Is the edtech bubble in India about to burst?

Updated: November 02, 2021 1:51 PM

The long-term success of any education player will likely be based less on how much money investors are willing to pour into their advertising, and on whether customers are actually satisfied with products.

All this while India grappled with one of the first education crises in our history, with millions of students out of school, and the inequality divide burgeoning.All this while India grappled with one of the first education crises in our history, with millions of students out of school, and the inequality divide burgeoning.

By Shveta Raina

The edtech sector has been growing exponentially, more so after Covid-19. A Blume Ventures report suggests that the edtech space was valued at about $750 million in 2020 and will hit the $4-billion mark by 2025. This is a drop in the ocean of the larger education market, estimated at $135 billion in 2020 (by the same report).

The Covid-19 pandemic accelerated the adoption of technology in India’s education sector, a traditionally slow-moving space. Investors started pouring funds into a sector they were otherwise wary to touch; India saw about $0.5 billion of funds flowing into edtech in 2019, and $4 billion in 2020 and into 2021. We now have five edtech unicorns. All this while India grappled with one of the first education crises in our history, with millions of students out of school, and the inequality divide burgeoning.

The question is: Where is this sector going?
Valuation versus value: Education has been about quality. Parents are willing to walk the extra mile or relocate to reach better schools for their children. Currently, the edtech market reporting is primarily about the valuation of edtech companies. Little is being talked about actual learning outcomes, customer satisfaction, and the impact these have on a student. The long-term success of any education player will likely be based less on how much money investors are willing to pour into their advertising, and on whether customers are actually satisfied with products.

Certificates versus outcomes: Most ‘informal’ players in the education space are focused on credentialing and certification. Few of these certifications lead to actual employment or a degree. Only a handful of players even attempt to give a soft placement guarantee. If the sector evolves towards actual career outcomes, it will create a more tangible impact in a learner’s life.

Push versus pull: Many edtech players’ products seem to have high customer acquisition costs, most of which exceed the actual price of the product. The Indian student has been attracted by these edtech companies with fancy ads, unique sales practices, discounts and the option to use EMIs. Similar to the US private education market which has led to stories of unsustainable college debt, some of the largest edtech players in India are able to sell products to middle class Indian parents who take loans and pay for these. These are not replacing school, but an additional economic load on parents who are told that their child will be missing out if they don’t enrol. This is why many edtech companies have achieved unicorn status and still don’t report a profit, even at an operating level. To make matters worse, they don’t seem to have loyal customers—with offline education a serious contender, parents are happy to switch their child out.

Investor returns 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 of the company, it seems most of the value is going to the hands of a few. Instead of the economy progressing, a few investors will benefit. Is that what India needs? In a country where education is a fundamental right, how long before the government cracks down on disproportionate gains in edtech? It happened in China. Is India to follow? If more edtech companies can increase their focus on lower-income students, their model can integrate better into India’s existing education system.

India is facing an education and employability crisis. Despite having 15 lakh schools and 40,000 colleges, the rate of literacy, quality of education and employability of our graduates is of concern. If these risk factors can be managed, will edtech companies be able to solve India’s education crisis? If yes, will they be able to solve the problem of educational outcomes and create work-ready graduates? Also, if technology can be integrated into the 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 have a real solution to our education crisis. That is when this bubble will not burst, but rise to solve one of India’s biggest problems.

The author (CEO of Talerang, a social enterprise that aims to solve India’s work-readiness crisis) is a part of the edtech space, respects all existing players, and wishes that this sector creates a larger impact on the education system

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