As edtech startups across India begin to see the pandemic-driven demand for their services wane, upGrad co-founder Mayank Kumar is not worried.
The edtech startup, which joined the unicorn club last year, is benefitting from its decision to focus on higher education programmes and stay away from the kindergarten to grade 12 space.
upGrad, which has made ‘lifelong learning’ its mantra, has no desire to enter the K-12 category since it lacks clearly laid out outcomes, said Kumar, who is also the managing director of the edtech unicorn.
“In the higher education space, there are outcomes like jobs, promotion, higher increment,” Kumar told DH. The onset of Covid-19 led to the mushrooming of edtech startups as many parents showed the willingness to splurge on online courses to compensate for their children’s learning loss tied to the closure of traditional classrooms.
That changed once the worst of the pandemic was behind us, dimming the prospects of edtech startups in general.
The dwindling demand for online tuition coupled with a funding winter made many such startups lay off their employees and focus on cutting costs.
The trend has affected certain edtech startups more than the others.
“In the last two years, offline K-12, tuitions and test preparation centres shut down, which is why a lot of demand went to the online space. But, in the working professionals’ space, there was no similar thing like tuition. The skilling programmes were anyway online,” Kumar said. While the doom and gloom conversations about the edtech industry gained strength in the K-12 space, online higher education programmes won more credibility after the pandemic, he pointed out.
The industry is currently seeing a correction as most edtech companies are adapting back to offline education, according to Unicorn India Ventures Managing Partner Anil Joshi.
“There may be short term impact till edtechs start working in unison with offline,” Joshi said.
The road ahead
In an attempt to boost its growth prospects, upGrad is looking to make acquisitions, diversify its businesses and think beyond India.
The startup is particularly keen on buying businesses that will give it a foothold outside India. About 20% of its revenue currently comes from its international users in the US, Southeast Asia and Africa.
The company counts its ability to offer programmes on data science and analytics at a low cost as an attractive proposition to its US users.
upGrad is also betting heavily on diversifying its reach in the corporate and enterprise level learning space. It acquired Work Better – a company providing customised business-relevant training programmes - in January this year.
Working professional users account for 60-70% of upGrad’s revenue. “We do not want to keep all eggs in the same market and hence we also started with our own branded programmes.
About 30% of our revenue now comes from our own branded programmes,” upGrad’s Kumar said.
He admitted that building upGrad’s own proprietary customer acquisition platform without relying on other global platforms had remained a challenge.
Path to profitability
The funding winter that has gripped the startup world has made profitability a more important and frequent topic of discussion among investors and venture capitalists.
“Companies closer to profitability or those that are already profitable will attract more capital,” Kumar said.
And in upGrad’s case, the key was to find ways to hold on to users for a longer period of time, he said, highlighting how about 30-40% of its revenue came from repeat users and referrals.
Kumar expects upGrad to be largely profitable throughout the current financial year even though some of its new businesses, such as ‘study abroad’ and online bachelor’s degree programmes, will take longer to turn a profit.
It will also have to cope with newer challenges. upGrad is poised to attract more competitors due to its stable growth prospects and the large size of the higher education market, investor Joshi pointed out.