Edtech startups can explore a sales-or subscription-based business model

Anindya Mallick, Partner, Deloitte India, opines that the business model to be adopted by edtech startups is typically determined by the development cost of platform and content and whether funding is available to recover the cost over a period of time through a subscription model or there is a need to recover upfront through a sales model.

IBT: Why are edtech startups seeing a record jump in fundraising activities around this time? How has the pandemic changed the business model for edtech startups?

Anindya Mallick: The growth of Indian edtech sector can be attributed to the need to bridge the gap in the Indian education system to acquire skills and expertise required in the job market or to supplement classroom teaching to prepare for board, entrance and other competitive exams. However, during the pandemic, the edtech sector recorded phenomenal growth, which was largely driven by demand for online classes following the closure of education institutions.

The sudden declaration of lock down, which went on for a prolonged period made educational institutions explore options for delivering lessons online to keep their students engaged and complete the courses. This led to an increased demand for edtech platforms and content, requiring edtech startups to explore options for significantly scaling up their operations to address the sudden demand. The need to suddenly scale up and also increase their portfolio of products and services made the start-ups take up fund raising activities.

IBT: What can these startups do in bridging the gap in Indian education system and helping acquire the skills actually needed in the Indian job market?

Anindya Mallick: Edtech startups, being on digital platforms, have the capability to reach students across the length and breadth of the country. Given the varying quality of education across the country, especially as one moves away from large cities to tier 2-3 cities and beyond, there is a need to augment the students’ skills and expertise so that these are aligned to industry requirements for getting a job or supplementary teaching required to prepare for competitive entrance examinations.

The edtech startups provide platforms as well as content by which lessons from teachers having the requisite expertise can be delivered to students irrespective of location. As lessons are delivered digitally, the number of students are not restricted by the institute’s physical infrastructure and can be delivered at much reduced cost per student. The startups can develop standardized content by engaging highly qualified faculty and also make the lessons interactive through use of graphical designs to enhance the students’ user experience. This differentiates edtech content from the text book based approach followed by usual education institutions as use of technology in content is helpful for conceptual clarity, especially for students pursuing STEM subjects.

Edtech startups can also cater to the market for upskilling and reskilling given the changing nature of job requirements on account of increased automation of industrial activities as part of the fourth industrial revolution. Edtech startups may find a ready market with organizations who will want online courses on digital platforms to be made available for upskilling or reskilling for employees to remain relevant and pursue their career growth.

IBT: A lot of these startups have a ‘one-size-fits-all’ model due to their obsession with scale, which ignores factors like differences in learners’ grasping powers and variety in courses. What strategies can these startups adopt to these situations and offer customised solutions?

Anindya Mallick: There is a market play for both large sized players who may be looking at the India as well as global market while there may be others who will be focusing on regional markets, which too can give sufficient scale. Edtech startups can differentiate amongst themselves by determining the markets they will play in and their service offerings. While there is a need for vernacular content based on student’s language preferences, courses can also be localised based on regional market requirements involving local faculty and addressing local industry’s skill requirements. Use of AI can today record students receptivity and grasp of lessons through interactive means and gaming techniques. Courses can be designed such that students who are identified as not able to keep pace with other students can be offered special support through additional classes, video conferencing with faculty, etc.

Identifying the target user base and understanding their needs, constraints and challenges faced in current learning methods will provide insights based on which the edtech startup can design their service offerings along with their value proposition for addressing the market they will want to serve.

IBT: A lot of education startups in India sell the dream of a promising job or admission in a premier educational institution to young minds in India. According to you, are these really successful, given the skewed pupil-to-teacher?

Anindya Mallick: Given the varying quality of education offered by education institutions across the country which may be on account of course design, lack of attention to individual students on account of skewed student to teacher ratio, quality of faculty, institute’s infrastructure and available facilities, there is a need to offer preparatory services for competitive exams. These services are generally provided by coaching centres which have come up in cities and towns across the country.

Edtech startups addresses this need by offering standardized online courses across their student base curated by faculty having requisite expertise. As part of their offerings, they conduct regular online assessments and mock tests, monitor student’s progress and offer customized support as required through virtual faculty interactions, extra classes, etc. Edtech startups using data analytics can assess the types of problems students are facing, categorize students facing similar problems and accordingly take corrective action through course redesign or change in teaching methodology. Given the benefits of reach, standardization of courses, access to quality faculty for curating and delivering online lessons and using of monitoring and analytic tools, edtech startups may have certain advantages over the traditional coaching centres in preparing students for competitive exams.

IBT: What is your take on the impact of startup business models on the digitization of learning? What kind of challenges are these edtech startups facing and how can these be resolved?

Anindya Mallick: Edtech stratups have a significant play in digitization of learning by providing the digital platform for lesson delivery as well as content creation. Smart classrooms are being introduced in both public as well as private education institutions for which the infrastructure and lesson content are supplied by edtech players. New institutes of higher education are following modern pedagogy like flipped classrooms which requires most of the lessons to be delivered digitally to students who learn at their own pace and classroom interactions are largely for faculty and students to discuss case studies based on lessons shared digitally and other interactive activities. Edtech startups through their product and service offerings are expected to change the user experiences for both students and teachers and bring in conceptual based learning which has largely been lacking in the current education system.

The business models for edtech startups could either be a sales model where they set up the infrastructure at the institute as smart classrooms or a subscription based model where they provide education institutes or individual students access to their platform for content, assessments, etc. The business model to be adopted is typically determined by the development cost of platform and content and whether funding is available to recover the cost over a period of time through a subscription model or there is a need to recover upfront through a sales model.

The key challenges faced by edtech startups include customer and market reach, branding, digital divide where access to devices and internet connectivity is a key issue with economically weaker sections and those staying in tier 2, 3  towns and cities and rural areas. The larger edtech startups have undertaken branding and marketing activities at significant costs. Many edtech startup have provided free trial periods to education institutes and students during the lockdown period so that users became familiar with the services, experience and understand the benefits and may continue to avail the service through sale or subscription.

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Anindya Mallick is a Partner at Deloitte India. He has a professional experience of 20 years in public and private sectors. He has expertise in (i) Business Transformation, (ii) Sector/ Organizational Strategies, (iii) Policy & Regulatory assessments and inputs on streamlining for Economic Development, Trade Facilitation, Investment Climate improvement, Industrial promotion & facilitation, (iv) Urban Governance & Reforms; Smart City Development, (v) Organizational Performance & Service Delivery Improvements, (vi) Organization Development & Institutional Strengthening, (vii) Education & Skill development, (viii) Social Impact – policy & strategy, partnerships, impact/ outcome assessment, monitoring & evaluation