Prospects of Educational Startups in India
I congratulate all the startups who have ventured to deliver a better education to all. There is a fundamental problem when we talk of startups and education. Profit is anathema to education. I assume that most of the startups were planning to build businesses for profit. Education is a noble cause. Due to regulatory or historical reasons, profits are not allowed in education. If you look at education, it remains long term in nature. Look at 200 years back, when the British ruled across the world. The average life of the sailor is probably 40 years. There was no opportunity for studying for 15 or 20 years. Now look at the life expectancy of an individual and return on investment on education. When one spends 20 years of learning will it give returns for next 40 years? Education in the capitalistic context in terms of investment in money and time and what is the returns you get. So it still remains a long term activity. When I look at startups and my own story, the time we expected that things will change has been far, far below than what it actually turned out to be.
Let's examine an educational product, a course. It will need a year to develop, another year to convince the school to adopt it and two more years to actually see the result. My suggestion to edu-startups is to think long term. There are possibilities of short-term responses but education is a long- term activity.
Last week I was talking to somebody in the financial markets and we discussed about what is happening in Edtech. He said education and Edtech is always going to be under pressure for two reasons. It attracts quality talent, you will always find people who are well educated, who have better view of life investing into it. Thereafter there is so much of money chasing. It is very difficult to succeed unless you have very good support. The prospect of any education startup depends on what value you are delivering. Technology has to be deflationary and or else we have lost the race. On the other hand, you have a very challenging situation- most of the children go to a private school. Whereas, if you look at the income levels, hardly 5% pay income taxes.
The value of a particular product or service that you have to offer- the moment you scale up it is not affordable beyond the one or two percent who can afford anything in India. So pricing is a challenge and whatever you build, you have to decide whether to target the top 5% or the 50%. This is very important and this is what we see across. If you want to scale, bring in the technology and bring deflation. Ensure that you have can stay in the long term. If you take China as an example, there are probably 3 companies that are probably $10 bn plus valuation- the first one teaches English, the second one teaches courses upto K12 and the third one is in entrance preparation. If you choose a particular sector, you address a specific area and have a long- term vision and bring in the capital and personalisation into the products or services.