Ed-tech will do well to build moats around a stack that serves customers’ life-cycle.

Byju’s is buying Aakash Education for a billion dollars – this is the largest ed-tech buyout. Not a done deal yet but it is likely to be completed in a few months. But headline numbers apart, it further cements ed-tech’s wider acceptance and the need to integrate up and down the chain. In a previous post, I was speaking about large available capital and how it will chase established quality. Byju’s and some of the larger ed-tech startups like Unacademy, Vedantu, Eruditus, Toppr, Doubtnut, etc. have been a beneficiaries of over 80% of the capital (see here) that came into the sector over the past year or so, and are now in a position to put some critical missing pieces together. 

Indian ed-tech has just had its watershed year – monumental in the way that habits and attitudes towards digital learning have changed across social classes, income levels, languages and regions. This, along with better internet speed, internet penetration, and smoother payments presents a golden confluence of enabling factors for ed-tech to capitalize upon.

But what are these missing pieces, and are there any? Sajith Pai noted in his essay, The Indus Valley Playbook, “The nature of the education market, and its universality mean that edtech players won’t face as much of a challenge in expanding into India2 as their ecommerce brethren did… They can succeed by providing access for India2 to ‘quality’ educational and test prep content… If ‘access’ is what edtech solves for primarily in India2 (and India1), then ‘identity’ is what it is solving for primarily in India1A.”

However, I would contend that identity, along with relevance and outcome, is a problem that even India2 and India3 face (more on that here). A large part of graduating classes from Indian schools and colleges is of poor quality (unemployability is still high, read here), and it is less to do with curriculum and more to do with lack of access to quality instructors and well-rounded skill development.

There is a huge market comprising of nearly half a billion and rising vernacular audiences (assuming 65% of this to be less than 35 years old as per national demographics, it’s a sizeable chunk), which has the aspiration to make it big, but is constrained by lack of networks, soft skills and English tax. For a win-win, where both the audiences and ed-tech players benefit, a full-stack, multi-language, and constructive life-cycle approach may work best, in contrast to the FOMO-inducing brand messaging currently being used. This is because in education there is no straight-line between the content delivered and real-life outcome, and often the results emerge way down the line.

 1)   Beyond curriculum and test prep: Agreed that those are the biggest chunks of the market and the easiest segments where users convert to paid subscribers. But there is a lot of scope in social & emotional learning and other character-building classes in the early years, which is currently unorganized and largely done by small companies and non-profits. In fact, this is a space where parents spend a lot of time trying to find the right fit and geographical location. Most parents are aspirational and want their kids to gain these skills. They have their comfort zones for price points, but that’s the beauty of digital. You can turn taps on and off, or gate-off certain premium sections depending on what grade of subscription the user has, and also, amortize the cost of content creation over a large audience. Even bite-sized experiments can be encouraged as bundles with other courses or via micro-transactions.

2)   Enabling P2P transaction-oriented learning: There has always been a tradition of tutors, who were perhaps a few years senior working their way through university, coming to home to teach (this is especially prevalent in tier 2 and 3 towns). Can such people be rewarded by the learners on the platform itself? This is going beyond the realm of organized coaching classes like Aakash. Similarly, pure P2P learning can take place where the bright students solve doubts for the not-so-bright ones, and instead of being treated to a pizza in the real world, they get rewarded with either real money or redeemable points on the system? Social recognition, community effects, and access to relatable peer groups could keep this part of the platform sticky and retain the brighter students who were previously consumers of the ed content – thus increasing lifetime value of each. P2P is also super-easy to scale into many languages.

3)   Job-oriented aptitude tests & tailored instructions: There is a lot of demand for talent at the junior and mid-level and even in blue-collar areas like department stores, logistics start-ups, fintech, social businesses, etc. Talent acquisition pipeline becomes an aggregation of resumes but finding the right person with the right attitude is a problem, which leads to only the most machine-optimized resumes getting a look. However, ed-tech could work with companies in various industry segments to create and administer aptitude tests, and then either (1) refer a vetted talent pipeline; or (2) suggest specific training programs to the candidates – tech makes it easier to even customize the course contents as per the candidate. The first could be monetized entirely by the client companies, and the second by both companies and candidates (companies pay for development of relevant training, and candidates pay for taking the course). Once again, vernacular options need to be part of even the most basic product roadmap.

4)   Soft skills: Beyond the 60-70 million-odd Indians who are the consumer class and are typically English-educated, there is a huge mass of Indians (another 100-150 million) who are aspirers, come from smaller towns and poorer neighborhoods of large citie - who are educated, but in local languages; who can’t splurge, but are conscious of spending money on right things like education and skills that will ensure upward mobility. These are the people who are using internet on a daily basis, but don’t have too many quality vernacular products catering to them. They are usually either low on career guidance (given their immediate environment and peer group), or lack the necessary soft-skills and English languages skills to break the blue-collar trap. Once again, there is an opportunity to ride the life-cycle of the customer as they enter grade 11 or get into colleges and prep for a career.

5)   Teacher skills: The quality of teachers is central to effective outcome. While there is an emerging market of teachers as content creators on various long and short-form video platforms, what ed-tech can do is standardize, certify and aggregate these creators. Larger market for teachers, with backend support and for students, easier discovery of subject matter experts (think of it as discovering a professor who is the best in cost accounting by checking his trust score, success score and number of subscribers; or maybe top tutor recommendations for a particular topic this month).

6)   Higher education and MDPs: Once again, while available in a disaggregated manner on various different platforms like Udemy and Upgrad, there is an argument for aggregating them under the same umbrella. These are areas which can command higher prices, provide better margins, and target a much deeper-pocketed customer. Here too, course structure, content, and delivery could be co-developed with established universities. A platform could host the best of programs from places as diverse as Yale, Oxford, IIMs, ISB, HKUST, INSEAD, etc.

7)   Transactions - Why buy the whole book?: This is another a large area of monetization and reducing friction. An instructor is teaching a concept from a specific book? You want it, but the whole book is too expensive? No problem, the ed-tech guy has it covered. Buy that chapter for a fraction of the price – delivered digitally on your device. There could be potential for partnerships with various publishers for such modular transactions. For publishers, it solves distribution, comes with endorsement from a subject matter expert, it can keep all versions digitally current without having to print new ones every year, removes piracy and lost revenue from photocopying (logically there should be more takers for these bite-sized transactions among the price-conscious audience), and maybe more. For the students, it’s easy, cheaper, and immediate.

Of course, a lot of this is already happening. Both Byju’s and Unacademy have gone looking to acquire these missing pieces, as have others like Upgrad and Convegenius. The acquisitions have been in a variety of spaces: LabinApp (virtual labs), Whitehat Jr (coding), PrepLadder (medical coaching), Rekrut (staffing solutions), Grey Matters (assessment), etc. With digital payments much smoother now, and acceptable to a much wider swathe of population, full-stack platforms that approach education from both academic and life-skills perspective make inherent sense. The space is still growing and in between there will be plenty of investments in a variety of early stage ed-tech ventures, but given the dynamic of the market, the early investments could very well exit to established large ed-tech players who need them.

Disclaimer: I represent MDIF in South Asia, and our equity fund EMOF I is a shareholder in Josh Talks, which is a skills platform for underprivileged youth.