EDUCATION STARTUP SPECIAL .........Learning Curve

EDUCATION STARTUP  Learning Curve





The opportunity for tech-enabled startups in education is huge -as are the challenges of scalability and viability

In March 2015, Embibe, a company pro viding customised learning solutions, de cided to make what appeared to be a fool hardy move. At a time when startups were racing to squeeze out more revenue from their business, it seemed to head in the opposite direction. After charging `12,000 per user for its online education content, it decided to make its content available for free and instead focus on im proving personalised learning outcomes.

The startup, backed by Kalaari Capital and Lightbox Ventures, eschewed fresh funding and unfettered growth and de cided to strengthen its business by push ing users to pay for better outcomes. In this case, it was via what it called person alised score improvement, by looking at three key parameters: behaviour or com mitment, test-taking skills and knowledge of candidates.

Embibe's founder Aditi Avasthi says the company is using growing capabilities in data analytics to go against conventional wisdom -and entrenched offline and on line competition -and try to recast the focus of the test-prep industry. From a zealous focus on inputs (massified, ge neric content and questions for candi dates), Embibe wants to make more aspir ants successful in tests. “Education tech nology, or edutech, is predominately an inputs-focused business, with little atten tion to the output or end result from using all this technology,“ she says.

Avasthi has led the hiring of senior management from companies such as Flipkart and McKinsey to add muscle to Embibe's new business model and says the firm can provide a 60% improvement on scores in over 10 tests. She points to an IIT-Madras student who used the platform before the Joint Entrance Exam to discover that he wasted precious time on 41 questions he didn't even answer. “We will soon launch a score-improvement guarantee programme for our candidates,“ she boasts. “We are basically selling them morphine.“ Despite her bombast, Avasthi and her peers in this space are quick to admit that it is very difficult to build scale and stickiness in this market. Not only do they have to compete with offline rivals for the attention and money of different pieces of the education ecosystem (students, parents, teachers, schools, government), they also have to deal with a flood of free content that is available online. “There has been little technology disruption in this segment,“ says Vamsi Krishna, cofounder of Vedantu, an online marketplace for tutoring and test prep, funded by Accel Partners and Tiger Global.

Free vs Paid

Convincing those who use free content to pay for value-added material is hard -according to industry estimates barely 2-3% make this switch while the rest elude the grasp of edutech companies. “Unlike other segments, education ventures need time to incubate and organically grow,“ says Shantanu Rooj, cofounder of Schoolguru, a provider of online courses to universities.

Funds are required to grow these businesses, but risk capital investors remain guarded on the prospects of companies in this sector. “Startups need to work hard to build trust as `education' brands,“ says GV Ravishankar, managing director, Sequoia Capital India Advisors. “This will take time. Startups should not expect that the best tech alone is sufficient to win the market. They need to focus on delivering on the promise of better outcomes for students.“

In March, Sequoia led the investment of $75 million in Byjus, an online person alised learning tool started by Byju Raveendran, a former CAT topper who used to run a successful chain of offline tutorial centres, before knuckling down to take his business online. While ventures such as Embibe and Topper (funded by Fidelity Partners, SAIF Partners and Helion Capital) focus on students preparing for tests, Raveendran thinks there's a bigger market to be tapped among students looking to improve their learning through the academic year and beyond.

“Technology is playing a big role in making learning interesting,“ he says. “With the smartphone as the access device, we have more than half of our users from outside the top 10 cities.“ With over 1,20,000 paying students on the app, which was launched in Au gust 2015, Raveendran and his team of 400 technologists, teachers and content developers want to move away from India's traditional focus on rote-learning.

“We want to create a habit of autonomous learning for Indian students,“ he says. Despite these claims, Byjus has not made a huge dent in the market -it plans to have at least 3,00,000 paid users on the app in a year, in a country with over 250 million students in the K-12 system.

Live Classes

Others such as Krishna of Vedantu are betting on the use of technology to disrupt the way teaching and tutorials are delivered. In its attempt to recast this business, Vedantu provides a live tutoring platform for students and teachers (not just trained teachers but anyone -an engineer, a homemaker or a retired senior citizen -who has time to spare) to take a few classes.

Instead of a fixed salary that teachers get in the offline world, the online tutors decide on the hours they work and the syllabus they teach and get wages accordingly. This means teaching can be for as little as 15 minutes or can be booked for an entire semester. Vedantu provides teachers with tools that enable them to create and share content, says Krishna. Users can either buy a monthly package or purchase bulk hours. “We have 300 teachers on Vedantu from over 200 cities and towns in India,“ he says. “We have 35,000 students who have completed over 70,000 hours of live sessions.“ As the model gains more traction, Krishna sees the business growing at 25-30% month-on-month.

When it comes to education, startups aren't just targeting the K-12 herd. As the need for education spreads from preschool to employees who want to be trained and retrained by experienced professionals, companies are devising business ideas to keep pace. For example, Nayi Disha, a developer of educational computer games for preschoolers, was founded by college mates Kartik Aneja and Kushal Bhagia to provide a new medium of motion-based learning for children.

Inspired by the educational CDs that they watched as children, the duo have devised games that are used in over 100 schools today. With early funding from private equity veteran Ajay Relan, among others, Nayi Disha should be in 300 schools in a year, says Aneja, but they have no illusions about the rough road ahead.

