Decoding the Indian Edtech in Higher Education
“The right time to start an edtech company in India was three years ago.”
2020 witnessed a year of exponential growth for the Indian edtech industry. Education technology was the most funded sector in 2020 raising $1.43 billion across 100+ deals. As the traditional education ecosystem got disrupted by COVID, edtech companies took complete advantage of the situation and acquired millions of users and funding from investors.
The Indian edtech industry is primarily divided into K12, test preparation, higher education, and online certifications segments. The majority of the buzz in the edtech industry has been around K-12 and test preparation segments with BYJUs becoming the world’s largest edtech company, and Unacademy becoming the second unicorn from the edtech industry.
In this report, we carefully evaluate a segment that is picking up the pace gradually and is considered perhaps to be the most important segment for the development of the Indian economy: Higher Education.
upGrad, Great Learning, Simplilearn, Udacity, Coursera, Emeritus are some of the biggest players in this space. The success of every edtech company in the higher education segment is based on the three key parameters: Growth, delivery, and outcomes.
Growth: Build, Launch, and Scale
Every company carefully evaluates a part of the market with high demand and high growth potential. Content development is considered to be one of the most expensive elements of building a higher education product. The content has to be industry-relevant, engaging, practical, and of the highest quality to produce desirable learning and career outcomes for the learners. One of the biggest challenges companies face is of getting the right product-market fit before investing millions of USD in its content development. A startup can lose a huge amount of its money if the program fails to see any traction from the customers and doesn’t sell. Some of the companies have developed an agile go-to-market strategy in their new products vertical to tackle the above issue.
The New Product Launch Blueprint
Companies conduct a thorough qualitative and quantitative market and consumer preference analysis for a possible product opportunity. However, there are two additional research areas of significance for this segment.
- Job Demand: To understand the number of job roles available in the industry, the growth potential of these job opportunities in the years to come, the different skillsets required to crack these roles. This activity helps the higher education companies understand how strong career outcomes can be for a particular program they are trying to build.
- Industry Experts: Sessions with domestic and global experts from the industry on the specific program topics to validate the above research insights, the recommended structure, and the curriculum, and also the feedback from the recruiters in the industry.
Unfortunately, the best qualitative and quantitative research can only go so far. It can never guarantee the success of your product selling in the market. upGrad had to shut their program with Cambridge Judge Business School’s Executive Education arm because the program failed to see any success in the market despite the Cambridge brand name.
Companies have now started running digital marketing campaigns about the potential program by using only the necessary minimum marketing collateral required. For example, landing pages, program brochure, tentative curriculum, tentative faculty, and a small sales team. At this stage, companies have not done any major investment in content development. Based on the success of this soft launch, if they can sell 100+ enrolments at an ARPU (Average Revenue Per User) of above 1 lakh, the companies go ahead with the program development in full capacity, otherwise, the product is either scrapped or modified for further testing. This strategy has prevented companies from burning a lot of their cash and make agile changes to the way they look at new product launches.
Once a pilot launch has been successful, the sales & marketing engines are deployed with the full thrust to acquire customers. Even though Great Learning, Coursera, Udacity have been slower in their marketing approach, upGrad on the other hand has been extremely aggressive to capture a large percentage of the market share at the earliest. upGrad’s CAC (Customer Acquisition Cost) is estimated to be ~50% at an ARPU of 2.5 lakhs. Marketing spends for edtech companies constitutes a huge chunk of their budget.
Delivery
These programs are generally longer in duration (6 months on average) than other short online courses on platforms such as Udemy, EdX, LinkedIn Learning. Some of the flagship programs are also 12 months long. Recently upGrad launched a 2-year Global MBA program in partnership with top universities from UK and Australia. Following the trend, Great Learning launched a 2-year long master’s program in Data Science in partnership with Northwestern University, US.
Companies strive to excel in NPS and completion rates metrics to offer an unparalleled online learning experience to their learners. The industry standard NPS in edtech is ~30. Higher education companies have achieved NPS scores of 60+ in some programs and an average of 45 in the majority of the programs. This is a high benchmark set by the companies.
MOOCs (Massive Open Online Courses), even though very popular, had extremely poor completion rates of around 5%. To simplify, this meant, if 100 people enrolled in a course, only about 5 people would end up completing it. Higher education companies have been able to solve this challenge by achieving above 90% program completion rates on average. They have been able to achieve this feat by implementing a strong structured experience system in place. Student success managers are assigned to every learner to keep a track of performance and progress and ensure motivation to not give up. Offline networking sessions are conducted to build a community-like experience across cities replicating the feel of an actual university. Fun and engaging pedagogy such as hackathons are used in the curriculum.
However, the scalability of these interventions remains a question and a major bottleneck for companies to solve. This has also been one of the reasons why higher education technology companies have not been able to raise VC funding to grow rapidly.
Outcomes
A working professional with 5+ years of experience when decides to invest in an educational program that demands 15–20 hours per week for almost 12 months, takes a toll on their personal life. Learning outcomes are not enough for such educational programs which command a premium price of above INR 1.5 lakhs, they need strong career outcomes. These working professionals constitute the largest customer segment for higher education companies.
Career outcomes are a key metric for every higher education company. These can be classified as job transitions, internal promotions, salary hikes. Without strong career outcomes, any online educational program is bound to fail in the long run. Even though the companies haven’t been able to perfect their career outcomes yet, they have a promising start with employers starting to show interest in hiring learners from these programs for roles in Data Science, Product Management, Machine Learning, Artificial Intelligence, Data Marketing as finding good quality talent from outside the market is difficult.
The Future
Even though the future of the industry looks promising and full of growth potential, the companies need to start showcasing financial muscle by having strong unit economics, developing a more scalable system for user acquisition and delivery, and achieving strong career outcomes in this sector. Solving these challenges is the way for a market leader to develop in this segment.
