Edtech deals likely to sustain momentum in post-COVID India, SE Asia

Photo by John Schnobrich on Unsplash

Education technology, or edtech, businesses in India and Southeast Asia are increasingly attracting investor interest as the COVID-19 pandemic has prompted consumers to embrace remote online learning across diverse spheres.

“Everyone is realising this is the time to go to market because of growing demand,” said Sandeep Aneja, managing partner at Kaizenvest, an education-focused investor.

Since early 2020, when the COVID-19 pandemic outbreak began to spread across Southeast Asia, traffic on edtech platforms has increased 2.5 to 5 times, according to Aneja. This is primarily because educational institutions across the region have been forced to remain closed to prevent the spread of the deadly virus.

According to data available with UNESCO, the onset of COVID-19 pandemic affected around 1.078 billion learners due to closing of schools across 116 countries in June 2020 alone. The month of March was the worst impacted, with 1.575 billion learners being affected in 182 countries across the world as most nations imposed a lockdown.

The rather sudden and massive migration from physical to digital classrooms have put the edtech sector in sharp focus with deal activity gaining momentum.

India alone has witnessed about 53 fundraising rounds totalling $735.5 million from January to July 2020, according to data compiled by Tracxn. Indian edtech unicorn Byju’s $500-million fundraise contributed 67.9 per cent of total sectoral funding this year.

Southeast Asia, too, is seeing traction. Indonesia’s Zenius $20-million Series A round from Northstar Group in February 2020 could well be the most significant round raised so far this year in the sector, followed by Singapore-based LingoAce’s $7-million Series A from Shunwei Capital.

Singapore’s Tigerhall raised $2 million from Sequoia Capital and Indonesian startups Arkademi and Gredu closed seed rounds in early 2020. Further, in April, Indonesia’s CoLearn was selected into Sequoia India’s Surge programme, which provided $1-2 million in capital to the startup.

Expand Table

RegionNo. of RoundsFunding Amount ($M)Top fundraiserFunding raised ($M)Percentage of total
India53735.5BYJU's50067.98%
Southeast Asia1332.5Zenius2061.50%

Expand Table

Funding DateRound NameFunding Amount (USD)Company NameInstitutional InvestorsLocation
Apr 28, 2020SeedUndisclosedEduka SystemInit 6Indonesia
Apr 02, 2020SeedUndisclosedProSparkAgaeti Venture CapitalThailand
Feb 13, 2020SeedUndisclosedArcLabEduSpazeSingapore
Feb 13, 2020SeedUndisclosedPracticleEduSpazeSingapore
Jan 30, 2020SeedUndisclosedArkademiThe Mobile Only AcceleratorIndonesia
Jan 23, 2020SeedUndisclosedGreduVertex VenturesIndonesia
Jan 15, 2020SeedUndisclosedToddleMatrix Partners India, Better CapitalSingapore
Jun 04, 2020Series A7 millionLingoAceShunwei CapitalSingapore
Feb 05, 2020Series A3.36 millionEdukasyon.phEduLab Capital Partners, Keibunsha Ventures, Foxmont Capital Partners, French Partners, Lorinet Foundation, First Asia Venture CapitalPhilippines
Apr 27, 2020Seed2 millionTigerhallSurge, XA, Taurus VenturesSingapore
Mar 19, 2020Seed150,000PahamifyY CombinatorIndonesia
Jan 07, 2020Seed74,190Joni.AIAccelerating AsiaSingapore
Feb 05, 2020Series A20 millionZeniusNorthstar Group, Kynesis Group, BeNextIndonesia

Source: Tracxn/DealStreetAsia

DealStreetAsia has learnt that Vietnamese learning platforms Everest Education and 1on1 English are in the market to raise funding.

Commenting on the growth of edtech, Vietnam’s Everest Education Chairman and co-CEO Tony Ngo said, “the number of families who are already trying online options is increasing rapidly, and I think everybody sees that this is a big opportunity.”

Everest Education is also said to raise around $5 million, but Ngo declined to comment on this issue. Everest Education had banked $4 million in a Series B round led by Hong Kong-based private equity firm Hendale Capital, marking the company’s first institutional funding, according to an earlier announcement. Viet Capital Ventures and Singapore-based family office Nullabor, among others, had joined the round.

Meanwhile, Vietnam’s virtual learning platform 1on1 English is raising $3 million, said founder and CEO Cedric Le Quellec. The fundraising process has received a fair amount of interest from local funds as well as funds from Singapore, China and the US. The firm anticipates closing the round within the next month and a half.

