Edtech leads investments in education sector; $1.1 bn poured in 2020

With Covid-19 changing how education is imparted, education sector received the highest-ever annual investment in this year

Amidst lockdown, the education sector continues to be one of the big bets for investors, education, especially edtech, has recorded investments worth $1.1 billion in 2020, its highest-ever annual tally and four times compared to last year. Investors say they will continue to see the maximum investment in 2020.

The pandemic has confined students across all ages to home and digital education is the only way to continue learning. High penetration of low-cost internet (4G) has made accessibility possible. With parents confined to home, even students without personal mobiles now have access to learning material through parents's phones

According to Venture Intelligence data, during January to August 2020, venture capital (VC) investors pumpled in $1.19 billion spread across 36 deals as against $409 million across 43 deals during the same period last year. VC is defined as investments in companies less than ten years old.

Byju Classes leads the table which raised nearly $1.12 billion in four tranches from January 2020 to September 2020 from various investors including Silver Lake, Tiger Global, General Atlantic, Owl Ventures and DST Global.

Vaibhav Tamrakar, VP of PGA Labs, said that low digital penetration of online education at 1 per cent ceiling is very high ($100 billion market size). Large untapped opportunity. With nearly 260 million student enrolments (from 345 million relevant population), spending on education as a percentage of family income is high in India.

Education is often seen as the most important solution by families to alleviate poverty. India has a large English speaking population with technology architecture and means, Indians can become global tutors not just for Indian students but also for the US, UK, Australia, etc. This can be akin to the IT industry outsourcing for doubt-solving and low-cost course delivery for the global population.

He added, government is gradually allowing schools to be reopened for students of classes 9-12 to help with doubt clearing and interaction on rotational basis. But since full-scale return to schools doesn’t look plausible in this academic year, it will continue to push online as a primary medium of instruction especially for primary and secondary levels.

EdTech may also leapfrog from chalkboard to whiteboard directly, especially for professional courses and higher education. With parents working from home and constraints on travel and other expenses, their involvement in student education will increase. Thus, home-schooling as a concept also has potential for growth.

The traditional education system is on a fast track to modernisation in even government schools and colleges and this trend will continue even if physical classes resume. Learning Managment System (LMS) integration, digital exams, faster results will become the norm, paving the way for indigenous technology companies to develop and maintain these systems in institutions across the country and the world. Many parents who were previously guarded about digital tools and e-learning, experienced them and this has boosted both penetration and demand for such offerings.

Sandeep Singhal, MD and co-founder, Nexus Venture Partners added, private education is a large sector as it forms the backbone of aspirational India. The next generation online education platforms have increased access to cutting edge content, new learning methodologies and more cost effective delivery. At the same time, online education solutions have struggled with high costs of customer acquisition.

"The large players in the space - Byjus, Unacademy, Jio Embibe, Vedantu, Toppr have become household brands and have thereby lowered the CAC, and they will continue to see the maximum investment in 2020. There has been a big surge during Covid-19 period which has also helped convert customers faster, and investors expect that the trend will continue as users get comfortable with digital learning.

Even though schools will reopen, supplemental and remedial learning will continue to grow online. There will be new formats that will emerge - AR/VR is just starting to make its entry into educational content. Local language support is another area for growth. We are also seeing new teaching pedagogies emerge across a range of subjects- math, language learning, interest-based learning, professional training programs are some that come to mind," he added.