The engagement problem with K12 Startups

Byju’s recently raised a massive $540M funding and is now the most valued edtech company in the world! Another player in similar segment, Toppr, recently closed $35M Series C round. Many other startups in this domain have raised funding in 2018. EdTech domain was in the news throughout the last year. It started seeing traction since second half of 2016 and picked up steam from late 2017 onwards and it is on a upward trajectory since then.

Online education tech has evolved over the last few years and is poised to capture $252 billion globally by 2020. This is just a small pie of the $5 trillion market size of education with dominant share going to come from Asia (China and India more specifically). Internet penetration, language barriers, income levels were a few reasons that edutech took its time and now poised take off in a big way. Smartphone adoption, access to 4g internet and general improvement in awareness around good education have contributed to its increase in adoption. Asia in general is going to leapfrog from classroom based learning 1.0 to directly Learning 3.0. In many cases users first mode of learning would directly begin with Learning 3.0 !

Edtech in general has evolved and is now a broad sector. The below illustration from CBInsights describe the evolving edtech landscape —

India K12 Landscape and challenges

India’s online education market is poised to become a $2B market by 2021 — K12 and Test Prep will be the ones growing fastest among all. It is also not surprising that India is the largest after-school tuition market with about 25% of school going students taking supplementary coaching classes to improve their performance. There are numerous startups in India working specifically around improving the experience for K12 segment, and prominent players like Byju’s, Toppr, Vedantu, Meritnation and Embibe.

However selling education is not easy, especially for the K12 segment. It is more like a b2b selling process with its own inherent challenges —

• You need to convince the parents about usefulness of your product. And it is difficult to do it online without an offline touch a.k.a a strong sales team. Once the product is purchased, the child is ultimately the consumer of the product / service. This is typical of b2b and SaaS companies where buyer and consumer are different users / departments.
• Business also comes with a longer gestation period, typically 3 months to 6 months and peak time for purchase is towards the beginning of academic year i.e. starting from April till July first week
• For the product to show its benefits, it needs commitment from the consumer (child) and patience from the customer (parent). Sachet kind of pricing may not really benefit anybody here. Or would it?
• Every child’s learning needs are different and can’t be standardized. It is subjected how quickly he/she understand the content and able to apply to various problem types. Curriculum is standardized but learning needs are not.
• The typical expected objective of such learning solutions is to improve child’s performance in tests which are conducted by the schools and exams conducted by boards. But these are outside the purview of these solutions! Repeat buy (if applicable) is subjected to child’s performance in the tests and exams

Hence for having a sound edtech business especially in K12 segment, one need to have competitive advantages on one or more of the below aspects —

• Strong distribution channels
• Engaging content
• Adaptive learning platform

Distribution channels

As explained above, customer and consumer are different entities. Additionally it is a high involvement category for customers a.k.a parents. Parents will do one or more of the below tasks before trying out a platform.

• Do a detailed online and offline research about benefits of this product
• Check with their friends, peers and school authorities for recommendations
• While the trigger could come from TV, Print and Digital medium, they will require an offline touch who can counsel them further on benefits of availing the service

There are various ways to build distribution capabilities here —

1. Build a strong sales team who will reach out to parents

Byju’s with its massive 360 degree ad campaigns and investments into building a strong sales and distribution network definitely gives an edge over its competitors. Aviral Bhatnagar’s excellent article shows how Byju’s could possibly be able to recover acquisition cost and also make profit within first purchase of a customer. Byju’s founder Raveendran has also mentioned a few times that its company will be profitable in FY19, a rare feat among the current unicorns!

Data from similarweb also proves how Byju is going about driving up the app install penetration base through its sales team —

Toppr also has a team of counselors who understand student needs and recommend courses. These counselors also double-up as sales persons for Toppr

2. Build strategic partnerships with schools and let them become your sales enablers

While this approach can be cost effective compared to previous one, it will come with a strong pricing pressure. Your efforts can be usurped by another competitor with aggressive commission structure. Hence schools must become strategic partners in the business and not just be ambassadors.

