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The Past, Present And Future Of Edtech Startups
- Between January 2014 and September 2019, more than 4,450 edtech startups have been launched in India
By: Shanthi S
An analysis of China’s current state of startup ecosystem will have very few but clear winners, one of which is the edtech sector. In India too, with the nationwide lockdown, there is a sudden surge in demand for edtech startups even as others are struggling to find a way out. Ecommerce and edtech are two sectors that may survive this rock phase, say experts.
However, as of now, it will not be wrong to say that edtech is yet to gain mass traction. Despite the launch of 4,450 edtech startups in the country, India has only one unicorn in the sector, BYJU’s, with a $5.7 Bn valuation. In fact, as we have mentioned in our earlier reports, BYJU’s also had to spend a good ten years to reach the valuation. The startup worked in stealth mode from 2011 to 2015 and the app was launched only in 2015.
For new entrepreneurs in the space, staying afloat has been all the more difficult. There is still a lack of warm reception for tech in India and many other countries. What a classroom can offer in terms of interpersonal skills, is something tech may not be able to replace, say educational experts.
“In our view, the failure rate for edtech startups is comparable with any other sector. Given that education is a high-involvement category and a career-affecting service, tech adoption is usually lower compared to other services and products. Hence, edtech startups can take more time to scale up than in some of the other categories,†Pranjal Kumar, CFO and head of education fund at Bertelsmann, told us earlier.
Funding And M&As In Edtech
According to DataLabs by Inc42, between January 2014 and September 2019, more than 4,450 edtech startups have been launched in India. However, 25% of startups have shut shop while only 4.17% of startups have raised funds. BYJU’s grabbed 65% of the total funding in edtech startups. The startups are, till date, finding it difficult to create a steady revenue stream.
Role Of VCs
To a great extent venture capitalists (VC) are playing an important role in helping the startup ecosystem, including edtech, largely considered futuristic. “VC investments have often been likened to rocket fuel or running on a treadmill. When we come in and invest we want to see you grow 5x over the next 15-18 months and keep that momentum going after each round of financing,†said Sajith Pai, Director, Blume Ventures.
The VCs who have been supporting BYJU’S, Vedantu, Toppr and others in the Indian edtech industry to scale-up businesses would be as below:
- Blume Ventures: Blume has made six investments in edtech at pre-series A and seed stage. The investments have been in an array of segments within edtech including online test-prep, gamified learning, B2B white label apps for coaching classes and others.
- Sequoia Capital: Known to be very active in the fintech segment, with 13 deals in 2019, Sequoia grabbed 10 deals in the edtech sector in 2019.
- Omidyar Network: The VC firm makes equity investments in early-stage enterprises and provides grants to nonprofits in education and others.
- Nexus Venture Partners: The venture fund has backed startups such as Unacademy, Quizizz, WhiteHat Jr among others
- SAIF Partners: Toppr and Unacademy are some of the key investments by the VC in the Indian edtech market so far
- Accel Partners: They have invested in startups including Edupristine and Vedantu
- InnoVen Capital: The two prominent companies funded by InnoVen India include BYJU’S and Eruditus
Other than the above, Helion Venture Partners, Indian Angel Network (IAN) and India Educational Investment Fund are some of the prominent funds in the sector.
Mergers & Acquisitions
The edtech ecosystem also saw Initial Public Offering (IPO), and mergers and acquisitions, the two of the most common exit strategies in any startup ecosystem. As per DataLabs’ The Future Of India’s $2 Bn Edtech Opportunity Report 2020 between 2014 and 2019, a total of 35 edtech startups underwent merger or acquisition. The report also states that the Indian edtech startup ecosystem has seen the participation of 28 active acquirers, 54% of which hail from the education technology sector itself.
Source: https://inc42.com/features/the-past-present-and-future-of-edtech-startups/