Edtech sector set for giant leap

Edtech leader Byju raising $460 million to reach a valuation of more than $13 billion shows the momentum in the Indian edtech space. As part of the series F round, this is the first funding for the Bengaluru-headquartered firm this year. Byju had raised more than $1 billion last year as Covid pandemic led to the surge in the user base. Led by MC Global Edtech Investment Holdings LP with participation from Facebook co-founder Eduardo Saverin's B Capital, this round of capital infusion reflects strong investors' appetite for edtech players in India.

According to Indian Private Equity and Venture Capital Association (IVCA) and PGA Labs data, Indian edtech startups raised over $2.2 billion in 2020 as compared to $553 million in 2019. While K-12 and test preparation companies accounted for the largest share of $1.98 billion, followed by continued learning ($142 million); higher education attracted an investment of $84 million, pre-K at $12 million and B2B edtech companies at $7 million. Out of the $2.2 billion raised last year, $1.35 billion was raised by Byju alone. Similarly, another major edtech player Unacademy joined the unicorn club last year after two rounds of fund raising which put the valuation of the company over $2 billion. Another edtech player Vedantu had raised $100 million last year as part of the series D round, taking its valuation to $600 million.

Not only big players, but even small edtech firms are also witnessing a surge in their valuation as learners opt for digital learning amid the ongoing pandemic. As India comes in the grip of the second wave of the Covid pandemic, this momentum is unlikely to fade in the near future.

As per estimates, the education market in India is expected to grow to $225 billion by FY25, a 14 per cent CAGR over the FY20-25 period. And domestic edtech players are likely to be major beneficiaries of this growth. As edtech firms use digital platforms for learning, a host of technology companies are also likely to be benefitted out of this surge. For instance, edtech firms are using augmented reality (AR) and virtual reality (VR) in the learning process. So, tech firms providing AR/VR solutions are going to receive new projects from edtech players. Similarly, artificial intelligence and data analytics-based solutions are in vogue in the learning platforms, which provide new business opportunities for IT services companies. No wonder, mid-tier firms like Happiest Minds have carved out edtech as a separate vertical to cash in these emerging opportunities.

The ongoing pandemic has shown that even the traditional education system, which predominantly relies on offline classes, can draw huge benefits from online learning mode. Therefore, it will be prudent if Indian policymakers mandate a mixed learning model for students. This will not only benefit students in rural areas but will also expand the teachers' base. If such an approach is taken, domestic edtech players will immensely benefit from the new demand and the next edtech behemoth will emerge out of India.