The use of digital technology in the education sector is growing at a remarkable pace in India. With news reports giving Byju’s, a Bengaluru based learning app, a valuation of over USD 2 billion in its latest round of investments, the investors’ interest in the education technology (edtech) sector is on the rise.As per publicly available reports, the first half of 2018 saw several investments in the edtech sector.

  • Reliance Industries Limited, announced a phased strategic investment of up to USD 180 million in Embibe, a Bengaluru based AI education platform that uses data analytics to deliver personalised learning outcomes to its users.
  • Gaja Capital, a private equity fund, invested USD 25 million in Ahmedabad based Educational Initiatives Private Limited. Educational Initiatives provides customisable learning tools for K-12 students.
  • Edtech firm Unacademy also raised USD 21 million from several investors in a Series C funding at a reported valuation of more than USD 100 million. Unacademy allows educators to use the app to create lessons for users.
  • Quiziss, an e-learning platform that helps teachers turn homework and tests into self-paced games received USD 3 million from investors led by Nexus Venture Partners.

Consolidation is also a trend in this sector.

  • In 2018, Byju acquired a Bengaluru based maths learning start-up, Math Adventures.
  • Towards the end of 2017, online education technology service provider Avagmah and online skill development course provider Acagild merged under Aeon Learning Private Limited.
  • Also in 2017, in order to expand its international reach, Byju acquired TutorVista from UK based Pearson Plc. TutorVista is one of the largest tutoring brands catering to school and college students in the United States.

Growth Factors

According to the joint report by Google and KPMG on ‘Online Education in India: 2021’, the online education sector in India is expected to grow from $0.25 billion in 2016 to $1.96 billion by 2021 and paid users for online education services are expected to grow from 1.6 million in 2016 to 9.6 million in 2021. There are myriad factors propelling this growth:

  • With a projected number of nearly 730 million internet users and 520 million smartphone users in India by 2020, internet technology will have a far greater reach including in rural and remote areas.
  • Companies in the edtech sector will be able to use this opportunity to provide distance learning and lower cost educational alternatives to their users as a large customer base and low infrastructure cost will help leverage economies of scale.
  • The use of technology in the education sector will assist users in upskilling/ reskilling through online certificate courses, providing vocational training, personalised assessments for competitive examinations, digital libraries, content in virtual reality and augmented reality, gamification of complex concepts, etc.
  • Edtech is also receiving immense support from the Government of India with the Government initiating programmes such as SWAYAM, Digital India, etc. The union budget for 2018 emphasised the Government’s aim to “increase the digital intensity in education” and gradually move from “blackboard” to “digital board”.

Challenges

Despite growth, the edtech sector in India faces several challenges as well.

Investors are concerned about scalability of operations and profitability of early startups in this sector. A review of the deals in the edtech sector for the year ending 2017 revealed a decline in investment in this space in the ‘early age startups’ and the majority of funding in this sector was made in companies with a proven ‘track record’. The actual investment in this sector declined from USD 269 million in 2016 to USD 178 million in 2017.

Scalability is hindered due to several indigenous reasons:

  • Traditional schooling is still a preferred way of learning in India. Even as supplemental means of education, private tuition with the personal presence of teachers in the class is preferred to online learning. E-learning platforms are mostly self-paced without providing any interaction with peers or teachers.
  • While digital infrastructure is growing, currently as per reports, the penetration of internet and mobile internet is as low as 18% in rural India and 59% in urban India.
  • There is a wide diversity in the medium of instruction and different academic syllabus are followed in different parts of India. To cater to different markets, companies in the edtech sector are required to recreate their content in the language of, and make it relevant to, their target consumers, which could result in increasing their cost of operations.
  • In several cases resources are also freely accessible on the internet and therefore, it is difficult for these companies to increase their subscriber base and to retain users in the long term.

In conclusion, the edtech sector in India is intricate with its unique set of challenges. However, with a projected demographic of 34.33% of India’s population by 2020 comprising of youth and an estimated 735 million internet users by 2021, the edtech sector has the opportunity to tap into a huge market. Robust financial models to achieve scalability will be the key.