Technology Driven Education Space Booms in India: A perspective onInvestment

17th Feb 2012
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Education seems to be the buzz word among startup entrepreneurs these days. With almost 50 percent of the Indian population below 25 years, the education industry is poised as one of the fastest growing sectors, and it’s no surprise that investors are drooling over it. In Lenovo’s DO network challenge, five out of the ten finalists had their ideas engineered around the education sector. From mobile classrooms, to online tutors, today there are hundreds of such startups passionate about transforming the education system in our country.

“Opportunities are endless in the education ecosystem, both from an enterprise and digital consumer perspective. It is a highly fragmented sector and startups need to choose their segments carefully,” said Soumitra Sharma, part of the Investments Team at IDG Ventures India that has invested in iProf, a venture that utilizes tablets and outreach learning centers to impart high quality distance learning and test prep training (GRE, GMAT etc.) to Tier II and III towns in India.

Soumitra believes immediate opportunities lie with technology driven products, be it in the K-12 segment or in higher education. “Urban schools are steadily adopting new techniques- from smart classrooms to online contents- wherever there is scope for technology to improvise, there will be more opportunities to scale-up,” said Soumitra.

Recent changes in examination guidelines by CBSE have also given a new dimension to the examination evaluation system. Not just for schools, even colleges are now rapidly shifting towards automated examination procedures.

“The number of competitive exam aspirants (IIT, Medical, CAT etc.) is going to increase every year. They will not only want good content but also look for easily accessible content, be it through their smartphones or tablets. Also, many higher education institutions are increasingly shifting towards automated technology driven workflows and processes that will allow technology based-startups to innovate and improvise,” Soumitra added.

Many working professionals are also opting for e-learning and distance learning programmes. Kapil Kaushik, co-founder of Sparsha Learning Technology that recently got funded by Blume Ventures and Tempus Capital got said building good partnerships was what helped them to stay one step ahead of their competitors. In developed countries, education is considered as an investment driven by its quality, whereas for India and other developing nations, the challenge stems down to striking a balance between quality and its affordability. For investors however, it’s a win-win situation backed by a steadily rising demand. Over 40 Indian education companies have successfully managed to raise funds in the last two years and new startups are getting registered every day.

“Education is a long scale cycle and you need to be patient. It is relatively easier to sell the services, but scaling up is the difficult job and that is what investors are looking at,” Kapil added.

With improving income and greater impetus on primary education, investors are also looking at the rural K-12 market. But, to take advantage of this market, cost of content needs to come down sharply.

Innovation is the key


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According to a latest survey conducted by ASSOCHAM, Private Equity and venture capitalists firms are likely to invest Rs 4,500 crore in the education sector over the next three years. Out of the 1,000 PE and VC firms which participated in the survey, about 55 per cent said that the Indian education sector has huge potential to grow and they are planning huge investments in the area. However, too many entrants also make the sector highly competitive and difficult for startups to make their mark.

“You need to innovate either on your business model or on your product, to differentiate your company from competition.  It is also very important to have a perspective on the size of the market you are catering to, in order to understand how quickly you can scale up,” Soumitra added.

In August last year, YourNextLeap.com, a web-based engine that acts as a virtual career counselor for students, raised Series A investment from Nirvana Venture Advisors and are now busy scaling up their web-infrastructure and expanding their team.

Mohit Gundecha, co-founder and CEO of YourNextLeap.com said before approaching an investor it is really important to have a clear picture of the market size. “It is useful to show early signs of monetization as Indians are willing to pay for education and career advice,” Mohit said.

For investors, innovation is the key. Education startups that can accommodate affordable technology into their products and services and make them more accessible to users are where investors are placing their bets on.

-Krishnakali Sengupta

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