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Evolving trends in Ed-tech — following the funding breadcrumbs

Photo by Compare Fibre on Unsplash

The widely quoted KPMG-Google report on Ed-tech sector, released in 2017, claims that the segment is poised for 8X growth over the next five years. According to the report India’s online education market is set to grow to USD 1.96Bn by 2021!

Continuously shifting grounds of this segment have kept the start-ups on their feet forcing them to innovate, invest in technology, and identify new business models and consumers. Even the investment scenario in the Ed-tech sector has not been consistent. It has been yo-yoing from early stage euphoria to cautious optimism.

2015 was the year of Ed Tech start-ups. With almost 44 early stage deals the sector was the sweetheart of the investment community. Investor interest in Ed-tech peaked in 2016, with startups securing a total deal value of $269 million for the year (according to VCCEdge). However, the deal value witnessed a drop in 2017, with investors putting in a total of $162 million in Ed-tech firms.

Source: https://www.vccircle.com/flashback-2017-ed-tech-startups-get-a-tough-funding-lesson/

Year 2018 has already seen a lot of movement — consolidation across the sector with bigger firms having deeper pockets acquiring smaller, headline grabbing high amount funding for the selected few, angel funding to new start-ups, and validation of new business models.

The best way to identify trends is to follow the breadcrumb trail of money! A big picture starts to emerge if we trace the companies that have received significant funding till now-

1. Strike the golden pot of ‘profitable business model’

Yes! It sounds clichéd, but nothing attracts more than a profitable business model. Investors in Ed-tech space are not shying away from investing in different business models veering away from the glamorous direct marketing B2C model.

Till now there has been almost negligible investment in companies selling to schools. The reasons are — longer sales cycles and low switching cost. But things seem to change with $25million investment of Gaja Capital in Educational initiatives. The company has been popular for its K-12 assessments and adaptive learning offerings to schools.

Another example of different business model is Cue Math that built its business of after school match coaching through multi-level franchisee model. Cue math received $15Mn funding in 2017. An after-school math coaching provider that operates on micro-franchisee model.

Among the companies in the re-skilling space, Springboard received $9.5Mn funding in Dec 2017. It recently launched specialised 6-month long courses that not only provide content but also an industry mentor thus easing out the process of career change.

2. Gamification, Adaptive learning and Artificial Intelligence — Solving the million dollar question of customer retention

Companies have started to realize that customer retention in the Ed-tech space is the most difficult piece to solve.

As Byju turned profitable this year after crossing Rs.100 crore in monthly revenue, the founder Byju Raveendran said — “The launch of the personalised version of our app last year further helped us boost engagement and enhanced the learning experience for our students.

Personalisation of learning through AI/adaptive learning and gamification has helped companies hold on to their customers. Established in year 2011, Byju has garnered over $244 million in funding till now.

Apart from companies operating in K12 space, test prep has also turned towards personalisation to reduce attrition.

Reliance has announced investing uPto $180Mn for a majority stake in Embibe. Using analytics and AI, Embibe captures student weakness centred on critical exam performance metrics like accuracy, speed, time management, stamina, attempt planning and confidence. Other AI- based start-ups working in this space are Bodhiai and Vedantu. Vedantu is raising up to $10 million (Rs 65 crore) in a fresh round of funding, after raising $5Mn in series B round from existing investors in 2018.

3. Online? Offline? Or both?

Coming years will see a lot more offline products/centres coming up to augment the online learning modules.

Ronnie Screwvala’s UpGrad plans to create 50 offline centers for engagement and networking. In its first round of external funding, Upgrad is set to raise $40Mn for 10% stake.

Edtech Startup IMAX Program raised $13.5 Mn funding in Feb’18. The company offers online and offline learning material in form of books and activity kits to schools and retail consumers.

Eupheus Learning is an edtech startup that develops hybrid solutions, including textbooks and digital material. The company which was launched in 2017 raised an undisclosed amount in a Pre Series A Funding from Nikhil Vora, founder and CEO of Sixth Sense Ventures in 2018.

4. Early stage- Bad; Series A — Good!

Data shows that investors are still not so confident about the early stage companies in the Ed-tech sector. Investors are more inclined to partner with companies who have proven their business model and have shown potential for growth.

In year 2017 angels and seed deals saw the least investments in terms of the deal value.

However, the problem does not lie in the supply side. There are enough entrepreneurs working in the Ed-tech sector but a break through idea remains elusive. At best the market is crowded with multiple “me-too” companies cropping up. To add to this investors want assurance that the promoters can solve the problem of monetization, customer retention and growth, all of which takes time to prove.

Start ups that were able to raise seed funding in 2018 were — Kidovator and Indigolearn. Kidovator provides program to develop 21st century skills for partner schools while Indigolearn provides e-learning solutions through byte-sized modules to professionals in accounting and finance.

5. If content is the king then ‘Immersive content’ is the future king

At present Augmented reality and Virtual reality are the most popular tools being used by Edtech companies. As the price of a VR headset continues to drop, the solution becomes affordable for a vast range of K12 schools giving options such as virtual field trips, lab-based experiments etc. Investment in research and content creation is required to create marketable solution to institutes as well as retail consumers.

Smartivity, which started out by creating STEM kits for children has now started producing augmented reality enabled coloring sheets. The company has raised another round of pre-series A funding from existing investor S.Chand.

Ed-tech sector is still in its adolescence phase trying to understand the consumers, navigate the infrastructure, identify robust revenue streams, and to show potential to scale. Thankfully there are enough entrepreneurs working to solve these problems positioning the sector as the next big thing after e-commerce in India.


Articles from VCcircle, Unitus ventures, Crunchbase and company websites.

Watch this space for more on Education, EdTech, and everything in between.



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LoEstro Advisors

LoEstro Advisors

Advisory firm with sharp focus on Fundraise, M&A, and Strategic Consulting.