In Vietnam alone, the online learning market is valued at $4.5 billion and growing at 30 per cent every year, according to EY-Parthenon research. This number is even expected to double in the next two years.

Edtech deals gain traction in India

Byju’s recently made headlines when it raised an undisclosed amount from Mary Meeker’s technology investment firm Bond at a valuation of about $10.5 billion. It is also in talks with Baring Private Equity Asia (BPEA) as it seeks to raise about $500-600 million in fresh funding.

In February 2020, Unacademy was reported to raise about $110 million in Series E financing from investors including Facebook and General Atlantic. Other firms that are in the fray to raise capital are Toppr and math learning startup Cuemath – they are eyeing a corpus of $30 million each. Edtech startup WhiteHat Jr, too, is also reportedly looking to raise funding to expand its operations. We also reported about Mumbai-based edtech startup Lido Learning being close to raising $20 million from new investors in an extended Series B funding round.

The sector is also seeing M&A activity as edtech startups seek to scale up rapidly. Unacademy recently acquired ed-tech startup PrepLadder for $50 million. Byju’s is reportedly in talks to buy smaller rival WhiteHat Jr and multi-lingual platform Doubtnut.

“The growth of e-learning platforms is here to stay even after the COVID-19 pandemic subsides,” said Raja Lahiri, partner at Grant Thornton.

“The sector has undergone a significant makeover, and given that startups are mushrooming across the country, it will be imperative to see how all of them keep up with the quality of content going forward.”

India’s higher smartphone penetration is among the critical drivers for edtech growth in the country, a result of the ‘Jio effect’ in the country, said Sajith Pai, Director of Blume Ventures that invested in Unacademy, Classpass, FlipClass and LeverageEdu.

In 2016, Reliance Jio Infocomm launched its cheap mobile data package which acquired 100 million customers in only six months that created the so-called ‘Jio effect’, according to a media report.

Edtech sector’s other growth drivers include higher disposable incomes, greater awareness about new kinds of jobs or extra-curricular activities, more aspirational workforce, greater competition for a small pool of white-collar jobs, more amiability towards studying online, rise in doubt solving and tech-first platform, as well as more tech-savvy schools and offline tutors, Pai added.



The road ahead

The increased demand for edtech has been encouraged by people’s ability to personalise learning and assessment, said an industry expert on condition of anonymity.

Going forward, the online education process may help reduce administrative work for teachers, besides sprucing up parents’ involvement and communications. Also, what’s significant is edtech platforms help provide access to kids beyond big cities in India and Southeast Asia.

And, what’s pertinent is the surge may not be restricted to COVID months alone. Even after the crisis fades, demand for edtech is expected to witness an annual growth of 170 per cent, from around 100 per cent before the pandemic days, said Aneja.

“COVID-19 crisis has accelerated the trend; anything tech-related will continue to grow. Now, it’s more needed than ever,” said Joseph M Mas, the Regional Director at EDT Partners.

However, this does not mean the sector is devoid of challenges.

Currently, there is a valuation mismatch between founders and investors.

Right valuation is what the market is willing to pay as basic metrics such as revenue or profit multiples are not consistent.  I believe this is based on the possibility of building a monopolistic company,” Aneja said.

And for investors, edtech is a crowded space, so the risk of getting the sector right but the company wrong is high, Pai added.

For Blume Ventures itself, the investment consideration comes with avoiding investing in multiple companies in the same risk bucket. In terms of the specific companies, the firm will look at the difference from the other players in the market, the problems they are solving, the competitors, as well as how well-funded and scaled-up is the competition.

Other challenges revolve around the retention of students and the lower cost of student acquisition in the online sector. These are related to profitability and growth being realised together, as customers have more options to try and buy.

Does that mean that with growing demand, the edtech sheen will reduce? The dust may settle at a higher level than today, said experts. “Some companies may grow faster than others after COVID-19 – like the ones in the professional learning segment,” said Aneja.

However, edtech is not a-winner-takes-all market, so it is hard to determine a “winner”, Pai added. The factors that help a company grow in this space will include how they can leverage technology to improve learning outcomes and branding.

Some sub-categories in the overall learning space will grow faster than others.

The K-12 after school tuition is expected to continue growing in India, as the country has around 260 million students in high schools. “With an increase in parental aspiration and concerns around in-classroom teaching, K-12 tuition is a big space,” he said.

Besides, the test-preparation for jobs is also expected to grow as the number of graduates from colleges is growing faster than the number of white-collar jobs in the economy.

In the months to come, edtech players may still see fierce competition from free-access online education platforms. This is indeed an all-time question, “but they cannot be free all the time and those with good services will get revenue,” Aneja added.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.