Eruditus Founder On Why It’s Difficult To Be Like An Amazon Or Flipkart In The Education Space

The Indian edtech startup ecosystem is in the doldrums. With more than 80 startups firing more than 25,000 employees since 2022, edtech startups alone account for nearly 37% of these job losses. Although the sorrows of the ongoing funding winter are to blame for the bloodbath, the wounds that the sector bears run deeper than they currently appear to be.

Speaking with Ashwin Damera, the CEO and cofounder of edtech startup Emeritus whose parent company is Eruditus Executive Education, we (Inc42) tried to understand the post-pandemic pain points that a majority of Indian edtech startups have been enduring.

One of the motivations that prompted us to have a one-on-one exclusive interaction with the industry veteran was the pace at which he is able to grow his venture, despite the sectoral headwinds.

Eruditus’ consolidated net loss rose 46% year-on-year (YoY) to $386.8 Mn in the year ended June 30, 2022 (FY22) as its marketing expenses more than doubled during the year. At the same time, its operating revenue jumped 1.8X to $245.2 Mn in FY22 from $131.2 Mn in the prior fiscal year.

However, Damera told Inc42 that Emeritus would become profitable this quarter (April-June) as the startup’s enterprise business has grown 3X between 2020 and 2022.

But what about many edtech startups that are still struggling to stabilise their revenue stream, let alone break even or secure profits?

“This is the time that demands us to be wary of our new initiatives, capital expenditure, and reckless cash burns. In short, we will have to be more conservative. As far as the broader funding environment is concerned, it will continue to be challenging for the next 12 to 18 months, at least, before some level of normalcy returns,” Damera cautioned.

While there is a possibility of a few more edtech layoffs making headlines by the time you finish reading these edited excerpts, here’s how the present and the future of the Indian edtech sector look from Damera’s spectacle.

Inc42: What have been your key learnings after the pandemic, especially when a lot of edtechs today are bogged down in challenges ranging from layoffs to falling revenues and mounting losses?

Ashwin Damera: Broadly, there are three key segments that edtech players largely operate in — higher education, test preparation, and K12.

The higher education segment largely comprises working professionals. The segment also gives them the flexibility to learn or upgrade their skills online whenever they find the time. Even though this segment caters to an underserved market, it has continued to do very well, helping many like us grow and expand despite multiple sectoral challenges.

However, if you look at the test preparation segment, you will see a lot of doom and gloom. This is because coaching centres have reopened and students and government job aspirants prefer to learn face-to-face at physical brick-and-mortar coaching setups. Similar is the case with the K12 segment. So, the companies operating in these segments have seen the most bloodbath after the pandemic.

As far as the broader funding environment is concerned, it will continue to be challenging for the next 12 to 18 months, at least, before some level of normalcy returns. This is the time that demands us to be wary of our new initiatives, capital expenditure, and reckless cash burns. In short, we will have to be more conservative.

Inc42: How have you changed your strategies between 2020 and 2023?

Ashwin Damera: Well, we have made two strategic changes:

We pulled back from a few markets: After starting our operations in India in 2010, we expanded our footprint in many international markets such as the US, Asia Pacific, and Middle East among others. In 2020-21, we opened up an office in Brazil, and then expanded our footprint to markets like Japan, Australia among others.

However, today, we have chosen to pull back from these markets and focus on our core markets. When we enter a market, it takes us typically three years to break even. As of now, we have plans to return to these markets when we are more profitable or have developed an appetite to back such investments.

Increased focus on profitability vs just growth: We are happy to curb our cost of acquiring students. Earlier, we would spend, say, 40% on marketing or toward acquiring students, which has changed now. We have realised that we are more comfortable with having 250 students than spending 40% for an additional 50 students. So, that is the trade-off that we have made.

Inc42: Tell us about the most impactful initiative/decision, aligned to the company’s growth, that you took during the pandemic.  

Ashwin Damera: Before 2020, we were predominantly a B2C business, with a focus on digital marketing across Facebook, Google, LinkedIn, etc.

