GSV Ventures
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GSV Ventures

Indus Valley: the Global Capital of EdTech

In June 2021, BYJU’S raised money at a $16.5B valuation and became the most valuable EdTech company in the world. The startup is now in talks to raise at $21B. According to some sources, it may IPO in 2022 at a $50B market capitalization. Why is an Indian company valued so much greater than EdTech leaders from the US?

The story of Indian EdTech goes all the way back to the origins of “India” itself. As an American, when I think of the beginnings of civilization I think of Ancient Greece; or if I go farther back, maybe Mesopotamia. However, alongside Mesopotamia the oldest known civilizations were Ancient Egypt and the Indus Valley Civilization. Located in modern Pakistan and Northwest India, the Indus Valley Civilization was in many ways far more advanced than its peers. The cities of Mohenjo-daro and Harappa had drainage systems, planned streets, and sophisticated metal tools. The Indians developed an early system of weights and measures to record length, mass and time. They created intricate sculptures, vessels and even games. People from the Indian subcontinent have been leaders in innovation from the early era of human civilization.

Even during the era of the Indus Valley Civilization, Indians were connected to the rest of the world. Evidence indicates that they engaged in sea trade with Mesopotamia during the 3rd millennium BCE. Trade and migration would go on to define the subcontinent’s history until the colonial period. The ethnic and cultural makeup of the region was largely reset when the Indo-Aryan tribes migrated through India, from Northwest to Southeast, during the Vedic period (1500–500 BCE).

From 1500 BCE to 1200 CE, the region was ruled in parts by various empires with Vedic, Hindu and Buddhist origins. All of them were somewhat indigenous after the large-scale migrations that occurred before the common era, but even during those 2700 years, India was connected to China, the Middle East and Europe through sea and land trade routes such as the Silk Road. Indian civilizations even had extended contact with Alexander the Great, whose Macedonian armies managed to reach Punjab before turning back. From 1200 CE onwards, exogenous forces dominated politics until 1947. Muslim empires from the West, most notably the Mughals, ruled large swaths of the region for centuries. Colonial forces began arriving in the late 15th century, when the Portuguese landed in the South. By 1757, the British triumphed over their colonial peers and consolidated control of much of the Indian subcontinent. The British — first through the East India Company and then through the ‘Raj’ — effectively ruled the subcontinent until the end of World War II. Finally, in August 1947, the British ceded control of the region resulting in the birth of modern day India and Pakistan.

India as we know it is a product of “foreign” influences. Throughout history the region was in its own way a melting pot / salad bowl of ethnic groups, cultures, languages, and ideas. This great mixing has been ongoing for millenia and it is why the subcontinent is so diverse today. Just the Republic of India (not Pakistan, Sri Lanka, Nepal, Bangladesh or Burma) hosts over 121 languages and more than 19,000 dialects. India’s diversity and global, historical connectivity are among the strengths that led to its modern innovation ecosystem.

Sajith Pai produced a terrific ~7,000 essay on the evolution of the Indian startup ecosystem. In short, it began somewhat in parallel to the rise of Silicon Valley in the 1980s and 1990s. But the real inflections were the rise of FlipKart in 2010 and the incredible adrenaline shot from Reliance-Jio in 2016. This current wave of innovation in India is a generational opportunity due to a perfect storm of catalysts.

Today India is uniquely positioned for innovation, particularly in education technology. Relative to China and the US, India has stronger projected GDP and GDP per capita growth. In addition, India’s literacy rate is much lower at 74%. Most strikingly, India has a much younger population than both China and the US on a relative as well as absolute basis.The differences are projected to narrow by 2050, but they will remain. Because of demographics, the EdTech opportunity in India is comparatively just at the beginning.

Sources: World Bank, CIA World Factbook, PwC

The Indian education market represents the opportunity to help educate hundreds of millions of people across PreK to Gray. As the second largest country in the world with a population of nearly 1.4 billion — including 270 million students — India has extremely attractive demographics. 26% of the population is under 15 and 44% is under 25. India is the 6th largest economy in the world by nominal GDP and the 3rd largest by purchasing power. In large part due to Jio-Reliance, internet usage is growing at 14% annually: the country has 740 million internet users and 700 million smartphone users. Economic growth coupled with step function infrastructure changes through Jio-Reliance have created a massive opportunity in India.

