After E-Commerce & Healthcare, EdTech to Emerge as the Next Sunrise Sector
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The education market in India is over $90 billion and growing at a healthy rate of 15 per cent CAGR. By 2020, India will have the world's largest tertiary-age population and second largest graduate talent pipeline globally.
Presently, higher education contributes nearly 60 per cent, school education 35 per cent, pre-school segment 1.6 per cent, and technology and multi-media 0.6 per cent. The higher education sector in India is poised for an average growth of 18 per cent CAGR until 2020. Online learning (eLearning) in India is still a minuscule segment – standing at less than $1 billion, but the same is growing at a healthy CAGR of 40 per cent.
Transformation of Indian Education Industry is happening gradually from conventional brick-and-mortar to digital education trends. Over the last 3 to 4 years, frugal innovation is something common amongst the start-ups succeeding in the education sector. Experts predict the online learning market size and investments to grow significantly in the coming years.
Furthermore, due to India’s infrastructural constraints, the reliance on technology for education is expected to grow even further, with even more organised investments in this space. “Technology intervention in education, infusion of PE capital in test based examination businesses are key growth drivers of education start-ups,” comments Sanjay Bansal, Founder and Managing Partner, Aurum Equity.
Recent developments such as standardisation of educational curriculum across regions and mobile broadband penetration have led to increased investment in Education Technology (EdTech) space.
Education sector has undergone many changes with the involvement of evolving traits in the existing system and therefore, has significant contribution towards transforming India. Technology and usage of digital media are considered as some of the emerging trends in the education sector.
“Education in India has developed gradually through several phases. However, the change is not balanced across the nation. Economic growth and privatization are the two major roadways to the present state of education market in India,” mentions Ajay Chhagani, CEO, Rise India.
Founded in the year 2012, Rise India is an education and training group serving over 50,000 students on various vocational skills such as Retail, IT, BSFI, Construction, Driving, and Renewable Energy.
Over the recent decade, Education Technology has become the go-to-innovation to incorporate at schools and institutions. The popularity of interactive smart boards came into being in the early naughts and has gained a lot of traction among the education institutions.
Yogesh Agarwal, CEO, Applane Solutions says that Indian education is on a transforming phase. Even if there are no fundamental reforms in this sector, a number of emerging traits are becoming pertinent.
Gurgaon-based Applane Education is a Cloud ERP that helps educational institutions focus on delivering quality education. Applane claims to be the only Education ERP provider backed by a Google Cloud Service Partner.
“While privatisation has led institutes and universities to adopt neoteric policies and methods of education away from the ambit of government sanctions, economic growth rendered a sense of quality and competitive education in students as well as their parents,” adds Agarwal.
Even through the education sector in India is poised to grow at the rate of 18 per cent annually by 2020, the sector is plagued by a number of critical issues. There have been huge gaps throughout the socio economic structure pertaining to access to quality education.
With privatization, quality education became handy only to those sections of society who have the capability to invest hefty sums. This has been creating further socio economic gaps between the deprived and the privileged sections of the society. In India, it seems democratisation of education has still a long way to go. There has been a consistent gap in quality of education between government and private sectors.
“Albeit, EdTech carries fantastic potential to enhance the teaching and learning process, if educators are not able to meaningfully incorporate it into their lessons or collate quality content designed to excite learning, EdTech will be rendered to the status of just another showpiece,” Rupesh Shah, CEO and Co-Founder InOpen Technologies.
Benesse Corporation and Ventureast backed InOpen technologies is an education start-up imparting life skills through Computer Science Education. Founded in the year 2009, the start-up was incubated under Society for Innovation and Entrepreneurship (SINE).
Shah adds further, “Currently, our flagship academic programme focuses on K-12 Computer Science that elevates regular ICT class to a place where students develop thinking process skills, explore underlying principles that go beyond simply learning parts of a computer, and office applications.”
On the other hand, Chhagani points out that the current education system is proven to be inadequate to develop skills in students. Therefore, Rise India is working towards livelihood creation through better education and better skills to this marginalized section.
