The ed-tech sector is facing its worst crisis, pummeled as it were by funding drought on one side and the emergence of technologies such as AI on the other. Against this backdrop, upGrad is looking to make the most of the demand opened up by skill and job obsolescence by offering cost-effective programmes, says Mayank Kumar, co-founder & MD. In this interview, he tells Akanksha Nagar that the platform is looking at offline distribution channels as a big driver of growth. Edited excerpts:
The ed-tech industry is struggling with issues such as layoffs, mounting losses, and with new technologies. What is your survival strategy?
If there’s one sector that is the most impacted due to AI/ML, education would definitely be it. We have added generative AI as part of our programme offerings, while also launching new courses. We are using this technology in making learning better, and are focusing on using it in the sales and marketing ecosystem as well. While the effects of this technology will be felt — for example, education will begin to become more automated — I think that the businesses that can use AI/ML to enhance their internal systems and processes while providing highly personalised learning will fare well.
Layoff is not something that the company has been looking at, but we have been cautious. We are not going after growth-at-any-cost but are very focused on driving growth at the right cost. We have cut down on channels that were not ROI accretive. The digital channel has its own strengths and weaknesses. While it can help you scale up very rapidly, the costs start going up aggressively beyond a certain threshold. Hence, a lot of firms start looking for offline channels for distribution and sales, and marketing. That’s a critical part of our strategy — how do we reach out to the customer that is not on digital channels? We are working on that to ensure widespread presence.
At present, up to 98% of our revenue is purely online; we are not getting into offline teaching or learning, but are focused on using offline distribution channels for expansion and scaling up in the ecosystem. The company has partnerships with entrepreneurs across 40 to 50 cities in India, who are interested in taking our online programmes, and pitching to the local markets or setting up a presence offline. The objective here is to build credibility.
Your category has acquired a bad name for focussing on marketing rather than on imparting best-in-class education.
A critical part for us is to provide outcomes for our learners; the outcomes in this sector matter because without it, education is nothing. If you just focus on selling, the market tends to fatigue and starts facing a challenge. For our long-term programmes (like MBA, Data Science), the completion rate stands above 85% and we are seeing that people are coming back and referring on an ongoing basis. At present, the firm has 10 million registered users, over 4,500 colleagues, and an employee strength of 5,100. We have learners from over 100 countries, with over 30 offices across the globe. Roughly 20% of our revenue comes from outside of India.
You said earlier that you are not getting into offline teaching. Then you set up the upGrad Institute of Medical Sciences, which is an offline campus, and now aim to set up three medical schools in the Pacific region (Australia, New Zealand and the Pacific Islands countries). What is the long-term plan?
There are only two types of talents where the shortage is very high — the entire digital and tech ecosystem, and medicine and healthcare. The shortage in both these is not just a one-time problem, but it is actually expanding. It also presents a once-in-a-lifetime opportunity for the firm to position India as a talent capital of the world — that’s our broader ambition between digital and health. India will have the largest talent pool. We believe that having a medical institution in a geography where talent can then move and position themselves globally is going to be critical. We are starting at absolute ground base zero but we are bullish on scaling this up significantly with both local and international students.
At present, we look at business in two broad components— B2C and B2B. Within B2C, there are multiple pockets of opportunities that we see. For instance, the entire space of study abroad, which is poised to grow. Our study abroad segment is expected to cross `500 crore of annual gross revenue in FY24 and will account for about 20% of the group revenue for the year. For other skilling programs like Advanced Certificate in Digital Marketing and Communication with MICA or Executive PG Programme in Data Science with IIIT Bangalore, enrolments have witnessed an annualised growth rate of 100%. On the B2B front, while we offer solutions across all major learning areas for corporate organisations, there are a lot of content libraries models that will emerge, and coaching and mentoring will become more critical.
It is reported that the company is expecting to hit profitability this fiscal. Where do you stand at the moment?
The company should become profitable this quarter. By the end of FY24, we are targeting $400 million in revenue. Close to 50% of job roles will get disrupted, more than a billion people will go through the upscaling need and 85% of corporates are saying that finding skilled talent is a challenge. For instance, tech talent is a problem not just in the US, but in Southeast Asia, the Middle East, and Europe too.
In India, there is limited access to education. For instance, just three crore students are choosing higher education, even though 15 crore students should be, meaning that the cross-enrolment ratio is barely 25% to 30%. Capturing the macro trend of skill obsolescence, jobs becoming obsolete, and people needing to stay relevant, plus offering programmes at the right cost, is keeping us in the ecosystem. Being in India allows us to price our programmes at a very affordable range, which is a big driver for us.