Covid-19 has been a tailwind for India’s burgeoning ed-tech sector—and acquisitions are proof.
In the first six months of 2020, seven ed-tech companies were acquired, according to startup data research firm Tracxn. This is higher than the four buyouts that happened during the same period last year, and more focused on consumer-facing ed-tech, as against business-to-business online training firms last year.
Three of the acquisitions this year so far were done by Facebook-backed Unacademy.
India’s fledgling ed-tech market is set to touch $3.5 billion by 2022.
“Although all the stakeholders were already moving to adopt digital technologies, Covid-19 has definitely led to faster transition and faster migration,” said Rajeev Tiwari, co-founder at K-12 ed-tech firm STEMROBO Technologies. After India’s Covid-19 lockdown in end-March, STEMROBO’s own coding platform “Tinker Coders” registered 50,000 free users and over 3,000 paid users in India and abroad in the last few months.
The biggest player in the K-12 segment, Byju’s, attracted over 15 million new students to its platform. In July, the ed-tech company clocked over Rs500 crore ($68 million) in revenue. On Aug. 6, it acquired a two-year-old Mumbai-based coding start-up, WhiteHat Jr, for $300 million.
The acquisition trend is fueled by the over-flowing war chests that companies like Byju’s have created. Byju’s raised over $500 million since the start of 2020 from existing investors Bond, General Atlantic, and Tiger Global. On Aug. 26, it raised over $120 billion from Israeli-Russian millionaire Yuri Milner’s DST Global. Meanwhile, Unacademy raised $150 million from Facebook and General Atlantic in February. Yesterday (Sept. 2), it entered the coveted unicorn club (startups worth over $1 billion) after raising $150 million in a round led by Japanese investing giant Softbank.
Experts believe most of these are likely old deals coming to fruition now but some may have accelerated in light of Covid-19.
With the sector gaining from the Covid-19 lockdown and the resulting shut down of educational institutions, the funding and M&A activity is expected to continue in the short to medium term period, said Nidhi Gupta, technology analyst at GlobalData.
Already, upGrad has earmarked Rs50 crores for two or three acquisitions in the fiscal year 2021, CEO Arjun Mohan told . The firm has also shortlisted a few prospective companies based on two parameters: “Does it give me access to a new market and does me give it access to new product capabilities?”
Covid-19 has “transformed user behaviour,” said Maneesh Dhooper, co-founder of online English and Math programmes for pre-teens, PlanetSpark. Nearly 87% of PlanetSpark users intend to stick with online learning even after the pandemic passes, according to a survey. Additionally, India’s New Education Policy approved on July 29, pushes for digital education in the K-12 space.
As the market matures and consolidation picks up, the 300-plus ed-tech startups in India need to devise ways to stand out in the crowd.
“Niche content and courses, new promotional methodologies, and competitive subscription packages are some strategies that would help ed-tech companies differentiate from others in the competitive marketplace,” said Gupta of GlobalData. Joining hands with more established players may be the best bet for many.
Ultimately, growth depends on how well these companies circumvent barriers.
Over 57% of Indian students cited poor internet connection as their biggest challenge for e-learning, according to an August survey of 10,000 students by scholarship portal Vidyasaarathi. ”Merely owning a smartphone isn’t always enough,” said Raghav Chakravarthy, co-founder of kids’ online quizzing platform QShala. “There is a basic understanding of technology and minimum connectivity that also determines the experience.”
Then, there are areas where online education cannot supersede the real deal at all. For young children, “it will do more harm than good during the early years,” said Arunprasad Durairaj, CEO and co-founder of Flinto Learning Solutions, a Chennai start-up launched in September 2013. “The more children interact, play, and explore with physical materials, the more they will learn, and online classes are no replacement for this.”