In the last two to three years, we have expanded our enterprise business significantly – whether it is in India, the APAC region, the Middle East or the US and Europe.

We’ve invested in the team and our enterprise business has grown like 3X between 2020 and 2022.

If you look at the higher education market as a whole, a larger part of it comes from corporate spending and from individuals who want to upskill or learn specific skills. This is one area we have worked towards, and today, it is bearing many fruits. Our enterprise business is already profitable and we plan to give it a further boost.

Inc42: Indian edtech players are struggling at a time when the sector is sitting on a whopping $29 Bn market opportunity. Do you think expanding to global markets can help Indian edtechs revive and stabilise their revenue streams?

Ashwin Damera: Global expansion is not possible for Indian startups operating specifically in the K12 and test preparation segments. This is because the curriculum in India is set by CBSE ICSE or state boards and the test preparation market is very local to the country.

However, in the higher education segment, especially for us, about 70% of our students are based outside of India. The reason for this is we work with MIT, Cambridge, Wharton, and Berkeley – brands that are known across the world.

The point here is that if an edtech startup provides, say, an MIT Data Science course or a Berkeley FinTech course, it is ought to get enrollments from different parts of the globe.

Interestingly, many edtechs now understand this and have started working towards it.

Inc42: Do you see anyone building an edtech super app from India in near future?

Ashwin Damera: As an entrepreneur, we always ask ourselves these questions that push the boundaries a little bit.

If you asked me sometime back if there will be a tool like ChatGPT, I would have said no.

Similarly, it is difficult for me to envision a super app because we all learn many different things and in many different ways, and to make an app that does it all seems like a very difficult task for now.

My view is that people will select where they want to go and figure out what they want. So it’s tough to become like an Amazon or a Flipkart in the education space.

Inc42: Which are the key areas that you see bolstering the edtech sector by the end of this decade? 

Ashwin Damera: There are approximately 600 Mn Indians below the age of 25, and I think we will remain the youngest economy until 2050.

If we have to become an intellectual powerhouse as a country, at least 40% of the 600 Mn individuals below 25 years of age will have to enrol in higher studies – and this is where opportunities lie for edtech players.

The growth of the Indian edtech sector in the next 10 years lies in areas like:

• Capacity expansion — either by throwing open more seats in existing campuses or setting up new campuses for higher education
• Setting up new campuses for K12 — either locally or via exchange programmes with foreign campuses
• Enabling capacity expansion via online or hybrid classes
• New institutions coming with pure online offerings
• Exploring opportunities around extra-curricular, sports coaching, foreign language, and more

Also, our Indian Government is becoming more and more progressive with each passing day, so I remain very bullish on India.

The only sour note of caution is if we don’t help our youth get higher education. So, in the next 10 years, if we don’t get serious about educating the youth, we could be staring down the barrel.

Inc42: So, what’s the future of edtech in India — hybrid? 

Ashwin Damera: I think that all learning platforms — classroom, hybrid and online – will grow. What’s important in learning is the outcome. While hybrid learning could be better in some cases and classrooms in others, we will still have to understand the nuances as there is no point bringing a 25-year-old data science student to physical classrooms.

However, if we talk about acquiring students, it will be largely driven via offline and hybrid models. Given that not everybody in India is on Facebook and Google, Instagram or LinkedIn, you will find offline sales agents’ feet covering Tier 2 and 3 parts of India to find the next batch of students.

Inc42: What are your plans for 2023?

Ashwin Damera: We are looking at ChatGPT and its implications on our business. We are experimenting a lot with the use cases of generative AI in education. We are also looking at acquiring global students and offering affordable courses to Indian students. We are also focussing on growing the enterprise vertical of our business.

Inc42: What role do you see ChatGPT playing in the Indian context?

Ashwin Damera: It doesn’t matter if you are a unicorn or a soonicorn – every startup will find a way to use ChatGPT. It’s here to stay for a long time. The question is: what’s the right use case for it? Also, ChatGPT is just one form of generative AI, and there are many like it.

[Edited by Shishir Parasher]