Hurdles in growth path
Education start ups are mushrooming in the education market of the country, but the major challenge for them is lack of sales strategy. Companies are finding it hard to pitch their products in schools and institutions. This is primarily due to lack of awareness and motivation to use new models of education.
“Start-ups making a strong mark in this space will need to consider all the stakeholders in the system, understand their problems, find a solution that integrates all the solution components and deliver it in a way that aids and empowers the modes and flexibility,” says Chhagani.
“Many institutions are not confident about returns from investment in new technologies. Most of the start-ups are based on ICT and this platform has not become a common trait across Indian schools and colleges. On the other hand, extraneous procedures, which are to be followed while establishing collaborations with institutions is a major obstacle,” says Agarwal.
Vishal Chopra, Co-founder, CourseKart, points out that language based learning, poor accessibility given infrastructure bottlenecks, poor affordability and lack of proven scale models (worldwide) remain major challenges.
Till now, the education sector has never been a sunrise sector for investors. Therefore, start-ups face additional challenge of impressing the investors. But the future prospects look good, and the space is slowly generating interest from investors.
Incubators, accelerators and investors have worked hard in creating more success stories out of the education sector. In the education space, due to scarcity of investors, incubators and accelerators are preparing start-ups to bootstrap and get profitable in the shortest time.
“Growth hacking, hockey stick model and adaptability to new technologies by customers (academic institutions, educators and students) are something on the top agenda for incubators and accelerators in India,” says Vikram Upadhaya, Founder, GHV Accelerartor.
Incubators and accelerators play a pivotal role in nourishing the small business. At the outset, they provide assistance by screening and rectifying the business plan and make it more appealing to the investor community. They utilize their network and help the business to get recognized among their business community. They also help the start-ups with marketing assistance, accounting activities; provide access to loans, strategic partnership with angel investors or VCs, Intellectual Property management and mentoring.
“Incubators and investors play a critical role in seeding risk-takers in their pursuit of disruptive innovation. Without their support, it would make it even more difficult for entrepreneurs to strive forward in the face of ambiguity,” avers, Vishal Chopra, co-founder,CourseKart.
CourseKart is a scalable, secure and cloud-based platform that enables instructors to engage, interact and collaborate with their students. The education start-up provides test preparation materials, both online and offline, to over 50,000 students across 50 cities.CourseKart is looking to raise Series A fund in second quarter 2015.
From the investors’ view point, education as a sector has had a negative bias from the investment community driven by most of the investors having lost money in education sector over the last 3 years. Even in the Silicon Valley, it is only as late as 2014 (end) that education sector has caught the fancy of VCs.
“Short term investments in the core education sector offers lower ROI. If one comes with a longer term perspective they will be rewarded. Also technology applications in education sector will offer higher ROI,” Vikram Gupta, Founder and Managing Partner, IvyCap Ventures Advisors Private Limited.
Role of government
Educations start-ups are of the view that the new Ministry has professed the need for reform and immediate action. What is most relevant to edupreneurs are the contents and extent of implementation of the Right to Education Act 2009.
“To create a better scenario for growth of micro level ventures in education sector, necessity of reforms is more in education sector. Form the viewpoint of establishing ventures, policies are amicable so far,” mentions Agrawal.
Bansal states that government of India does not need to create specific policies for small firms in educator sector in India, but identify the importance of education in India in a more holistic way and make fundamental changes to regulations, so that technology can be used as a mechanism to impart education.
But keeping a rather contrarian view, Upadhaya expresses his concerns over the lack of concentration from the government’ side in formulating favourable policies for the education start-ups.
Experts believe that the Indian Education sector will see a lot of growth with availability of new technologies specific to distribution and creation of content. The sector will also see emergence of new business models related to outsourcing of non-core operations of educational institutions. Moreover, the sector is more likely to witness lot of consolidation as smaller companies will get acquired by the larger companies.
“After eCommerce and healthcare, education sector is going to be a sunrise sector for start-ups,” emphasises Upadhaya. Online platforms, cloud technology and mobile devices are going to be more imperative to this market. Many new enterprises will emerge with innovative ideas and ranges of products will be extensive. However, quality must be a consistent aspect in them to survive.