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Covid effect: Ed-tech firms corner $1.95 bn funds so far this year

The amount, raised since the beginning of the year till date, is 31 per cent higher than the combined funding of $1.48 billion collected in the preceding five years.

Written by Pranav Mukul | New Delhi | Updated: December 2, 2020 1:00:58 pm
ed-tech firms, education sector funding, covid crisis, economy news, Indian express newsAccording to data sourced from Venture Intelligence, eight of the top 10 deals, of over $100 million, in the segment happened in 2020.

Accelerated adoption of technology products in the education sector and a robust demand scenario due to the pandemic has led to the “ed-tech” segment in India – mainly controllesd by startups like Byju’s, Unacademy, Vedantu, Toppr etc – raising a record $1.95 billion from private equity and venture capitalist (PE/VC) funds this year. The amount, raised since the beginning of the year till date, is 31 per cent higher than the combined funding of $1.48 billion collected in the preceding five years.

Those tracking the sector said investor interest in ed-tech companies has been mainly due to Covid-19, which forced schools and colleges to shut down and prompted people to upgrade their skills for a shrinking job market.

According to data sourced from Venture Intelligence, eight of the top 10 deals, of over $100 million, in the segment happened in 2020. These include two rounds of funding of $300 million each into Byju’s — first in January led by Tiger Global and the second in June by Silver Lake, DST Global and others.

US-based Tiger Global also bet on Unacademy last week, investing an undisclosed amount in the startup along with investment firm Dragoneer Investment Group, taking the online learning platform’s valuation up to $2 billion. Tiger Global funded Vedantu, another ed-tech company in India.

“The opportunity to improve lives through online education is enormous because of its sheer accessibility. The Unacademy team has innovated rapidly to build a leading platform that is taking education to the farthest corners of India. We are very excited to partner with Unacademy and look forward to seeing it scale further,” Scott Shleifer, partner at Tiger Global, had said in a statement.

Tiger Global is not the only marquee investor in India’s ed-tech segment, which has seen big names such as Facebook, Softbank, Naspers, General Atlantic and Surge (Sequoia Capital’s early-stage startup investment vehicle).

“In India, education has been a non-profit activity … it is only when the digital economy picked up, the digital solutions — which could go directly to the parents — happened to break the myth that education cannot scale up. The revenue opportunities for each of these startups is significant,” Sunil K Goyal, managing director and fund manager of YourNest Venture Capital, told The Indian Express.

According to a recent report by Inc42 Plus, India’s ed-tech market size is estimated to grow nearly four-fold over the next five years, from the current $2.8 billion to $10.4 billion in 2025.

Last week, Mumbai-based after-school online learning platform Toppr reported doubling of its revenues in the last 12 months, along with a 125 per cent growth in subscribers for live classes each month and 100 per cent growth in the free user engagement month-on-month. The company is funded by SAIF Partners, Helion Venture Partners and Fidelity Growth Partners, among others.

Goyal pointed out that currently the money being invested in ed-tech startups is going into brand building and reaching out to “decision makers in the family”. “The content development and content collation is like a short period of two, two-and-a-half years. Once that is done, it is all about reach after that. It is also about getting the best customer service people, best teachers, getting multiple front-end sales people,” he said.

Notably, many of the larger fundraises by ed-tech firms have followed extravagant marketing campaigns. For example, Byju’s raised $150 million in July 2019, and during the same month, it was selected as the sponsor for the Indian cricket team’s jersey. Similarly, while Unacademy was one of the official partners of the Indian Premier League, Byju’s was said to be in the race for the title sponsorship. Even as firms in the ed-tech segment have reeled in record investments, PE/VC funds have turned away from non ed-tech firms in the education sector.

After raising $115 million in 2018 and $522 million in 2019, non ed-tech companies raised only $41 million from seven deals this year so far.

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