3. Rely on creative referral campaigns

Referral coupled with viral nature of the campaign is by far the cheapest way to acquire a large set of relevant customers. Dropbox grew a massive 3900% in 15 months through the popular refer your friends and get free storage campaign. However one cannot use the cookie-cutter approach. It needs a rigorous and hard look at the inherent behavior traits of the customer and consumer of this space and build a grounds-up referral campaign capturing the same. This is relatively untapped and a difficult one to execute!

4. Leverage the distribution strength of another company

Reliance Jio invested $180M in AI powered edutech platform, Embibe. Building strong distribution channels requires huge investments and Embibe with its association with Jio can leverage on their Jio Points Network to make deeper inroads into Tier 2 and beyond markets. This is a smart move as each is bringing its own strength on the table — Jio with its distribution strength and Embibe with its investment in building a strong AI enabled education platform

Engaging content

Gone are the days when all the concepts from Maths, Physics, Chemistry were explained via a black board and some minimal live experiments. Internet, Multimedia, AR and VR can together make even complex concepts easy to understand. Check a few sample ones below. Imagine how easy would it be for us the grasp the concepts of organic chemistry or laws of electromagnetism if explained using the new age tools!

Electromagnetic Induction- Definition | Principle | Examples

Learn about Electromagnetic Induction and the principle of electromagnetic induction along with examples and more by…byjus.com

Application of Faraday's Second Law | Class 12 Physics - Electromagnetic Induction - Unacademy

Electron orbitals - MEL Chemistry VR

Electrons in an atom behave very differently. You will see that when an electron becomes a part of the atom, it is… (melscience.com)

Adoption of new tech like AR / VR is however limited and hence many startups are still thinking these in terms of experimentation and not a full commercial roll out.

Adaptive learning platform

Every child’s learning needs are different. The learning retention also varies based on how well the child has understood the concepts taught in the school. Learning modules need to account for behavioral and intellectual traits of child and tweak the content, pace and complexity of course accordingly.

It is extremely important for the business to meet the primary objective of improving the child’s performance in the subjects. That translates to engaging him/her with good quality content as well as personalizing the learning experience to keep him/her engaged. Else you would end up seeing a lot of churn with low renewal rates. While many of the popular K12 startups claim higher engagement and retention rates, data from similarweb gives a different picture —

One of the metrics to measure engagement is the average time spent per daily active user and it does not show a good picture

A recent study by Gray Matters Capital also suggests that “…improving User Engagement (40%), creating Personalized Learning Paths (31%) and Monetization (26%) are the top challenges faced by EdTech entrepreneurs…” 

In one of the articles from The Ken, Byju’s claimed that per day avg time spent is 40 minutes. In the same article, The Ken claimed that the number to be much lower at about 11 minutes .Meritnation and Toppr are leading the group with better numbers here (in the chart). But 20 minutes average implies about 50% of one classroom session which is low and disappointing if Edutech is pipped to be game changer due to higher engagement on these adaptive learning platforms.

So is adaptive learning model is good as it is proclaimed? It seems to be if we look at experiments that ran in other institutes like Arizona State University

Adaptive learning model is not new and has been in the use for assessment purposes for some time now (GMAT, CAT, SAT etc. are computer adaptive tests). Its advent into curriculum preparation and tuning the course is however a recent phenomena. A few universities have trialed this and are seeing improved student performance.

I personally feel adaptive learning systems is way to provide a comprehensive and holistic learning experience for the kids. To me this is the strongest moat of all for an edtech startup. If you can create a highly engaging learning experience, you don’t need external support to drive repeats. It will come naturally! Who doesn’t want their kids to perform well in their school?

What are your thoughts?

I also recommend you to read the below informative articles on India Edtech landscape —

Why edtech sector will bring out more unicorns - https://techcircle.vccircle.com/2018/12/31/why-the-indian-ed-tech-sector-has-scope-for-at-least-10-unicorn

Why edtech is not an attractive sector — https://thepassage.cc/article/863

State of online education in India — https://assets.kpmg/content/dam/kpmg/in/pdf/2017/05/Online-Education-in-India-2021.pdf