Owl Perspectives

International

India’s Future as an EdTech Epicenter

By Amit A. Patel, Managing Director and Kriti Bansal, Principal at Owl Ventures

EdTech Epicenter_Insight

The EdTech sector in India has made many strides in the last decade. With 350 million people under the age of 30, India is a gigantic market with a society eager for education. It has one of the largest K-12 populations on the globe - an estimated 260 million students that attend 1.5 million schools across the country. In higher education, 40 million students are served by 55,000 colleges. This also forms the base for the large lifelong learning and upskilling market, where India has one of the largest and youngest English-speaking populations of 125 million.

This massive $90 billion education market is ripe for digitization.

With 743 Million (and growing) internet users, it is only a matter of time till EdTech becomes a ubiquitous term in every household. Parents depend on word-of-mouth and peer networks to adopt products. The higher than average student:teacher ratio of 32:1 in India verus 16:1 globally has also led to a demand for more personalized learning solutions. In the K-12 sector, digital solutions are consolidating the highly fragmented supplementary education in India and bring efficiencies by leveraging technology. On the higher education side, EdTech products are working to upskill and make the workforce more job-ready with skills relevant to future employers. India will continue to see increasing EdTech penetration driven by the founding of more EdTech companies democratizing access to education, increasing number of internet users, and government focus through the New Education Policy (NEP) 2020 on improving outcomes through digital adoption.

The introduction of the NEP 2020 further accelerates the adoption of EdTech solutions by recognizing the need to leverage technology and optimizing digital platforms to provide quality education to all. This implies that there will be higher budgets for technology solutions, teachers will be provided effective training to be online educators, and students will be provided more personalized learning. At the K-12 level, the NEP 2020 states that students will be taught coding as a subject from as early as Grade 6, leading to increased demand for coding related solutions. At the higher education level, the aim is to double the higher education capacity from the current 40 million enrolled students by increasing students’ access through online universities. The online lifelong learning market has also expanded as the pandemic instituted the requirement for continuous learning. The coming decade in Indian EdTech is going to be one of the most exciting sectors to watch.

The capital flows into this sector also point towards the acceleration of digitization in the Indian EdTech sector.

Indian EdTech players have raised over $2 Billion this year alone in venture capital funding compared to $1.85 billion in venture funding over the last 9 years combined.

Furthermore, scaled players in the ecosystem are looking out to round out their portfolio through M&A activity with 8 transactions just this year out of the total of 43 M&A deals in EdTech over the last 10 years. One of the most active acquirers in the ecosystem has been BYJU’S, the India based EdTech decacorn that has rocketed to become the second-most valuable private EdTech company globally.

BYJU’S recently acquired Whitehat Jr for $300 Million to expand their subject base, making this the fastest exit story at this size in the Indian ecosystem. BYJU’S also acquired Osmo, a US based educational gaming system company, highlighting the fact that Indian EdTech companies are now looking globally for acquisition targets. This has led to a flywheel effect where there are now 4,450 India based EdTech companies.

A significant number of these companies have been B2C offerings because the education sector remains a largely out-of-pocket expense for households in India. However, B2B EdTech companies are starting to scale as schools, universities and tuition centers are adopting technology at an accelerating pace.

Of the 346 deals in EdTech this year, a large proportion of the deals have been in Test preparation companies (25%), followed by K-12 supplementary tools (17%). Skill development and Higher Education constituted 14% of the companies who raised capital.

Capital raises aside, these EdTech companies have also stepped up in a meaningful way during the COVID-19 lockdown to help millions of students continue their learning across the country. As more students and teachers have adopted the ‘new normal’ of remote work and learning, a whole host of new EdTech solutions have been born to make their experience enjoyable and increase learning effectiveness. As an example, BYJU’S has provided free access to its complete app amid the lockdown to enable school students to complete their on-going academic year and witnessed a 150% surge in its new student enrollments.

On the business model side, the lockdown has made startups adopt a leaner sales model with increasing dependence on digital marketing and inside sales leading to lower customer acquisition costs and better unit economics. Interestingly, we’re also seeing many more players leveraging India’s abundant supply of highly educated english-speaking teachers, targeting the US market, and competing with global players in a capital-efficient manner.

As investors in both BYJU’S and WhiteHat Jr, we’ve enjoyed front row seats to the tremendous growth and impact these companies have had on the ed-tech sector in India and globally. We consider the EdTech market in India to only have just begun to boom, and there’s immense scope for more to happen, and we, at Owl, are looking forward to partnering with more entrepreneurs who want to impact this space!

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