Building a 'Perspectful' Edtech Ecosystem in India
India’s education technology industry is poised for explosive growth over the next few years. Over the past 20 years, India has enjoyed an annual average GDP growth rate of 5.8%. Although recent months have seen a slowdown, analysts estimate a growth increase of up to 7.5% within a year. The mobile industry is slated to be the second largest market by 2016, and half of its 1.2 billion people are under the age of 25.
So if you want to make an impact in education at scale, India is the the place to be. Just ask serial entrepreneur John Danner, who co-founded Rocketship Education and devoted a 4-part series on his blog outlining the insights from his travels there last winter.
While the opportunities seem exciting, there are many challenges in connecting Indian startups with investors around the world. Enter Perspectful, a newly launched advisory firm that helps investors make more meaningful and effective edtech investments. I recently caught up with one of the founders, Shabnam Aggarwal, to learn more about her take on the Indian education ecosystem.
What drew you to working in education in India?
I am a Bay Area native, and after studying electrical and computer engineering at Carnegie Mellon and working stateside, I realized there were more opportunities to make an impact abroad. In 2008 I moved to Cambodia to dive into the world of social impact. A year later I moved to India to work with a professor from Carnegie Mellon to build English games on low-cost mobile phones for children in rural areas.
This is when I became obsessed with the potential of technology to make an impact on student learning. In April 2012 I joined Pearson in India as the Head of Strategic Partnerships, where I spent a year working with local edtech entrepreneurs to determine how Pearson could support their work. During that time I crossed paths with Josh Engel, who became my co-founder.
What is the problem that you’re trying to solve?
Perspectful wants to channel more investment dollars to promising entrepreneurs in India by enabling more risk-tolerant foreign investors to enter the market and make an impact. Our efforts are focused on 3 core areas:
Sourcing: Identify education ventures that increase access and offer high quality learning opportunities
Diligence: Align and mobilize capital
Mentorship: Provide assistance to entrepreneurs on content, team, product, processes and technology
What are the challenges for edtech investors in India?
One of the biggest problems is finding the right entrepreneurs that meet their investment philosophy and are at the right stage for funding. Through numerous conversations with investors who were curious about the Indian edtech market, a common concern was being able to identify and support the right entrepreneurs, given their limited travel to this region. And even after the investment, support for entrepreneurs require more hands-on attention that can’t come from Silicon Valley.
From our research, there are hundreds of investors for whom "education in India" is a portfolio they'd like to pursue over the next five years. We've personally spoken with at least 50 of them, with a good majority looking to make investments this year.
The most well-known education investment firm in India is Sandeep Aneja's Kaizen, which focuses on later stage ventures to mitigate risk. The latest philanthropic fund is Ashish Dhawan's Central Square Foundation, which solely focuses on nonprofit ventures. These two firms are just the tip of the iceberg when you think about the increase in VC investments and actual dollars going into education over the past decade.
The edtech ecosystem is just starting to develop. There have been a few social entrepreneurship pitchfests, and Pearson’s Affordable Learning Fund, in partnership with Village Capital, just kicked off the first education-focused incubator.
What is one of your current projects?
In April 2013, Atlanta-based Gray Ghost Ventures First Light Fund invested in Sudiksha to build a chain of affordable private preschools. They then decided to hire us to help scale that model to support another 50+ schools. Building, recruiting and creating processes for that type of growth is a daunting task, so Josh is in Hyderabad right now working with that team.
What are the main challenges to the effective adoption of education technologies in India?
India's education technology ecosystem today is where the U.S. was about 15 years ago. We don't have centralized systems for teachers and educators to connect, streamline systems and share best practices.
In terms of actual tech adoption, the challenges aren’t that different from any other region in the world. Currently, almost all the attention is focused on hardware sales--mainly Android tablets/phones--and there is very little software or programmatic support to ensure effective implementation. There is huge potential for products on the Android platform for teachers, parents, administrators to manage and improve learning outcomes.
Which edtech companies have caught your attention out there?
TutorVista is heralded as the darling of edtech in India. It was one of the first Indian edtech companies to expand services to U.S. and Europe, and in 2009 was acquired by Pearson for $127 million. This acquisition also included the subsidiary company, Edurite, a school management company that provides private schools with services to revamp infrastructure, technology, and teacher training.
On the flip side, all the buzz and growth potential don’t always lead to positive outcomes. The case in example is Educomp, which went public in 2006 but has spent the last 5 years in a downward spiral. Despite the fact that the adoption numbers for its most touted edtech product, Smart Class, grew from 100 to 6,550 schools in 2012, net profit margins have fallen 61% in the last four years. The stock has fallen 91% over the last three years. This has created quite a few disgruntled schools, parents--and investors.
What we’re seeing today are smaller efforts targeted at parents-as-payers, such as after-school tutoring products, informal “educational” (often used more for marketing than actual learning) gaming apps and test prep for IIT entrance exams.
Where do you see the brightest spots for innovation in edtech in India?
The areas that excite me most from an entrepreneurial perspective are the unregulated markets: preschools (a $2 billion market projected to grow at an annual rate of 40-45%), supplemental tools for K-12 classrooms, tutoring, assessments and test prep.
Over the next few years, I think we will see services that empower students to play a more active role in their learning process. We will see more and more students in India gaining access, via mobile devices, to tools like Coursera and Khan Academy that are better tailored to the Indian culture and context.
It's an insanely exciting time to be at the front line with such innovative entrepreneurs. I'm meeting entrepreneurs who are able to put adaptive learning tools in the hands of poor children at just $2/month. And companies such as FunToot can show a 20% improvement on learning outcomes at that cost. I don't know anywhere else in the world you can achieve that kind of cost-benefit ratio in education for the poor.