Education sector consolidating now3 min read . Updated: 19 Aug 2020, 06:53 AM IST
We expect covid-19 to accelerate the shift over the medium term in K-12 market share from government to private schools, says Gopal Jain, co-founder, Gaja Capital
MUMBAI : India-focused private equity firm Gaja Capital, which has been investing in the education and ed-tech space since 2005, expects the covid-19 crisis to accelerate market share gains by private schools in the K-12 segment. India is the most attractive private education market in the world, with the kindergarten to class 12 (K-12) space comprising 270 million children, 10 million teachers and 1.5 million schools. Unlike most markets in the developed world, Indian K-12 education is significantly privatized with parents voting for paid, private schools over free government schools, says Gopal Jain, co-founder, Gaja Capital, in an interview for Mint’s Pivot and Perish series. Edited excerpts:
How will the pandemic change the education sector?
We expect covid-19 to accelerate the shift over the medium term in K-12 market share from government to private schools. India is the most attractive private education market in the world. India has the world’s largest K-12 system with 270 million children, 10 million teachers and 1.5 million schools. Unlike most markets in the developed world, Indian K-12 education is significantly privatized with parents voting for paid, private schools over free, government schools. Through the covid-19 crisis the gap between private and government schools has widened. Many private schools have ensured continuity by offering online classes, etc. By comparison almost the entire government K-12 sector is non-operational.
The education sector is attracting a lot of investments. Do you think this will continue?
The hype might evaporate, but the increase in investor interest is here to stay. There is still a lot of catch up waiting to happen between what consumers spend on education and the amount of market value this education spend has created. Also, schools have discovered blended learning. So far, they had been reluctant to retain control of learning beyond the classroom other than through projects and homework. This has enabled the emergence of the private offline tutoring market and learn-at-home companies. Schools will leverage digital technologies to offer blended learning and extend their reach to at-home. This will have a positive impact on both revenues and academic outcomes. At-home engagement will go beyond academic content. We are already seeing some green shoots—at-home engagement has been accelerated by covid-19 , with a near two times growth in website traffic, paid user base, user engagement levels and willingness to pay.
Do you see partnerships with academic institutions (especially K-12) as the next step to scale up from existing online ed-tech demand?
We see a permanent change in the way schools look at the post-lunch, or at-home sector. Schools have realized they can improve both educational and financial outcomes by moving into this space using online channels. This will in turn increase B2B tech spends and partnerships. While most schools will not be able to afford expensive, on-premise technology infrastructure, they will seek to rent technology solutions (SaaS) for digital payments, finance and accounts, learning management systems, live classes, assessments, reporting and collaboration.
Given the number of rapidly growing edu-tech companies, do you see a possibility of consolidation in the near future?
There is consolidation happening as we speak. But it will accelerate when the investor hype dissipates. The K-12 space will see a fresh wave of mergers and acquisitions, and consolidation opportunities. In the short-term, covid-19 will impact schools much like other small businesses. Mandatory education is insulated from demand shocks, but schools will face stretched receivables, reduced availability of debt for capacity expansion and cost pressures.
How should prospective startups in this space differentiate themselves?
Focus on usage and outcomes rather than merely acquiring customers. The lack of regulatory oversight or rules in online ed-tech selling is bound to be addressed at some point in time.