Sudiksha will utilise the funds to streamline operations and expand its network across Andhra Pradesh, Madhya Pradesh and Bihar, said P. Naveen Kumar, co-founder and chief executive of Sudiksha.
Sudiksha operates a chain of 23 pre-schools in underprivileged localities in Hyderabad. It recruits locals, usually educated housewives, to run its branches under an incentivized profit-sharing model. It charges annual fees ranging from Rs4,000 to Rs5,000 for a child.
“We are so excited about this investment because this partnership will enable Sudiksha to not only stabilize its operations, but also further refine new streams of revenue," Kumar said.
Sudiksha will pilot test a franchisee model ahead of its expansion across the three states. It is aiming to set up 500 pre-schools over the next three years, Kumar said.
Pearson, the UK-based publisher and education company, invested $50,000 in Sudiksha through Pearson Affordable Learning Fund (PALF), set up in 2012 to give the poorest families in Africa, Asia and Latin America access to affordable and quality education. The other investors, Village Capital, Italy-based Opes Impact Fund, Ennovent and angel investor Sadeesh Raghavan, put together the remaining $160,000 in exchange for equity in the company.
“We are excited to work with Sudiksha to learn more about low-cost early childhood education models. Sudiksha is the first example of our desire to help education starts-ups focused on low-income populations at an early stage," Katelyn Donnelly, managing director of PALF, said in a statement.
This is the sixth investment by PALF, which invests in for-profit private companies in the social impact education space, from its $15 million initial capital.
PALF and Village Capital invested $50,000 and $25,000, respectively, as part of their commitment to the 2013 Edupreneurs programme. Sudiksha was one of the two winners of the three-month business incubator programme that is targeted at education entrepreneurs who are trying to make a social impact.
Sudiksha, set up in 2011, will turn profitable this year, said Kumar. It earlier raised $200,000 from The Eleos Foundation, First Light Ventures, and 1to4 Foundation.
Education start-ups have longer gestation periods and need more avenues than typical venture capital funding, said K. Ganesh, who sold his online tutoring platform, TutorVista Global Pvt. Ltd, to Pearson for $213 million in early 2013.
“India needs more angel funding options and large global corporates need to initiate small funding vehicles (small funds) to help education," Ganesh said. He pointed out that more companies such as Sudiksha are likely to get funded if the government mandates large corporations to make corporate social responsibility (CSR) investments in education and healthcare sectors.