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IDGVI News: Portfolio News

Why edtech startups will be the next to top the class

Times of India, Bangalore – 7 August, 2015

By Anand J & Shalina Pilla

Education is the next frontier to be conquered with technology.Companies are getting tuition teachers and coaching material to students through apps and videos. And yes, the VCs are sitting up and listening too

When his son Rishi entered Class 9, V Ravindhar, like most parents with 14-year olds, started worrying about marks and wanted the boy to get personalized attention from a tuition teacher. But, Ravindhar's job with LIC in Coimbatore didn't give him the time to pick and drop Rishi at various tuition classes. So he signed Rishi up for math, physics and chemistry tuition on online education platform Vedantu and chose teachers. Rishi has finished 30 hours of classes, interacting directly with teachers in Bengaluru and Chennai via video-conferencing.

Education technology companies like Vedantu, which recently raised $5 million from New York-based investment firm Tiger Global, seem to have graduated to the next level, and are using new technologies to disrupt the way tuition and coaching are delivered to students. Popularly known as edtech companies, they are getting the attention -and funding -of venture capital firms, and each targets a specific kind of student. While some focus on tuition for schoolgoing children, others aim to help you crack entrance tests, and a third segment provides professional certification courses.

“Education is the next front to be conquered using technology . Books cannot be updated real time, but we can push updates on an app and this can be distributed to millions with no incremental cost,“ says Zishaan Hayath, founder of Toppr, an online test preparation platform used by more than three lakh aspirants.

Hayath says advances in technology have made it possible to adapt question papers to a personal level. It can figure out the weaknesses of a student based on past performance on the platform, and can serve him or her appropriate content and questions.

Since videos are the most engaging form of content delivery, most edtech companies use technology to compress data so that video streaming or pre-recorded video files can be sent over EDGE or 2G connections. Faster internet speeds, higher smartphone penetration and Indians' growing comfort with the online medium have also helped the segment's growth.While e-books and tablets were heralded as the primary technology enablers a couple of years ago, smartphones and apps are taking over.

It also helps, of course, that spending on education is something that parents are unwilling to skimp on. The segment that has seen most players vying for consumers' money is online test preparation, focusing on entrance exams for IIT, IIM, UPSC and bank probationary officers.

Karan Mohla, executive director and head of digital consumer investment at venture capital firm IDG Ventures, says IITengineering coaching is where the per capita spending is at its highest, around Rs 75,000 per head. “You are not constrained by Kota [the Rajasthan town that has become a hub for IIT coaching] or national and regional differences anymore. Offline marketing is also easier if you target specific hubs and events,“ he says.

IDG has backed online test preparation platform SuperProfs, which has tied up with 200 professors across India and uploaded their lectures. The startup uses data analytics to determine a student's weak spots based on tests and provides personalized course recommendations.The courses cost Rs 2,000 to Rs 5,000 a month.Of its 1.5 lakh students, only 40% come from the metros. “The biggest problem for students in tier-2 and 3 cities preparing for competitive exams was lack of access to good teachers within their city. We ensure that the best teachers from cities like Kota, Delhi, Chennai and Bengaluru are on our platform to provide their lectures,“ says SuperProfs founder Piyush Agarwal.

Their system enables HD quality videos to reach areas even with 100 kbps speed. This ensures that people in places with lower internet bandwidth are not denied the chance to learn from the best teachers in the country . Students also get to interact with these professors and clear their doubts by booking a slot for a live online session. “We are offering the same quality of education through technology and disrupting this space,“ Agarwal says.

The main beneficiaries, of course, are students, who can study where and when it is most convenient, often at costs much lower than in traditional brick-and-mortar facilities. “Mobile education is the only way to democratize education. This generation communicates only through smartphones,“ says Sanjay Purohit, founder of iProf, a content distribution platform that also lets students engage with tutors online.To cater to the lower-middle class, the startup has introduced pocket friendly “sachets“ priced between Rs 5 and Rs 200. iProf has reached students living in the remotest of areas of the country , says Purohit.

Vedantu, on the other hand, operates entirely online as a marketplace where teachers and students meet and select one another. The tuition classes are for students from Class 6 to 12, and the charges range from Rs 150 to Rs 250 per hour. Students can rate teachers, which will be visible to potential new students.

K Ganesh, founder of Tutorvista, believes online education is still in the discovery phase.“The sector has not even started and it is difficult to say which model or segment is going to work,“ says Ganesh, a serial entrepreneur who has funded companies like BigBasket and Portea Medical. “We will see a lot of offline players taking their brand equity online.“

One such player is Bengaluru's Byju's Classes, which started as classroom coaching for MBA entrance exams but has metamorphosed into an online player. The company, which raised $30 million from Sequoia Capital recently, has been offering study material to students from Class 6 upwards on a tablet and is launching an app soon.

The company is making videos to help students understand concepts better. Founder Byju Ravindran says the app will soon reach China and Latin American markets after replacing the Indian teachers in the videos with Chinese and Spanish ones. Students can schedule sessions with teachers and clear doubts.

Globally too, funding to edtech companies has been booming, says data from VC investment tracking firm CB Insights. Financing grew from $944 million in 2013 to $1.6 billion in 2014, a 71% increase. In the last four quarters, including the second quarter of this year, education technology startups attracted $2.3 billion, a jump of 96% compared to the previous four quarters.

Global education giant Pearson made the biggest acquisition in the sector in India five years ago with the $130 million buyout of Ganesh's Tutorvista, though the industry has not seen any major exits since. But this should not be a concern, says Ganesh. “The education budget is not affected by elasticity of price,“ he says. “And Asian parents in general and Indian parents in particular are always willing to shell out extra for education.“

The decision to open public consultations was made at this meeting, he said. "We are delighted to see tangible progress being made and are optimistic about reversing the exodus of technology startups over time," said Sharad Sharma, co-founder of iSpirt, which facilitated the interaction with Sebi and has been a vocal proponent for change in current regulatory norms.