Giving education a digital future

Gowdhaman Margabandu was troubled by the fact that his six-year-old son could not wait to come back from school to play with his iPad.

“Why couldn’t education be as much fun? I wanted to know if I could give students like him that experience even when studying coursework. Why shouldn’t they enjoy learning new things?” said Margabandu, who founded Digital Future of Education Pvt. Ltd in August 2011.

His venture provides students and teachers access to coursework, quizzes and activity-based learning games on a tablet—an Apple iPad, Samsung Galaxy or even India’s own Aakash, “depending on the project budget”.

According to Margabandu, who is also the company’s chief executive officer (CEO), nine schools and colleges, including some leading management schools in India, have signed up to make “classrooms technology-friendly and fun”.

Experts say there has been a surge in the number of education start-ups in India over the last two years, following the popularity of smartphones and computer tablets.

“Tablets offer a unique opportunity to engage students in a personalized manner that was not possible previously, and offer great potential for content to become highly interactive and non-linear compared to conventional books or videos,” said Anup Gupta, partner at Nexus Venture Partners, a venture capital firm whose portfolio includes education start-ups like Talent Sprint Education Services Pvt. Ltd—an online vocational training platform.

Education start-ups typically cater to K-12 (kindergarten to Class XII) education and continuing education. Experts estimate there are about 60 successful education start-ups in the market, and approximately 100-200 being launched every year.

A large number of these start-ups are said to focus on curriculum content development and mid-career education options such as skills training, vocational courses and online certification courses.

“This obvious spurt of education start-ups in the last 18-24 months is due to the sudden increase in the number of incubators in the country and the trigger of successes from the Silicon Valley,” said Binny Mathews, co-founder of Dezyre.com, an online vocational course platform.

Dezyre.com, founded in November 2012, offers about 14 courses on big-data programming and finance to professionals who wish to further their careers. Most courses are pre-recorded, except for Hadoop—a big-data programming language which is delivered live.

India Ratings and Research Pvt. Ltd, a part of the Fitch group, in a February report estimated the Indian education market to be worth ₹ 5.9 trillion in 2014-15 against ₹ 3.33 trillion in 2011-12.

“Professional education and online learning are big and growing. Working people want to improve their skills and are willing to pay to learn and earn degrees or certification,” said Ganesh Krishnan, a former CEO of TutorVista, which is an online personal tutoring website that was acquired by NCS Pearson Inc. for $213 million in 2013. This is only exit in the Indian education space in recent years.

Edupreneurs (a term sometimes used for education entrepreneurs), who were, until recently, smitten only by the idea of online content creation—be it for degree certifications, K-12 coursework or vocational skills, now want to experiment with new kinds of courses.

Khan Academy, for instance, is a YouTube video-based education platform that has become popular across the globe. It is a non-profit educational website created in 2006 by educator Salman Khan, a graduate of Massachusetts Institute of Technology (MIT) and Harvard Business School (HBS).

In May 2012, Anant Agarwal, professor of electrical engineering and computer science at the US-based MIT, launched edX, a free online education platform, to tap into the massive open online courses space.

EdX is a $60 million, non-profit venture launched by MIT and HBS, with more than 160 free courses in subjects ranging from literature and management to engineering and languages. Over two million students (with 250,000 from India) across the globe are enrolled on to courses from professors of 50 universities. The product, called xConsortium, aims to reach out to one billion students in the next two years.

“I failed my first mid-semester Physics exam in IIT Madras and it shook me up, because I knew that there were so many students in the world who want this education, but don’t have access to it. Ever since, I’ve always wanted to do something about it,” said Agarwal.

It’s a bumpy ride for most education start-ups. While hundreds are launched every year, only a fraction of them survive.

For instance, Mayank Jain, co-founder of Intinno Technologies Pvt. Ltd—a learning management system for colleges—struggled for three years, trying to convince institutions and investors in India, but failed to do so and launched StudyPad Inc., which develops core curriculum content in the US.

“If our product had to make its way into an educational institution, we had to go and convince the entire faculty and admin first. Because someone else will pay for it, we had to convince them too,” said Jain.

Delivering their product or service is a challenge faced by most education start-ups—61% of the companies built mobile and tablet apps in the education space; 54% of them leveraged the cloud for their start-ups while 32% used video technology and 25% made custom hardware or devices, according to an August 2012 survey by EduStars, and conducted by YS Research—research division of YourStory Media Pvt. Ltd.

The survey noted that most start-ups in the education space are quite small, with 61% having less than 10 employees and 25% having 10-50 employees while 4% having more than 100 employees and 11% having no employees at the time of the survey.

When asked about their monetization strategy, 25% of them mentioned per user pricing as their strategy while 21% of them use per-content, per-course pricing to monetize their product. About 32% of the companies surveyed mentioned subscription or annual contracts as their revenue model. Only 7% of them use a one-time licence payment as their pricing model. That said, 14% of the respondents use other pricing models apart from above mentioned revenue models, the EduStars survey said.

The survey concluded that there is a tendency of start-ups to use monetization strategies that provide them with a constant flow of income over a one-time payment model.

Return on investment also remains a challenge. About 39% of the companies earned up to ₹ 5 lakh per annum and 11% did not have any revenue at the time of the survey while 32% earned between ₹ 5 lakh and ₹ 1 crore and 25% of these start-ups earned over ₹ 1 crore per annum.

“The distribution channel is a challenge in education start-ups that are not online, because it essentially works as a brick-and-mortar sales business...one school at a time. Also these companies should be able to get enough traction, which according to me is at least 100 schools or customers. If they can solve these two issues, there is a lot of scope for this sector in India,” said Anand Daniel, partner at Accel Partners, a venture capital firm that organizes the education start-up competition called EduStars.

The competition gets around 300 education start-up applications every year, from which only 20% get funded. “The market size is actually not so large if you see the markets of specific education products. It is a good market if a ₹ 1,000 product can be sold to 10,000 schools,” said Daniel.

“Many start-ups adopt a ‘me-too’ model. I would encourage entrepreneurs to think in simple terms and out of the box. I would like to see more disruptive ideas in the education space coming out of India,” said Gupta of Nexus Venture Partners.

Some experts say that parents, who are major stakeholders in students’ education in India, need to take a critical look at traditional educational systems if such start-ups are to succeed.

According to Vijay Anand, CEO and founder of the Startup Centre, an accelerator in Chennai, “Parents sometimes don’t find value in lateral thinking or fundamentals-building. Many don’t know the value of online education. All they say is ‘go get a degree in IIT or IIM’. That has to change.”