Is the EdTech bubble in India about to burst?
Shveta Raina
The EdTech sector has been growing exponentially over the past few years, and even more so after Covid-19 hit. A Blume Ventures report suggests that the EdTech market was close to $750mn in 2020 and will hit $4bn by 2025. This is a sheer drop in the ocean of the larger education market, estimated at $135bn in 2020 by the same report. The market starts from early learners who are in pre-school to continuous learners looking to upskill themselves.
The Covid-19 pandemic accelerated the adoption of technology in India’s education sector, a traditionally slow-moving space. Investors started pouring funds into a sector they were otherwise wary to touch, and India saw Rs$0.5bn of funds flowing into EdTech in 2019, and $4bn flowing into EdTech in 2020 and into 2021. We now have 5 EdTech unicorns. All this while India grappled with one of the first education crises in our history, with millions of students out of school, and the inequality divide burgeoning.
The question remains, where is this sector going? A few different factors are important to consider as we evaluate the space and its players, and their long-term impact on education in India.
Valuation vs. Value: Historically, education has been about quality. Parents are willing to walk that extra mile, or relocate to reach better schools for their children. Currently, the EdTech market reporting is primarily about the valuation of EdTech companies. Little is being talked about actual learning outcomes, customer satisfaction, and the impact that these courses have on the student. I had to scan the several reports by investors and different players multiple times to try and find any impact or learning comparisons, or detailed customer feedback on any of the players. The long-term success of any education player will likely be based less on how much money investors are willing to pour into their advertising, and on whether customers are actually satisfied with the products.
Certificates vs. Outcomes: Most “informal” players in the education space, and especially those in the higher education and employability fields are focused on credentialing and certification. Very few of these certifications lead to actual employment or a degree. Only a handful of players even attempt to give a soft placement guarantee. If the sector evolves towards actual career outcomes, it will create a more tangible impact in the learner’s life.
Push vs. Pull: Several of the leading EdTech players’ products seem to have high customer acquisition costs, most of which exceed the actual price of the product. The Indian student has been attracted by these EdTech companies with fancy ads, unique sales practices, discounts and of course — the option to use EMIs. Similar to the US private education market which has led to stories of unsustainable college debt, some of the largest EdTech players in India are able to sell products to middle class Indian parents who take loans and pay for these supplementary courses. These are not replacing school, but an additional economic load on parents who are told that their child will be missing out if they don’t enrol. This large CAC is why, many of the EdTech companies that have achieved Unicorn status still don’t report a profit, even at an operating level. To make matters worse, they don’t seem to have loyal customers – with offline education a serious contender, parents are happy to switch their child out. If EdTech companies can improve their CAC and create more of a pull for their products rather than a push, their business models will appear more sustainable.
Investor returns vs. economic progress: Education has traditionally been a non-profit sector in India. Yet, most EdTech companies are for-profit. With so many for-profit investors sitting on their CapTable, and their founders owning a large chunk of the company, it seems like most of the value is going to the hands of a few. Instead of the economy progressing, a few investors will benefit. Is that what India needs? In a country where education is a fundamental right, how long before the government cracks down on disproportionate gains in EdTech? It happened in China. Is India to follow? If more EdTech companies can increase their focus on lower-income students, their model can integrate better into India’s existing education system.
India has been facing an education and employability crisis. Despite having 1.5 million schools and close to 40,000 scolleges, the rate of literacy, quality of education and employability of our graduates is of concern. If these risk factors can be managed, will the EdTechs be able to solve India’s education crisis? If yes, if they are able to actually solve the problem of educational outcomes, and create work-ready graduates, then they are here to stay. Additionally, if technology can be integrated into the existing education system, into our millions of institutions and if Edtech players can partner with them to offer quality at a sustainable, reasonable price along with strong outcomes, we will have a real solution to our education crisis. That is when this bubble will not burst, but actually rise up to solve one of India’s biggest problems!
The writer is CEO Talerang (social enterprise solving India’s work-readiness crisis), ex-Teach For India
