Here’s why an Indian ed-tech unicorn belongs to Hogwarts territory

With the exception of J K Rowling, no one has been able to put unicorns and education in the same zip code. Recently, having attended a seminar on Disrupting Education in India, I came away with a sense that the search for a unicorn in disruptive education, at least in India, may continue to belong to the realms of fantasy.

Globally, PluralSight and Udacity are valued at the billion-dollar mark and LinkedIn acquired Lynda for $1.5B (before being gobbled up itself of course!). Also Coursera and course-prep giant Knewton are on their way to getting there. Domestically, Byju’s raised a significant $70M recently. So why should an Indian company not get there, one may counter. Furthermore, in a country where the rural school drop out rate is 35%, any innovation that can bring this down to a manageable 10–15% should surely be value-creating and given the size of the Indian market, should be able to create value in excess of billions of dollars. Well, here are my reasons as to why not:

Market size for supplemental education is too tiny: The Indian market in the supplemental education and test prep space remains very small. Unlike the US, in-face tuition centres in India have always been priced competitively. Moreover, revenue generation is in rupees whereas content hosting on cloud services will inevitably be in dollars for a quality offering. Given existing internet penetration levels and access speeds, the market simply does not exist to put the billion dollar tag on a company in this space anytime soon. Most products in this space such as Embibe, Byju etc are in competition with established players such as FIITJEE, TIME etc that have significant on ground coverage as well as good brand value sustained over decades.

Creating value is not sufficient in itself: Raghuram Rajan in his book “Fault Lines” rightly points out that politicians focus more on subsidies rather than on education in bridging income inequality while knowing fully well that the effects of the latter move have greater permanence. The long-dated returns of education which may span several electoral cycles while leaving an incumbent government to defend a big budget deficit is to blame. Well, the same cause can be attributed to the lack of big VC funding in the space. The nature of funding requires recouping returns in 5–7 years while the true impact of education an 8-year old may not be evident even20 years later. Even with the certainty of value creation, value capture remains elusive.

Unfortunately here, content is not king, delivery is!: As the son of an academic, I am well aware of the dearth of teaching talent in this country evident in the number of subsequent tenure extensions my dear father has had moving the retirement age from 60 to 62 and now 65. At rural primary levels, the situation is dire. And yet, there are startups that have focused on content creation alone with scant regard for delivery modes. For instance, teachers with mediocre academic qualifications but above average levels of empathy in delivering standardized content could solve the teacher deficit problem to a large extent. Very little focus has been made on who delivers and how the content that is readily produced.

State involvement in education: Given the ubiquity of state and centre-owned schools in the country, strong involvement with the respective education departments is required to make meaningful changes to outdated curriculum. Given that the most notable forays by government education departments in the field of technology have been in the free distribution of laptops and creation of the much-vaunted Akash tablets, cause for pessimism remains.

I would love to be proved wrong but then in terms of impactful changes, the context globally is no different. Khan Academy, for instance, runs on philanthropy as a non-for-profit initiative. Perhaps the creation of a national education fund to be supervised by a board comprising of education and investment professionals makes sense. This fund would conduct due diligence on startups seeking patient capital and would not be under pressure of demonstrating periodic returns to LPs.

I would love to hear a less pessimistic outlook on the sector. Please feel free to do so in the comments section.