The Big Small Question
Forbes India|April 23, 2021
As Byju’s and Unacademy grow at breakneck speed, what will it take for smaller edtech players to survive?
NAINI THAKER & NAANDIKA TRIPATHI

Anita Kishore recalls the first time she experienced education joining forces with technology—now popularly referred to as ‘edtech’. It was in 2013 at a seminar in the Indira Gandhi Stadium in New Delhi, with about 20,000 students attending and content being projected on a screen. “Byju [Raveendran] stood in the middle of the room, conducting a session with students learning from a ‘screen’,” she says.

A lot has changed since.

Today, Byju’s is one of the largest edtech players globally, with a valuation of a little over $13 billion. So far, it has received funding of $2.3 billion from investors including Tiger Investments, Baron Capital, Owl Ventures and BlackRock. On March 31, Byju’s raised another $460 million as part of its ongoing series F round, led by MC Global Edtech Investment Holdings LP, with participation from Facebook co-founder Eduardo Saverin’s B Capital, among other investors.

With funding flowing in, Byju’s has also been on an acquisition spree—starting with Osmo in 2019, followed by online coding startup White Hat Jr last August for $300 million, making it one of the biggest deals in the Edtech space. It also bought virtual simulations startup LabInApp last September. According to Tracxn, Byju’s has acquired 11 companies worth $1.43 billion (as of February 2021). “The vision for most of these entrepreneurs is to try and get as many products out and get access to a larger platform. We have been able to scale these businesses by giving our full support, but also giving them the autonomy to run the company freely,” says Kishore, chief strategy officer at Byju’s. In the first 2.5 years since Byju’s launched its app, it saw about 45 million downloads; since the Covid-19 pandemic began, there has been another 40 million.

Then there’s Unacademy that has acquired six startups—Kreatryx, CodeChef, PrepLadder, Mastree, Coursavy and NeoStencil—in various sectors, in 2020 alone. The latest is Handa ka Funda, which it acquired for an undisclosed amount in March 2021. Unacademy’s valuation has increased 4x, from $510 million to $2 billion between February and November 2020. Its total funding is more than $400 million, including investors like Tiger Global Management, Dragoneer Investment Group and Sequoia Capital. When it comes to acquiring companies, Hemesh Singh, co-founder and CTO, Unacademy says, “Our focus is on companies that use technology in the education space in interesting ways. Also, having a good relationship and alignment with the founders is necessary.” So far, Unacademy has been focusing on prep for competitive exams, including the likes of JEE, UPSC and NEET. But from then second half of 2020, they have started looking at the K-12 segment as well.

Over the next three to five years, there is going to be a lot of consolidation in the online education space. “I feel that across three segments in edtech—K-12, test prep and working professionals—there’s going to be one to two large players in each segment. Education is not going to be like one-player-takes-all kind of a market. There will be one player holding maybe 40 percent market share, another holding 30 percent, and the last 30 percent will be owned by multiple players,” says Mayank Kumar, managing director of upGrad.

Unlike a lot of other players in this space, online higher education company upGrad has not seen an exponential jump in growth—it has been consistently growing at about 100 percent year-on-year—since it focuses on working professionals. Kumar believes, “In the longer run, there will be consolidation, and the pace of acquisition will also increase. The two or three larger players are likely to acquire multiple companies, and the large players will be ‘large’ because of mergers and acquisitions.”

With two giants emerging, what is the future for smaller players: Stay niche or get gobbled up? Sajith Pai, director at Blume Ventures, one of the largest investors in this space, says, “These two—consolidation and the arrival of new innovative players— will keep going hand in hand.”

So far Byju’s has focussed on an asynchronous app-based approach, where content is available for students to access at any time. The acquisition of White Hat Jr was to help the company move into a synchronous format and build its one-on-one live tutoring model. “White Hat Jr has done a great job in scaling this model, with over 10,000 teachers, while still maintaining an average session rating of 4.85/5,” says Byju’s Kishore. Its live tutoring model will have an India presence, but will be focussed on international markets.

“The Byju’s acquisition was a critical step in our journey and helped us fast-track the growth initiatives. Today, WhiteHat Jr is present in multiple countries globally, and has already expanded its product offering to two subjects—coding and maths,” says Karan Bajaj, founder and CEO, WhiteHat Jr. The platform has more than 9 million registered students, of which 1.75 lakh are paying subscribers.

Test preparation for K-12 is another vertical that Byju’s is betting on big time in the hybrid space. This makes sense given the company is acquiring exam preparation firm Aakash Educational Services (AESL) in a deal reportedly worth $900 million (as on April 5, 2021), making it the highest valued deal in the edtech space till now.

“When AESL, which is a well-known name in test preparation, joins hands with large players in edtech like Byju’s, we can provide better access of test preparation education to Indian aspirants. The number of students who write test prep for medical and IIT in India are close to around 2 million,” says Aakash Chaudhry, managing director, AESL.

Blackstone-backed AESL has a pan-India network of over 205 Aakash centres (including franchises) and a student count of more than 250,000. In June 2020, in the midst of the pandemic, AESL transferred a section of its offline classes to the Aakash digital app. “Our online education has grown more than 100 percent this year. The number of students has increased by 150 to 200 percent, and we have doubled in terms of revenues. There is a great acceptance that we are experienced from the test prep side. 2020 has been our best result year in 33 years,” adds Chaudhry.

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