Right Now (The StartUp Newsletter) Aug'20
Right Now Podcast Ep. 5
In Conversation with Shreyasi Singh | CEO, Harappa Education
In this Episode, Ritwik and Kartikeyan have a conversation with Shreyasi Singh, Co-founder and CEO of Harappa Education, based out of Delhi, India.
Harappa Education is an e-learning platform which offers a unique curriculum designed around foundational Habits which are believed to play a critical role in achieving ‘professional success’ and ‘personal meaning’. Every course focuses on the impact it is likely to make on the individual's performance at the workplace. Some of these courses include – Thinking Critically, Unleashing Creativity, Building Presence, to name a few.
After 15 years of work experience, Shreyasi took the leap to pursue an idea which is likely to change how India looks at learning. And with the recent change in the Indian Education Policy, Harappa’s courses are bang on!
There’s a lot to learn from the CEO & Co-founder of a 2-year-old Startup, which has already attracted Foreign Funding, headed with full throttle to change your learning experience, and we can’t wait for you to listen!
The Golden Era of Edtech has just begun
A startup comes into existence for 2 main reasons: It’s either tech capabilities that can help accomplish a task with much added convenience or it’s the existing way of doing things that has just too many flaws. In the education space there is a little bit of both:
•About the convenience: Since the beginning of time, humans have been going to the school for intake of education. However, since tech is bringing everything else right to our doorstep, there is no reason why education should not come too.
•About the flaws: Well, you know it better. Here are some interesting numbers.
According to the annual status of education report (ASER), Between ‘08 & ‘18, Percentage of 5th standard students being able to solve a simple arithmetic division problem has declined from 47% to 34% in Private Schools and from 40% to 23% in Govt Schools.
The education system naturally becomes responsible for the rising unemployable job seekers. An analysis by DataLabs reveals 38% of the Indian IT job applicants were unable to write a single compile-able code (USA: 4%).
Resultant: Edtech has broadly been shaped into the following core sub-sectors:
Test Preparation – let’s admit it, lounge pants bring in that extra level of calm while giving that extra level mock tests.
online certification: delivering at work and continuing to learn from home hasn’t been easier.
Skill Development: Increasing the employability of the incomplete products of the traditional education system is the need of the hour.
Online Discovery: NO STUDENT in this universe likes to visit the school admin office. Thank you, techies, for helping to shift the admin to online.
STEAM (Science, Technology, Engineering, Arts and Mathematics) Education: STEAM sums up all the subjects that have been dented by the rote learning methodology of the traditional schooling system. Even the innovative spirit of teachers has been largely subdued within the boundaries of conventional curriculums.
B2B solutions such as learning management systems and coaching class management apps: Let’s admit it, our teachers deserve convenience much more than we do. It’s high time that Tech is used to enable the teachers to make much more impact in the same 24 hours (Teachers are teachers 24*7).
So how good has their run been? Here are the numbers for some perspective:
Growth in userbase reported in April’20:
Even though much of this action is dedicated to converting the courses to absolutely free, this mammoth jump in traffic has greatly assisted the startups in making the consumers get acclimated to online learning at a time when they did not have a choice.
Sneak peak: Byju’s and Vedantu, who are big time into Test Prep added 6 Mn and 100K users respectively, within a week into the lockdown.
According to the Economic Survey 2017-18, the income elasticity on education is estimated at 0.93 compared to 1.95 in health and 1.44 in clothing and footwear. Which means that even if a family’s income reduces amidst this economic slowdown, the expense on education is less likely to go down and with little scope of offline teaching resuming any time soon, Online Learning is bound to flourish. The free trial phase is over and the Edtechs are now headed full swing towards encashing the new consumers.
According to a 2017 analysis by KPMG, Edtech sector is expected to grow to $1.96 Bn and around 9.6 million paid users by 2021 from $247 Mn and around 1.6 million paid users in 2016 (Pandemic will further pump the numbers)
The hurdle: As per DataLabs, the average ask from paid customers is INR 10,000 p.a. by Byju’s and INR 23,000 p.a. by Toppr. Therefore only 5% (boils down to 12Mn paid users) of the present addressable population has the purchasing power to afford Online Education.
Even though Edtech will sustain through unique content and pedagogy, their growth will be significantly dependent on the macro economic factors like Disposable Income, Internet Penetration, Smartphone user base, Government’s digital initiatives and most importantly, Government’s education reforms.
White Hat Graduation
Last month we discussed how WhiteHat Jr. is disrupting the Edtech space by teaching coding to kids aged 6-14 years. This month its founder Karan Bajaj sold off the 18 months old startup to Edtech Behemoth Byju’s for $300 Mn ALL CASH DEAL. Bajaj owned 40%+ of the company per Money Control which means that he earned $120 Mn in CASH from an 18 months old startup.
Is this a big deal? Here’s some perspective – Sriharsha Majety (Co-founder and CEO of Swiggy) owns only 6% of Swiggy (6 years old) and his net worth is around $220 Mn (and it is illiquid).
The earning boils down to a daily cash earn run rate of INR 1.67 Cr. If you have been wondering what’s the right amount of earnings that justifies over-working, INR 1.67 Cr per day is a pretty good benchmark (weekends included).
Too good to be true right? Well there’s more: Bajaj is going to stick around with Byju’s for 2-3 years more to build the next generation of products.
But is it all justified?
WhiteHat Jr. Claims to have clocked a $150 Mn Annual Revenue Rate (ARR) as of July’20. It was just $12Mn in Jan’20. (Unacademy had an AAR of $30 Mn in Feb’20).
The wow factor: The Startup boasts a customer return rate of 80% (WOW!)
