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Education Blog 2016-09-14

These have come out as investors’ favourite areas in education sector

E-learning is one of the areas being preferred by investors looking at the education sector. Which are the others? Find out here.

By Associate Editor
These have come out as investors’ favourite areas in education sector

The Indian education sector is seeing growth like never before. The schooling segment is anticipated to be around US$ 144 billion by 2020. In 2014, with 29.63 million students and approximately 48,116 colleges and institutions, India’s higher education segment is the largest in the world. It is expected to increase to US$ 37.8 billion by 2020.

Growing in addition to this is the EdTech sector. India has become the second largest market for e-learning after the US. The sector is currently pegged at US$ 2-3 billion, and is expected to touch US$ 40 billion by 2017, according to data by the IBEF.

It’s also a sector that has seen startups coming up in large numbers as well as investors funding these startups. But a few specific areas dominated by Edtech have seen aggressive investments in the past one year. Let’s take a look at these:

Competitive Exam/ Test Preparation

With the Indian government taking initiatives to increase the number of higher education institutions, the market for competitive exam preparation is also growing. More than 15 million students prepare for competitive exams (IIT JEE, CAT, Banking, etc) every year. However, there is a shift being seen from the traditional methods of test preparation to the technological methods of the same. Investors are seeing this shift and are all out funding such startups.

Byju’s, a test preparation startup, raised $70 million in March 2016 and very recently raise another $50 million recently from Chan Zuckerberg. In May 2016, free learning platform Unacademy.in raised a $500,000 seed round of funding led by Blume Ventures. Google India Head Rajan Anandan, CommonFloor Co-founder Sumit Jain, Taxi4Sure Co-founder Aprameya Radhakrishna, former Flipkart senior executive Sujeet Kumar, redBus Co-founder Phanindra Sama are some of the angel investors who participated in this round.

Vocational education

Thanks to Narendra Modi government’s Skill India programme, vocational education in India is also on a high. Firms like Simplilearn and Edupristine have impressed the investors in this sector, seeing huge fundings. Simplilearn recently raised $3 million from InnoVen Capital, taking the EdTech firm’s funding to over $30 million in the past one and a half years.

EduPristine too raised $10 million in its second round of funding in May 2016 by private equity firm Kaizen Management Advisors and US-based education company DeVry Inc.

E-Learning

As mentioned above, India has become the second largest market for e-learning after the US. The sector is currently pegged at US$ 2-3 billion, and is expected to touch US$ 40 billion by 2017. In March 2016, e-learning startup Flipclass raised $1 million from S. Chand & Co. Pvt. Ltd, a publisher of textbooks and provider of online educational content, and venture firm Blume Ventures. EdTech startup Prozo too raised $205,000 from investors including Nalin Jain, president and CEO of GE’s transportation businesses; Shomil Pant, head strategy at Wockhardt Pharmaceuticals; Dinesh Kundu; an unnamed McKinsey & Co director and other angel investors.

Some words from investors

Educationbiz spoke to some investors to find out what impresses them and what not. Avinash Mehra, Portfolio Manager, Acumen Fund, says, “We’re ready to invest in EdTech startups but the problem lies in the fact that many startups approaching us have only technology and no education.”

Monica Mehta, Director Investments, Omidyar Ventures, says, “We do not prefer ‘me too’ businesses. Many a times we have startups approaching us who themselves are not clear on their goals.” “A new enterprise aspires profitability. The time we give to an early investor is 5-8 years depending on how fast it grows but we are in a hurry to see whether it is able to make profit or not. We check on the high selling overheads and getting the unit economics in place,” she adds.

Gaurav Mehra, Partner, Kaizen PE, says, “We usually do not enter government startups in education as they can be lumpy. They require large funding orders and involve delayed payments though a certain level of government intervention is required when you come down the pyramid.”

All these things kept in mind, if you are planning to start your venture in the education sector of India, you know where to look at.

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