It’s not just Arvind Sodhani, the chief of Intel Capital, interviewed above, who’s a big believer in the potential of education in India emerging as a big business in the coming years. Other venture funds such as Lightspeed India, Capital18 and Ojas Venture Partners, to name a few, are keen to invest in a business that might seem getting crowded.
Growth potential:Lightspeed India’s Srini Vudayagiri says the fund is keen on strong regional players that can go national
Cyrus Driver, director, Helix Investments, an India-focused fund, lists three promising parts in the business: school tutorials; IIT JEE (the joint entrance exam to the Indian Institutes of Technology, the country’s premier network of engineering schools) and various state and local board exam preparation coaching centres; and vocational and soft skills training, which he describes as the largest segment in the overall business, estimated at some $40 billion (Rs1.72 trillion) by CLSA Asia Pacific.
Helix Investments made a $12 million investment in Mumbai-based school tutorial, Mahesh Tutorials Pvt. Ltd late last year, after which the incubatee firm has made acquisitions and expanded its network from Maharashtra to eight other states. Driver says his firm hopes to announce a new deal with an education company by the year-end.
The core market for education services in India, particularly schools and colleges, is highly regulated and intended to be run on a not-for-profit basis, thus keeping venture capitalists (VCs) away. But supplementary and tertiary segments, though fragmented, offer benefits of potential scale in a country where families spend up to 20% of disposable incomes on education.
Last week’s Intel Capital funding of education assessment firm Vriti Infocom followed a raft of similar deals earlier. Blackstone Group, New Vernon Private Equity and Deutsche Securities pooled Rs94 crore into Chennai-based e-learning firm Everonn Systems India Ltd in May and earlier this year KPCB (Kleiner Perkins Caufield and Byers) and Sherpalo Ventures funded education portal StudyPlaces.com. Earlier venture fund rounds in the sector were at Bangalore’s TutorVista Global Pvt. Ltd, Mumbai e-learning services firm 24x7 Learning Solutions Pvt. Ltd, New Delhi-based exam preparation tutorial Career Launcher India Ltd, Hurix Systems Pvt. Ltd and Educational Initiatives Pvt. Ltd, among others.
Will there still be more investments in the business? “There will be lots of deals. This is a fast growing sector with high profit margins,” says Driver of Helix Investments.
Still, the kinds of start-ups likely to get backed in education could be different from the ones that got funded so far. “We are exploring the segment in education that leverages technology…we are ready to put our money even at a pre-revenue stage,” says Gautam Balijepalli, principal at Ojas Venture Partners at Bangalore.
The other kind will be regional players with the potential to grow rapidly. “We are open to players that have a strong regional presence; this can be built into a national footprint,” says Srini Vudayagiri, managing director, Lightspeed India that backed TutorVista in 2006. Lightspeed India is looking at businesses in the exam training space, and vocational and soft skills training.