By-Ondrila S Sarkar
Funding in the Indian EdTech sector has dropped by 42% for the first six months of 2017 as compared to the similar period of last year as low number of successful exits has made investors wary about investing in such companies. Data from Tracxn reveals that $62.4 million has been invested during the first half of 2017 as compared to $107. 1 million in the similar period of 2016. The number of deals has also come down to 26 as against 46 during the same period.
Bengaluru-based BYJU’s received the lion’s share of investment in 2017 which includes the $75 million funding from Sequoia Capital and Belgian investment firm Sofina. In 2016, it accounted for 81% of the total funding in this segment.
Rutvik Doshi, director, Inventus Capital Partners, said, “2017 is definitely a slower year than 2016 and the bullishness of 2015-2016 is not there. Caution has come in among investors who want to invest in companies which will scale, so the pace of investment seems to have come down to the 2013 levels.”
Shavinder Singh, CEO and co-founder of Bengaluru based EdTech start-up FollowClass said, “The traditional venture capitalists and EdTech companies have never been a perfect match for each other since their expectations about the way this sector can grow is very difficult.”
According to Singh, a few VCs who invested in the EdTech sector have realised that the returns are not high, so they are backing out.
The online education market in India is expected to touch $1.96 billion with around 9.6 million users by 2021 from the level of $247 million and 1.6 million users in 2016, according to a report by KPMG and Google.
Karthik KS, CEO of Bengaluru based EdTech company Avagmah felt that the dynamics of edtech sector is very different from the e-commerce industry. “One fundamental issue here is that like in any other tech enabled sector entry barriers are very low in EdTech, because of which a lot of companies claim to be an EdTech but they make no value difference to the end consumer. The EdTech companies who have proven themselves to be a differentiator are the ones who are consistently getting funded. Funding will come in once the segment matures to some extent in India and investors start seeing good exits,” he said. The potential in the Indian edtech sector is large not just in the K12 segment but also from the area of open online courses, where people from India are the second largest consumers. Industry players felt that customer base and scale is available but the investment is slow as there is no rapid growth.
Anil Arvindam of Ideaphora India said, “Successful exits will convince investors to take a closer look at the market and make them think about it. Product-market fix and revenue traction have always been big issues, so it is a very risky venture and investors feel that they rather be risk-averse than invest in something that will fail to make a quick comeback.” Another challenge faced by this sector is that despite education having a huge market, its adoption outside of school or coaching is not common in India.