The Big Picture:
The exit story of WhiteHat Jr. throws light on a promising method of startup exit, i.e. selling a smaller startup to a larger Startup.
How does it work?
Step 1: You get inspired by a startup that has been making noise and decide to replicate the model.
Step 2: You assemble a team and sprinkle a bit of innovation by tweaking the product to cater to a niche segment within the industry.
Step 3: Give it some time. Shed some sweat. Over work. Build a brand. Build a personal brand image.
Step 4: 2-5 years down the line if you’re able to maintain superior customer feedback with a high rate of repeat paying customers, you can start posting your company’s resume to the bigger fish and sell the company for cash. (Disclaimer: It comes with a huge list of ifs and buts).
Foodtech: Spare Labs (2 years old) that was into last mile food delivery was bought by Zomato back in 2016.
Edtech: Osmo (5 years old) that is into creation of AR games for Kids was bought by Byju’s back in 2019.
Why M&A in Edtech makes perfect sense?
Let us reflect on the M&A opportunities in the Edtech sector. WhiteHat Jr.’s acquisition comes amidst an economic slow down when experts had already been speculating consolidation across industries. And M&A is expected to be all the more active in Edtech sector. Here’s Why:
According to DataLabs, India is home to over 3,300 Edtech startups. However a chunk of the market share is enjoyed by a handful of big players like Byju’s, Vendatu, Unacademy and Toppr. Which means that there are a lot of small fish that will be interested in M&A amidst the cash crunch.
M&A’s are beneficial for financial synergies and rapid inorganic growth. The peculiarity of the Edtech sector is that the assets of the company are an easy sell to the interested acquirer.
If you were a last mile delivery startup, the best-selling point to let’s say Swiggy would be your Delivery fleet, Restaurant base, your Customer base and if you’re too good then even your tech.
In the Edtech space on the other hand, apart from bringing the teacher base and the customer base to the table, you also bring the assets that you create over time in the form of Educational content and the Pedagogy that cannot be easily replicated by the industry.
NEP 2020 - New Opportunities for Edtech
The National Education Policy 2020 made a big noise among the Gen Y and Z. For years we have boasted of having one of the youngest population in the world but have done little to cater to their biggest need i.e. Education. However it’s all set to change with the adoption of NEP 2020 (fingers crossed). While we were low-key sad that policy makers are still ignorant about prom-nights, we were thrilled (on behalf of the startup ecosystem) to learn about the following objectives that NEP intends to uphold:
Policy: No separation between arts & sciences, curricular & extra-curricular and VOCATIONAL & academic streams.
CKA's Take: An elaborate emphasis on Vocational streams comes as a huge relief to the youth who have for long, been pushed into academics due to no realistic alternative. However, the fact that most Higher Education Institutions do not have specialized faculty for vocational training, open doors to a plethora of opportunities for Edtech players to collaborate and offer joint degree/certificate programs.
Policy: Change the pedagogy by moving away from rote-learning based systems currently in place to more activity-based, experiential learning methodology, with an increased emphasis on choice for students in the secondary grades.
Developing higher order cognitive skills, 21st century skills, mathematical and computational thinking, critical thinking skills.
CKA's Take: The transition to activity-based learning will depend on the pace with which school administrations will be able to adapt to the change. Leaders of Edtech startups and associated teachers are sitting with some vital know-how and experience in this space. This will create opportunities for consultancy and strategic partnerships. At the same time, it will also lead to higher acceptance of the unconventional curriculum of Edtechs.
Policy: Moving towards establishment of Collaborative and Resource-efficient school complexes.
Building State Level Child Tracking Systems, efficient EMIS System with real time data analytics; Identification of Socio-Economically Disadvantaged Groups (SEDGs) within the state and developing alternative methods of schooling to meet their education needs.
CKA's Take: Enterprise tech and Edtech startups will have a significant role to play to give life to these policies.
We believe that the startup ecosystem that is essentially empowered by Tech will have a huge role to play in the successful implementation of the NEP 2020. One of the objectives reads, “Greater focus on online education and Open Distance Learning (ODL) as a key means to improve access, equity, inclusion.” This in itself is evidence of the Policy makers’ recognition of the Edtech space and their capability to facilitate change.
And not just a handful but a score of startups will get the opportunity to make an impact. That is because of 2 main reasons:
Education falls in the concurrent list of the Constitution which means that even though the Centre can define a macro level policy, the States will get a significant level of independence in the implementation of the policy. Which means that every state is a new opportunity for startups to collaborate and facilitate change.
An extract from NEP 2020 reads, “Schools will have the autonomy to adopt student-friendly curriculum and pedagogical standards.” This means that even though the State may devise a macro level implementation plan, each school still gets the independence to tread down its own lane. Therefore, each school is a new opportunity for startups to again, collaborate and facilitate change.
New Ideas in Edtech
Name of the Company: AugLi
Founded in:2018 Founders: Anjali Tiwary, Kamal Kashyap What makes it special: It helps children in honing skills in lines of critical thinking, communication and digital literacy by gamifying the experience with quizzes and leaderboards. It believes that all these skills are important for building the emotional intelligence of the Children. Each skill on the app has been bundled under a superpower such as News Surfer, Active Reading, Captain Precise, Magneto, and Debate Ninja among others. These superpowers can be won by children after completing various battles.
Number of Customers: 5000K
Name of the Company: Uable
Founders: Saurabh Saxena
What makes it special: Uable is focussing on developing the creative intelligence of children. It helps students explore different sectors at an early age and develop future-ready skills to achieve their goals. the company leverages active learning principles, where students spend time visualizing ideas, discussing, debating and collaborating with their peers.
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