Despite a lull in the second quarter, when only $66 million was invested as venture capitalists took stock of the pandemic, edtech scored more than $2 billion in funding in 2020, nearly three times as much as in the previous record year of 2018
The $1.1 billion pumped into edtech startups in India in the third quarter this year almost amounts to the total funding in this space in the previous two years combined, according to data from venture capital analyst Tracxn. Despite a lull in the second quarter, when only $66 million was invested as venture capitalists took stock of the pandemic, edtech scored more than $2 billion in funding in 2020, nearly three times as much as in the previous record year of 2018.
But this funding spike in leading edtech players has also brought in its wake concerns over their aggressive marketing to expand fast and perhaps justify their valuation. “When you start giving companies tremendous amounts of money, the easiest place to spend that is marketing. Now, what happens is that rather than proving that my product works because of the results that come out of the student population, I’m proving my model works by the number of people joining my programme. And that’s very dangerous," says Sid Talwar, who sold his edtech startup Evolv to NIIT in 2007 and became a founding partner at VC firm Lightbox.
Marketing campaigns that sell dreams of becoming rich quickly by making apps or cracking entrance exams gloss over what percentage of their users have actually become top-notch coders or joined premier colleges.
Lives at stake
“Education companies, by their very nature, have to scale slowly," says Talwar. “They need to learn from a small group of people on what they’re able to do or not do, and realize that they’re not going to get it on the first try. They definitely don’t want to bastardize all this by marketing, and especially marketing lies, because they’re playing with people’s lives."
From his vantage point as an edtech entrepreneur and investor, Talwar believes the focus should be on learning outcomes and not just growth. “Education is massively complex. It will be years before we’re able to fully understand how impactful are certain ways to educate students. If something doesn’t get delivered on Amazon, the company gets to know within hours or days. But in edtech, it takes an inordinately long time to know if someone is learning or not. So, I’m not convinced that trying to change user behaviour quickly through advertising and making promises is the ideal way for creating an education business," he says.
The funding boom has been skewed towards leading edtech players that were already growing fast in the areas of test prep and bringing K-12 tuitions online. Byju’s alone cornered more than $1.3 billion of the edtech funding in India this year, followed by $264 million for Unacademy and $144 million for Vedantu.
These startups saw their adoption rates soar as parents searched for ways to keep their kids engaged with learning at home.
But the pandemic has also opened opportunities for players aiming to deliver tools for more engaging or holistic learning than test prep. California startup Square Panda, backed by tennis legend Andre Agassi, entered India this year, partnering state government organizations to deliver foundational literacy to kids in the 2-8 age group through games. This is an underserved segment, which has become all the more so as a large number of brick-and-mortar pre-kindergarten playschools shut down.
Bengaluru startup Quizizz, whose app enables teachers to engage students with quizzes, went from 20 million monthly active users (MAU) around this time last year to over 60 million MAU now. Whereas its early adoption came from US schools, which accounted for three-quarters of its traffic, “the US is now only 40% of our traffic as the product has become more and more global across Europe, Southeast Asia and even India", says Quizizz co-founder Ankit Gupta.
“Teachers and parents found it useful to have something interactive like this to keep the kids engaged during the pandemic."
A spinoff was that corporate clients like AWS, Deloitte and Discovery Network started adopting the app for training purposes. This has helped the startup turn profitable earlier than it had envisaged. However, its primary focus remains on kids’ education, creating tools that help them “become better versions of themselves".
Pratik Poddar, principal at Nexus Venture Partners, believes the growing adoption of digital tools has primed the market for edtech’s foray into new areas. “I’m excited about the opportunities in peer-to-peer learning and community-based education. Most of the companies that we have seen and the market has funded have been one-to-one or one-to-many, but not so much in project-based learning which arouses curiosity and creates a longer term impact."
Poddar believes another neglected area is continuing education. “After school and college, you don’t really learn in a structured manner. So, I’m excited about the potential of continuing education in India and companies being created for that."
Poddar believes that existing players have barely scratched the surface, but have made a meaningful impact on creating an ecosystem for edtech.
Malavika Velayanikal is a Consulting Editor with Mint. She tweets @vmalu
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