startups in education offer learning resources, including blended learning, AI-based experiential and interactive learning, to provide a new experience.

Consistent Fund Flows To Buoy Edtech Space 

With technology disrupting the education sector, private equity and venture capitalists realised the huge potential the sector offers.

The total fund flows to edtech startups touched $4.7 Bn in 2021 in 165 deals. How Covid-19  impacted fund flows positively is visible in the accompanying bar graph as both the number of deals and value surged in 2020 which got a further boost in 2021. No wonder, three new edtech unicorns emerged in 2021– Eduditus, upGrad and Vedantu.

Eruditus’ $650 Mn fundraise and Blackstone’s acquisition of a controlling stake in Simplilearn for $250 Mn were the two mega PE-VC investments, other than BYJUS’s  $1.9 Bn fundraise, during 2021.

Test preparation startups walked away with almost 65% of funds ($3.06 Bn) that came into the edtech space. The number of deals here was fewer at 28 than in the skill development which saw 34 deals (see the accompanying graph), which probably hints at higher ticket size in test preparation startups.

The ticket size of investment in test preparatory startups is projected to surge to $2,669 (annual purchase ticket size per user) by 2025 from $666 in 2020.

Test preparation is the most prominent sub-sector of the edtech market and would remain so, thanks to students’ penchant for good grades, admission to top engineering colleges and government jobs. Startups here help students ace competitive examinations such as IIT-JEE, NEET, CAT, UPSC, SAT, etc. Big names such as BYJU’s, Unacademy, Vedantu, etc all have a good presence here. 

Online certification occupied the second slot at $1.04 Bn. K-12 attracted only $270 Mn. Interestingly, the K-12 sub-sector saw 57 deals, accounting for 34.5% of the total deal count in the edtech space.

“K-12 will see digital as an augmentation to in-person learning, while higher education will adapt digital as an active part of the pedagogy,” said Singh. 

K-12 is projected to account for over 40% of the edtech market by 2025.

BYJU’s Leads The M&A Action  

The sector witnessed vigorous M&A activities, led by BYJU’s which acquired 10 companies. The acquisition spree to a large extent was helped by easy access to huge funds. BYJU’s acquisition of test preparatory firm Aakash for a whopping $1 Bn was the highlight of 2021. Unacademy was a close second with 4 buyouts – TapChief, Handa Ka Funda, Rheo TV, Swiflearn.

The edtech space as a whole witnessed 31 M&A deals, accounting for 15% of the total 206 M&A deals in the startup universe. In the individual category, it is second only to the glamour boy, ecommerce, which saw 62 deals.

The objective behind acquisitions seemed to be increasing user base, growing product offerings and capturing audiences in newer segments.

“The M&As will help create a better education ecosystem with newer possibilities for collaborative synergies that is beneficial to both end-consumers and edtech players,” said Singh whose Infinity Learn by Sri Chaitanya acquired Teacherr during the year.

The Short-Term Outlook For Edtech Space

There is a huge market out there for the education sector to leverage and grow as 36% of India’s population is young and learning. Factors that are likely to drive the edtech market this year are the deeper penetration by mobile devices, wider availability of broadband internet and flexible learning modules. 

“Bite-size learning modules, live training and the use of AR (augmented reality) and gamification make learning interactive, said Singh, adding that online education offerings across classes 1 to 12 are projected to rise 6.3 times in 2022 to create a $ 1.7 Bn market.

A study by KPMG and Google has noted that nearly one-third of online learners believe online education does not substitute traditional learning due to a lack of interaction with peers and instructors. Low completion rates of online certification courses due to lack of feedback and interactions further underlines the need to have multiple models.

Physical classroom learning is expected to regain momentum, but edtech is unlikely to fade in 2022 or beyond. In terms of teaching strategies, gamification will help the most and many companies have also started experimenting with AR and VR technologies to make their courses more interactive and engaging, according to Singh.

Online education is unlikely to lose its shine even if the conventional physical classes resume in the later part of 2022. Different hybrid models of online education are expected to emerge sooner than later. Sector leader BYJU’s acquisition of Aakash is a testimony to that.

Brick-and-mortar institutes offering value-added services online is one hybrid model that is likely to catch the fancy of learners. Edtech apps offering offline platforms for engagements is another hybrid model that is likely to come up soon.

Arun Natarajan of Venture Intelligence said going forward, as students return to physical schools and colleges, they (with the support and advice of parents) are likely to pick and choose the edtech apps. “This is likely to cause some attrition in the sector, leading investors to take a pause. Overall, the boost that edtech companies have received from the pandemic, especially in getting so many students to try out the online option, will provide the sector a permanent leg-up,” he added.

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