Is India’s EdTech Bubble about to burst?
In the EdTech space, any education player’s success will likely depend less on how much money they can spend on advertising than on whether customers are actually satisfied with the products they purchase.
EdTech has grown rapidly, especially after Covid-19. According to Blume Ventures, the edtech space was valued at about $750 million in 2020 and will reach $4 billion by 2025. This represents a drop in the ocean of the greater education market, estimated at $135 billion in 2020 (by the same report).
India’s education sector, which traditionally has been slow to adopt technology, was accelerated by the Covid-19 pandemic. As a result, investors began pouring funds into a sector that had previously been conservative; India saw about $0.5 billion of funding flowing into edtech in 2019, and $4 billion in 2020 and into 2021. India now has five edtech unicorns. All of this when India was facing one of its first education crises, with millions of students out of school and sharpening inequality divides.
Where is this sector headed?
Valuation or value, education has typically been about quality. Oftentimes parents are willing to relocate or walk extra miles in order to send their children to better schools. Presently, most edtech market reporting focuses on the valuation of companies. The discussion about actual learning outcomes, customer satisfaction, and their impact on students is minimal. Any education player’s long-term success is likely to depend less on how much money investors invest in advertising, and more on whether customers are actually satisfied with its products.
In the education sector, most of the informal players focus on credentials and certifications. Few of these certificates lead to jobs or degrees. There are only a handful of players who offer a soft placement guarantee. It will create a more tangible impact on people’s lives if the sector shifts to actual career outcomes.
The products of many edtech players seem to have high customer acquisition costs, which are typically higher than the product’s actual price. Students in India have been attracted by fancy ads, unique sales practices, discount offers, and the ability to pay with EMIs from these edtech companies. Like the private education market in the United States, which has led to unsustainable college debt, big edtech players in India are able to sell their products to middle class Indian parents who take out loans to pay for them. Rather than replacing school, they add to the economic burden on parents who are told that if their children do not enroll, they will be losing out. It is for this reason that many edtech companies have achieved unicorn status and still do not report a profit, even at an operational level. In addition, they don’t seem to have loyal customers – with offline education a serious competitor, parents are happy to switch their children out.
Also read – Why Is Edtech Industry Gaining Popularity & Funds From Across The Globe?
Returns on investment versus economic progress: Education has been a non-profit sector. Yet most edtech companies are for-profit. With so many for-profit investors sitting on their CapTable, and their founders owning a large chunk, it seems most of the value is going to a select few. Rather than the economy progressing, investors will benefit. Would that be a good thing for India? In a country where education is a fundamental right, how long until the government cracks down on disproportionate gains in edtech? This happened in China. Will India follow? In order for edtech companies to better integrate into India’s existing education system, they should try to focus on lower-income students.
India is experiencing a crisis of education and employability. Despite the fact that we have 15 lakh schools and 40,000 colleges, the literacy rate, the quality of education, and the employability of our graduates are still very low. Would edtech companies be able to help India’s education crisis if these risk factors could be managed? If so, will they be able to solve the problem of educational outcomes and create work-ready graduates? Furthermore, if technology can be integrated into our 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 find an actual solution to our education crisis. This will be the day when this bubble won’t burst, but instead solve one of India’s biggest problems.
The author (CEO of Talerang, a social enterprise that strives to address India’s lack of work-readiness) is involved in the edtech space, is respectful of all existing players, and wants this sector to have a greater impact on the education system.
Also read – Fee Financing To Help In Infusing Liquidity In Education Industry.