How to build a startup like Unacademy and WhiteHat Jr: Pratik Poddar of Nexus Venture Partners
In this week’s 100x Entrepreneur Podcast, Pratik Poddar, Principal at Nexus Venture Partners, discusses the growth of edtech startups in India and reveals what he looks for in a founder.
Pratik Poddar, an alumnus of IIT-Bombay, is probably the youngest Principal at a VC firm in India. He previously worked at Morgan Stanley and The Blackstone Group, and founded companies such as social ecommerce platform Clipr, marketing platform Scatter, and content platform Content R Square.
In 2015, Pratik joined Nexus Venture Partners as an Investment Associate and is currently the Principal at the VC firm.
Pratik Poddar, Principal at Nexus Venture Partners
Founded in 2006, Nexus VP is an India-US venture fund, investing in global technology products and tech-led businesses for India. Nexus VP’s portfolio companies include , , , , , , , Zolo, and , among others. The venture capital firm has made several exits as well.
Pratik says most of Nexus’ portfolio companies are product-first and that’s the DNA of the VC firm. But for every startup that Nexus backs, there are 10 others solving a similar problem. So, what exactly differentiates a Nexus-backed entrepreneur from the 10 others?
“We discuss risks as well. For every problem you are proposing, the thought process is very product-driven. And it’s a founder skill that we truly look for. In most cases, a lot of these guys will not be thinking about solving problem by throwing money or people at it. And I think that is a unique trait that I find in a lot of Nexus entrepreneurs; that’s what we love backing,” he explains.
In this week’s 100x Entrepreneur Podcast, Pratik discussed the growth and monetisation of Indian edtech startups with Siddharth Ahluwalia.
Edtech: COVID-resistant sector
The only sector that has seen a huge uptake despite the coronavirus pandemic and the subsequent economic slowdown has been the edtech sector. The sector is seeing tailwinds stronger than ever before, and has been observing huge inbound growth, in terms of users and monetisation.
Pratik says a couple of things that happened in the last three to four years have been responsible for this. The confluence of smartphone penetration increase, faster internet because of Jio, payment infrastructure, and digital payments facilitated this trend. “Because of these, there was already infrastructure for education companies to grow on,” Pratik says.
With COVID-19 forcing people to stay indoors, the idea of e-learning gained currency. And after some experimentation, users have realised the worth of online learning.
“I would argue that over time people should think about edtech as even better than offline education that they were getting,” Pratik says.
The democratisation of content from the supply side means one can access the best quality content easily. Further, with creation tools improving and people learning to create better quality content, one would probably find a better teacher online.
“This is a large social experiment that we are going through. And it seems that the result of the experiment is clear. Online learning is good; perhaps even better than offline learning. So, we should see a massive shift in the perception of how people think about online education,” he adds.
Nexus is an early investor in K-12 edtech startup , K-7 education company Whitehat Jr, and also in Quizziz, an edtech platform that makes learning fun by introducing quizzes and games. Nexus has also invested in upskilling companies and .
Offline vs online education
India has a lot of exams and cracking one is like a ticket for middle or lower middle class Indians aiming to improve their socio-economic status. This is why most Indians either try to crack the civil service exams or get into a top engineering or medical school, creating a huge demand for test preparation educational companies.
Pratik says coaching institutes in India work like the caste system. Students need to take an exam and are divided into groups based on the marks they secure. Better scoring students get the better teachers and classmates, and have a higher chance of success than those who get less-motivated teachers and classmates. This, despite paying the same amount of coaching fees.
Edtech startups are breaking this rule and democratising the education system by making the best teachers accessible to every student. “This has led to new supply creation and has expanded the market phenomenally,” Pratik explains.
As far as the teacher-to-student ratio is concerned, in online education, a lecturer is different from the doubt-solver, who is different from the mentor. This model works more effectively than the one-on-one classroom model, Pratik feels.
Unacademy: The journey so far
Pratik says before investing in Unacademy, Nexus’ biggest challenge was closing the deal, not wondering if it should invest in the company.
Unacademy, which started as a live test prep platform, has now expanded to K-12 and other categories as well. The edtech startup started monetising early last year and has recorded tremendous growth since then. According to Pratik, Unacademy is perhaps the second largest revenue-generating edtech company in the country right now. He adds that the company is doing Rs 100 crore in monthly revenue.
However, Pratik feels that there is still a long way to go for edtech players, as they are yet to capture a larger portion of the market.
“I strongly believe that in the next five to 10 years, we will see multiple $5 billion and $10 billion revenue educational companies coming out of India. This is the need of the hour and we don’t have the fundamental infrastructure created by private companies or by the government. A lot of value will be captured by startups and entrepreneurs working in this space,” Pratik says.
Investing in WhiteHat Jr
Nexus is also an early investor in WhiteHat Jr, an online coding platform for children. When speaking to Founder Karan Bajaj, Pratik recalls that the discussion was around two things: building a team, since Karan was a single founder then, and working on the risk of WhiteHat Jr turning into a niche, rich-people product.
“While we were iterating on the idea with Karan, we unearthed that the market was yet to be created; there was a lot of latent demand,” Pratik says. Additionally, the team discovered that there was “a lot of appetite to pay for a solution like this, and there was no second best alternative”.
Pratik says that it is all about getting deeper into the skin of the value proposition and that education is fundamentally a high-margin business. “Because at the end of the day, you are selling aspirations and hope,” he explains.
Nexus invested in WhiteHat Jr in the seed round, when Karan was the only person in the startup team. There was no product, no experiment; only one person trying to think of an idea.
Later, Nexus co-led a Series A round with Owl Ventures and Omidyar Network India, after the company showed traction and there was product-market fit.
Pratik reveals that up to 60 percent of the parents paying for WhiteHat Jr are from Tier I cities of India; the rest are from Tier II and Tier III cities of India. “There is a huge demand. It is a supply-constrained market right now,” he adds.
What VCs want
Nexus is bullish on education. “It is one market that has both scale and monetisation, which is why we should be seeing multiple multibillion-dollar revenue companies being created in education out of India,” Pratik says.
He further says edtech players in the US cater to a very thin slice of the market because of the existence of public and private infrastructure of education. In India, on the other hand, entrepreneurs are creating the infrastructure.
Speaking on the qualities that VCs look for in edtech entrepreneurs, Pratik says that Nexus looks for entrepreneurs with a product-first approach and the scalability of the model.
“It is not as easy to get customers' love, because at the end of the day, there are almost always many options. We look for that maniacal focus and obsession to create a high quality experience customer.”
A lot of this depends on the positioning of the company and creating a package that is easily consumable for both, parents and children.
Nexus also focuses on observable outcomes. He says it is important that there is some goal associated with education for people to be willing to pay. According to Pratik, the founder should be able to communicate that well and understand the nuances of the demand.
Nexus advises its entrepreneurs to be a leader in a small market, and then expand into allied markets.
A successful edtech startup also needs a complementary team. Nexus often asks founders if they can build a high-quality team that can tide over tough times.
“When we evaluate any investment, we look at the market, the approach, and the team. In most cases, it's the team first,” Pratik says.
(Edited by Teja Lele Desai)