“Selling to schools can be quite tricky,“ he admits. “Since multiple stakeholders are involved, it is difficult to evaluate who takes the final decision.“ While Nayi Disha benefited from getting an early customer and product votary in Swati Vats, president of Podar Education Network, the founders have yet to put in the hard yards to convince potential customers, even as they keep a wary eye out on potential competition. “Edutech can quickly turn into a feeding frenzy, because every competitor can devise a me-too product,“ says Aneja.

At the other end of the spectrum, compa nies such as UpGrad and Simplilearn are targeting working executives who want to upgrade their skills.Simplilearn started as a blog before it evolved into a venture to provide mid-career training in new technologies such as big data, cloud, IT security and digital marketing.

The firm, backed by over $27 million from Mayfield Fund, Kalaari Capital and Helion Venture Partners, has trained over 5,00,000 people thus far and expects to train 3,00,0004,00,000 people annually. Uniquely, Simplilearn isn't an India-only business. The firm has studios in the US to build its content and is eyeing expansion both in India and overseas. “We have become a reliable source for working professionals to reskill and upskill themselves,“ says Krishna Kumar, CEO and cofounder, Simplilearn.“There is an opportunity to build a global edu cation platform from India.“

As demand grows, Kumar and Co are tweaking the venture's business model to keep pace. For instance, Simplilearn offers courses in subjects such as big data, where a professional can take a clutch of online courses and get professional certification once she complete the programme. Elsewhere, the type of content is moving from purely self-learning modules to live classes, even as the company goes beyond IT-related courses and adds a few in the fields of sales, finance, human resources and project management to its portfolio.

On the Job

It isn't always easy to zero in on a business plan while building an edutech venture. Just ask Piyush Agarwal, CEO of SuperProfs, a provider of online coaching for competitive exams, especially for government jobs. The company has been through at least five iterations, from trying to capture classes and making the videos available for later viewing at institutes such as IITs (something he saw at Stanford) to developing high-definition content and transmitting it on low-bandwidth network for schools.

Finally, Agarwal decided to target the millions of applicants for government jobs. He estimates that there are about 50 lakh applicants for jobs in Central and state governments. SuperProfs, which has almost 200 teachers in English and Hindi with more being hired in vernacular languages, hopes to make a dent in this market.

“We want to be the online market leader for people preparing for government jobs,“ he says. In doing this, the company, backed by IDG Ventures and Kalaari Capital, is going head-to-head with old-school, offline training institutes, which not only have a larger volume of students but, arguably, a stronger brand. Agarwal, however, is unfazed. “Offline providers don't have the technical know-how to migrate their large businesses online,“ he says.

There are others that want to take a crack at the government jobs market. IIT-Bombay graduate Ashutosh Kumar, who started Testbook three years ago, thinks there is a massive opportunity in this segment but worries that there are no success stories to emulate. “No one has proven that you can make money in the edutech market,“ he admits. “We think graduate students (with better purchasing power) are a more viable target than high schoolers trying their luck with exams such as JEE.“

To this end, Testbook claims to have racked up 5,00,000 users who have solved some five crore questions on the platform. In a sign that offline ventures want a piece of this market, textbook publisher S Chand took a significant stake in the firm, which was backed early on by Shanker Narayanan, a veteran private equity investor, and LetsVenture, a funding platform for startups.

“By the end of this financial year, the number of users should grow from 5 lakh to 14 lakh,“ claims Kumar. Based on a freemium model of allowing limited free access, Testbook converts barely 6-7% of its user base to paid subscribers. Even if this is almost double the industry average, it will be some time before Testbook can become a meaty business.

Lessons for Universities

Away from the consumer side of the market -those writing exams or looking to reskill -some ventures are also helping with the backend of the business and showing strong, if slow, signs of growth. Rooj of Schoolguru, for example, helps universities take their courses online, with a special focus on digitising the paper-based content handed out to distance-learning students.

“Globally, distance education has transformed and we want to help Indian universities keep pace,“ says Rooj. “We provide them with the tech platform, including audio and video content, to make this transformation.“

Schoolguru currently has exclusive tie-ups with 14 universities across 10 states, with several more in the pipeline, according to Rooj.

“We provide instruction in 10 regional languages,“ he says. “Now, we are looking to expand this business. We have signed our first pact in Africa and are being approached by universities in nearby countries too.“ Rooj is thinking big for his business; in five years, he expects five million students to use his platform and expects revenues to touch $250-300 million.

Scope for Improvement

Harman Singh, founder of WizIQ, meanwhile, has built a software platform where students, colleges, universities and test-prep companies can interact. The firm has over 5,000 service providers and about five million students using its platform. The business is expected to double every year from now, according to him.

Two years ago, WizIQ got over 85% of its business from outside India, but in 24 months it should get 40% of its sales from here. “The Indian market is highly fragmented, with not one provider owning more than 2-3% of the market,“ he says. “A platform like this allows you to consolidate these service providers.“

At the end of the day, both investors and entrepreneurs are betting on the long-term potential. Says Ravishankar of Sequoia: “The promise of technology is to make high-quality education available at affordable prices, at scale. This is the promise that investors are backing and hopefully we will see several valuable companies built in the education sector over time.“

Rahul Sachitanand

ETM22MAY16