Lower user acquisition costs drive up edtech valuations, says HarukaEdu’s Rustandi

HarukaEdu CEO Novistiar Rustandi

Indonesia’s Communication and Information Minister Rudiantara’s belief that the country’s next startup unicorn could come from the education space is shared by edtech startup HarukaEdu CEO Novistiar Rustandi but for different reasons.

While the minister puts it down to the huge money invested into the sector as a whole, Rustandi says it will be due to the efficiency of startups in the field.

“There is a company in the US called 2U that does exactly what we do here in Indonesia – help universities go online. Their valuation now is $4.5 billion. Their number of students is only 32,000. They gained the unicorn status when they had only 12,000 students. Imagine that. E-commerce needs to have millions of users before they can reach such valuations,” said Rustandi.

He explained that part of the reason for such a high valuation, despite the modest number of users, is the low customer acquisition cost and edtech firms’ ability to maintain customers long term, unlike companies in other sectors who have to consistently fight to retain and win over customers.

“In education, once they join an e-learning program, say a four-year degree program, they will be paying for the entire four years until they graduate. So we don’t have much acquisition cost. Once we have a customer, they will keep paying for four years. That is what makes the difference,” Rustandi said.

HarukaEdu is an online education startup backed by CyberAgent Ventures, Samatar Education and Pearson Affordable Learning Fund (PALF), the VC arm of global education company Pearson.

Rustiandi said the company, which has been selected to be part of the government’s Nexticorn (Next Indonesian Unicorn) programme, is currently in talks with investors to raise fresh funding. Proceeds from the upcoming funding round will be invested in a newly-launched offering, Pintaria, that uses a mix of online and offline learning methods to provide degree and training programmes in partnership with universities.

In an exclusive interview with DEALSTREETASIA, Rustandi talks about competition, valuation and fundraising challenges.

Edited Exceprts:

How does Pintaria relate to HarukaEdu’s past business?

Earlier, HarukaEdu focused on helping universities to go online. So we provide the platform, and content so that they can study using blended learning. We started to have partners – now more than 10, with over 23 programs – that is why we made Pintaria. Pintaria is a portal for education and training. Everyone can use the portal and see many college programmes offered through blended learning. It is particularly useful for people wanting to study while working a day job.

Will there be other products launched in the near future?

We will be focusing on growing Pintaria, which we plan to turn into a ‘life-long learning platform’. So there will be many degree programs and also training programs. This is to help people get the education and skills needed by industries. So right now they can go to Pintaria and see the various professions required by industries. It will have job descriptions, average salary and the required skills for that profession. Under that, there are the blended learning degree and training programs that they can take to help them get that job they want.

What is the target for the first year?

We want to socialize this blended learning because we feel that this is a solution for many people. About 70 per cent of working people without a bachelor’s degree want to study but want to do it while working their jobs. The obstacles are first, time – they work and can’t go to campus at night – and second, cost. This blended learning program resolves their problem. First, it is flexible in terms of time because it is online. Second, the price is reduced by up to 50 per cent. So, there are no more excuses for not studying for a degree.

Is this kind of program being offered by anyone else in Indonesia?

There used to be some portals, but I don’t know whether they still exist. But if you’re asking about online blended learning degree programs, Pintaria is the only one so far.

How has HarukaEdu’s growth been since its last funding in 2016?

It’s been good. The number of students for blended learning degree programs it is still in hundreds, but if we include training programmes, then the figure reaches thousands.

How do you see the competition in the edtech sector in Indonesia?

The ones targeting employed people are still very few. From what I see, most of them play at the elementary, junior high and senior high levels. There are Zenius, Kelase and Ruangguru. But we’re the only one offering blended learning degree programs.

Because of the huge market and the potential, do you foresee any mergers or acquisitions in this field?

It is possible, but I haven’t given that too much thought really. At the moment, all the players seem to be working on their own. But it is a possibility.

Do you have plans to expand geographically outside of Indonesia?

Not at the moment. We are focusing on Indonesia first. In fact for this blended learning product, the focus is still on Jakarta and Bandung.

Pearson is one of your investors. How have they helped the business?

They have transferred plenty of knowledge. They have a similar company in the US that has worked with more than 40 top universities there and offers more than 240 college programs. So, they have a lot of experience and knowledge and they share it with us so we don’t have to learn from scratch. The best practices we learn from Pearson, we then pass it on to our university partners, with the hope that the quality will improve together.

Your last funding was in 2016. Are you currently in talks about raising a new funding round?

Yes. There have already been a few discussions and some [investors] have shown interest. There will be some news on that.

When do you target for it to be closed?

There is no target, but there are quite a lot [of investors] that have contacted us. Existing investors will still be participating [in the next round].

You raised a Series B round and there is a large funding gap in the country seen at that stage. How has the experience been?

That’s true. It’s not a problem limited to Indonesia alone. Why this happens is because early stage requires smaller investments and the risks are lower, so a lot of investors are interested. When it comes to Series B and above, the size of the companies is not quite big enough. So they are not proven yet, but they need funding. So investors are more careful. But once you have gone past that and made it at the Series B stage, the company is seen to be mature. So, the risk goes down and a lot of investors become interested again.

Did HarukaEdu experience any problems when raising Series B?

We were chosen by the government to be one of the startups in its nexticorn program. A lot of investors are interested because education is a sector that is sexy. As an industry, education is far bigger than the mobile industry. Secondly, in Indonesia, the players in education are still very few, so they probably don’t have much choice.

Minister Rudiantara said it is likely the next unicorn will emerge from edtech. Do you agree?

I agree. There is a company in the US called 2U that does exactly what we do here in Indonesia – help universities go online. Their valuation now is $4.5 billion. Their number of students is only 32,000. They gained the unicorn status when they had only 12,000 students. Imagine that. E-commerce needs to have millions of users before they can reach such valuations.

In e-commerce, you acquire a customer but they buy something, they go back to comparing other e-commerce sites for their next purchase. They may not return to the same e-commerce platform. And so e-commerce always needs to raise their acquisition cost or marketing costs. That’s why a lot of e-commerce companies struggle. But in education, once users join an e-learning program, say a four-year degree program, they will be paying for the entire four years until they graduate. So we don’t have much of an acquisition cost. Once we have a customer, they will keep paying for four years. That is what makes the difference.

So, what’s the valuation of HarukaEdu?

Well, that’s a secret.

Also Read:

Pearson Fund leads $2.2m round into Indonesia’s HarukaEdu

India: Edtech startup Byju’s in talks with Tencent, others for $150m funding round

Exclusive: Indonesian edtech startup Ruangguru closes series B

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.