Edtech sector attracts top dollar funding as traction grows
The ed-tech sector is in an overdrive. Byju’s recently spent a whopping $1.1 billion to ink acquisitions as it looks to tap into newer segments and fuel its international expansion.
The $600-million transaction to acquire Great Learning and $500-million deal to buy US-based kids digital reading platform Epic comes close on the heels of the Indian start-up’s near $1-billion acquisition of Aakash Educational Services.
Krishna Kumar-led Simplilearn that offers online professional programmes got Blackstone on board, which is acquiring close to 70% stake in the firm in a $250-million deal. The investment marks Blackstone’s first private equity investment for a majority stake in Asia in a consumer technology company.
The segment has been one of the beneficiaries of the pandemic — as classrooms moved online and more students signed up for edtech platforms to supplement restricted school learning, subscriptions boomed. Not surprisingly, investor appetite for the space continues to grow; the Blackstone deal is one among many.
For instance, behind the spate of acquisitions by Byju’s lies investor backing worth over a billion dollars. The Byju Raveendran-led firm mopped up about $1.5 billion earlier this year from a slew of marquee investors including Facebook co-founder Eduardo Saverin’s B Capital Group, UBS Group, Baron Funds in tranches, bulk of which has been used to fund M&A deals.So far in 2021, the ed-tech sector attracted $1.86 billion in funding, showed data sourced from market research firm Venture Intelligence.
Companies operating in the space garnered $2.27 billion in the whole of 2020.
There is ample room for growth given that a considerable proportion of the learning population is yet to be equipped digitally. “What we consider as the target audience, we have less than 4% of penetration in that segment…more than one-third of schoolgoing students do not have a smartphone. There is still a lot of catching up to do,” Raveendran had said at an event last year. As players broaden their portfolio of offerings, focus on adding vernacular languages to reach more people and get quality faculty, the ed-tech market is expected to get a boost. It is pertinent to note that the education industry is plagued by unequal distribution of teaching staff. Nearly 0.4 million schools have less than 50 students each and a maximum of only two teachers.
Analysts estimate the market size of the Indian ed-tech sector to grow by 3.7 times in the next five years, to touch $10.4 billion by 2025 from $2.8 billion in 2020. The segment will see more than 37 million paid users by 2025, according to a report by EY-IVCA.
While other players like upGrad are fast scaling up, the space has also seen entry of deep-pocketed firms like Amazon which launched Amazon Academy, an app-based service that helps students prepare for the Joint Entrance Examination (JEE) earlier this year.
Startups such as Byju’s, Udacity, Vedantu and Edureka are making use of deep tech such as AI, VR and analytics to come up with interactive, personalised and user-friendly one-stop knowledge banks, said analysts. Increase in digitisation, rapid growth in the startup ecosystem and the ever evolving consumer base have given the sector a huge growth opportunity, they added.