As China’s crackdown on its tech industry extends to edtech, spooked investors appear to be turning attention to another huge market for online education – India.
Vedantu, an edtech platform has raised $100 million in a Series E round, making it the latest Indian startup to become a unicorn. The fund also marks another milestone for India’s online learning industry.
The round, which pushed its value to $1 billion up from $275 million early last year, was led by Singapore-headquartered — and Temasek-backed — private equity firm ABC World Asia. The startup said the new round was “strongly” supported by existing investors Coatue Management, Tiger Global, GGV Capital and WestBridge.
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Based in Bangalore, Vedantu offers live and interactive courses for students in grades six through 12. Through partnerships with Airtel and Tata Sky that enables it to offer its courses on their respective satellite cable TVs, the startup offers a large library of lessons at no cost to students.
In July, China extended its tech sector reforms to edtech, asking companies in the industry to go non-profit. The move has wiped over $100 billion in China’s online learning industry and forced investors to turn their attention to other places.
India, with a booming digital market that has been enthusiastically spearheaded by Prime Minister Nerandra Modi, has become a favorite destination for investors looking for edtech markets to put their money. The effects of COVID-19 in the country has also spurred the number of students who have switched to online learning, pumping the growth potentials of the edtech sector.
India has over 250 million school-age population, the largest in the world. The country’s edtech user base saw a sharp spike due to COVID: total users grew 2x, from 45 million in 2019 to 90 million in April 2020, analysts at Bernstein wrote in a report to clients earlier this month.
Vedantu says it has amassed over 35 million monthly active users, and as of last year, had 200,000 paying customers. Vamsi Krishna, co-founder and chief executive of Vedantu, told TechCrunch in an interview that paying subscriber figures is expected to more than double this year. The startup’s revenue has also grown more than 4x in the past one year, and the current annual run rate is around $65 million, he said.
While India booms with millions of students, the quality of education and its affordability have become two major challenges. Online tutors are now working to fix the challenges.
Besides Vedantu, India is home to other online learning platforms such as Unacademy and Byju’s, which operates an eponymous digital reading platform for kids aged 12 or younger. The company, which in July, acquired Epic in a $500 million deal, holds the country’s most valuable startup status.
Krishna said Vedantu‘s goal is to fill the vacuum in India’s education sector not marketing, (explaining why the startup isn’t funded regularly) and it will keep innovating in its own pace to achieve that.
“You have to look at our genesis. We were already running a successful education venture. The reason why we started Vedantu was to solve the challenges teachers and students were facing. Having spent 16 years now in the education space, we know that creating a significant impact takes time. So our orientation has always been long-term,” he said.
Vedantu has organically amassed some users in over 47 additional countries, and has been looking for opportunities either in merger or acquisition, to expand its services.
“As long as you are able to innovate for students and deliver value, nothing can prevent you from creating a long-term sustainable company. You can’t afford to keep getting distracted with what others are doing and how their revenue or valuation is growing. This is what we have been telling our team from the beginning,” he said.
Per TechCrunch, analysts at Bernstein estimate India’s edtech market to be worth $126 billion by next year, up from $63 billion in 2016. Spending on the K12 education market is expected to jump to $55 billion by 2022 and the post-K12 education market is projected to hit $71 billion.
In a statement, Sugandhi Matta, chief impact officer at ABC World Asia, said, “Vedantu embodies our investment themes of providing better access to quality education and using digital technology to improve lives and livelihoods. In India, online education has the potential to extend the scope of ‘right to education’ to students in the underserved community and capture the ‘next half billion’ income group, representing over half of the country’s student population.
Vedantu said it plans to use the newly raised funds to expand its offerings aimed at students in grade one to five.