150 million K-12 students in India already have internet access. 70 million of those students are considered upper middle class, with disposable income to spend on supplementary learning. The total serviceable market for Indian EdTech will however be considerably bigger than the 70 million users when it expands to serve early childhood, K-12, higher education, and adult learners. Founded in 2011 by Byju Raveendran and his wife Divya Gokulnath (2021 ASU+GSV Power of Women Winner!), BYJU’S serves 100M free users and 6.5 million paid users today across PreK to Gray. More broadly, Indian EdTech companies have 10 million paid users. Yet the market is seriously underpenetrated, considering that 150 million students in India have internet access. Inc42 estimates that Indian EdTech is a $2.8 billion market that will grow at a 39% CAGR to $10.4 billion by 2025.

Source: Inc42

In addition, India has not only a massive population of students, but also a massive population of teachers and engineers. The country has about nine million instructors and the supply could be enormously expanded by recruiting women who are not presently participating in the workforce. Furthermore, about 1 million Indian engineers join the workforce every year. Many of them come from modest backgrounds: they understand the power of education. This pool of talent is an amazing resource for Indian EdTech startups to succeed at home and abroad — Indian EdTech is a dominant export. Companies like Quizizz and Emeritus actually have the majority of their users outside India. BYJU’S generates nearly half of its revenues outside the US. BrightChamps is based in India but scaling in Southeast Asia and the Middle East.

India’s education culture is distinctly robust. In many of our conversations with founders, we heard that Indian parents will go hungry in order to fund their children’s education. Teachers are idolized by parents and students: in the early days of his business, Byju Raveendran was a superstar tutor who taught 20k students live in a stadium. Students with financial means learn their curriculum in school, and then learn it with tutors for a second time. It is not surprising that annual education spend in India is $135 billion. Moreover, the education system is incredibly competitive. Every year over 150 million Indians take high stakes exams to get into university programs as well as to get government jobs. Many of these universities and jobs have acceptance rates under 1%. Given the extremely high competitiveness of the system, learning efficacy is particularly important.

It is important to note that educational outcomes and access are not well distributed in India. India is not a monolith in terms of language, culture, or economic strength. Sajith Pai breaks down the country into three segments; in short, India1 is like Mexico, India2 is like Brazil and India3 is like central Africa. A quarter of India’s population is illiterate and less than 5% of people have higher education degrees. EdTech companies have the opportunity to expand access and bring quality education to millions of students in India. They must not focus just on the country’s elite.

However, the upper tier of Indian society is driving a robust startup ecosystem, which helps EdTech. Paytm, Flipkart, OYO, Ola, and BYJU’S have collectively raised over $20 billion in venture capital. In conjunction with elite Indian undergraduate colleges, these companies have developed a deep pool of talent. The Indian startup ecosystem boasts companies, capital and talent. These dimensions have created a positive feedback loop that generates more exciting startups every year. India is home to about 4,500 EdTech startups and new companies are started daily.

The growth of Indian EdTech is spurred on by increasing amounts of global venture dollars. Smart investors like Sequoia, Accel, Lightspeed, and Tiger Global have been pouring money into the ecosystem. The EdTech leaders are massively capitalized: BYJU’S, Unacademy, Emeritus, UpGrad and Vedantu have collectively raised over $5 billion in funding. BYJU’S, perhaps the world’s most important education company, raised $2 billion in the last two years. It was the first EdTech decacorn in the world. It recently acquired offline test prep leader Aakash for $1 billion and has been on a shopping spree.

This myriad of compelling factors — demographics, economic growth, internet penetration, talent, education culture, startup infrastructure — drives our enthusiasm about Indian EdTech. When Byju Raveendran spoke as a presenting CEO at the ASU+GSV Summit in 2017, his company had 400k paid users and was valued at $500M. Today, BYJU’S has 6.5M paid users and is valued at $16.5B. Since then we at GSV have learned a ton about education in India. Deborah Quazzo, Managing Partner of GSV Ventures, joined the board of Aakash in 2019 and of Classplus and Simplilearn more recently. I joined GSV in the early stages of the 2020 pandemic and dove headfirst into the India market. In the last 15 months, I have met 500 EdTech startups from India.

Byju speaking at the 2017 ASU+GSV Summit

We are continuously looking for EdTech companies in India that correspond with our investment themes and have the potential for impact. Every company we have backed thus far in India is expanding access to education. The landscape below highlights some of the startups that fit within our core themes.

When I joined GSV Ventures, the firm had only ever made one investment outside the US. We have now made ten investments in India, eight of which are announced.

We believe that India, a cradle of innovation thousands of years ago, will be home to many Stars of Tomorrow in the coming years.

This piece is authored by Mujtaba Wani, an investor at GSV Ventures, who leads the firm’s investments in India. Abhinav Tyagarajan of GSV Ventures also contributed. Lastly, special thanks go to Sajith Pai of Blume Ventures for his insights.

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