7 February 2020
Can more be done in early stage funding for Edtech startups in India?
India’s online education market is expected to go from $247 Mn in 2017 to $1.96 Bn in 2021*. However, we continue to see a lack of investor funding in this space and a large untapped opportunity still to be explored. Most startups in this space have focused on test preparation, K-12 and skilling, with many having similar business models. So, while we see a large number of investors providing initial funding for startups in India in the Edtech space, we don’t see many startups getting follow on funding.
In my interaction with entrepreneurs and investor partners in India, the biggest challenge I see in this sector is customer acquisition. While there are several B2C, B2B2C and platform-based models directly connecting the content providers and users, only a few ventures get the aspired growth and traction.
The reason is that there are several decision makers in the process of choosing a product or service in this sector. Education is usually an interface between the school, teacher, parent and student, and depending upon whether it is a government or public school the user and payer for the service would differ.
An Edtech company needs to understand the requirements of these various decision makers and come up with a solution that works for all. Presently we see test preparation and gamification of content being targeted at schools and users, while skill development is being targeted at corporates and users. However, there is more to be done to bring on board teachers and schools into this decision. Also, there is not enough data and experience to convince consumers that online education offers a better outcome than the traditional mode of teaching.
While we see many customers in smaller cities choosing online products due to lack of options and cost effectiveness, we still need to see a more widespread acceptance of Edtech solutions for greater investor interest to be generated. In many cases there may even be a lack of incentive for teachers and schools to provide quality education using technology enabled solutions.
So, while I cannot say if we will see more early stage funding for Edtech in 2020, we are definitely some time away before we will see more Edtech companies being launched and scaling up to the level that we have seen some other sectors. In short, there’s hope that, venture capital firms in India will show more interest in Edtech companies in the future.
*Inc 42 “The future of India’s $2Bn Edtech Opportunity, Report 2020”