Deal focus: Vedantu highlights impact potential in Indian edtech

As education investment in China flounders on the back of sweeping regulatory changes, the Indian market continues to inflate.

In the past few weeks, entrance exam specialist Unacademy has raised $440 million and Eruditus Executive Education has secured $650 million. Their valuations are $3.4 billion and $3.5 billion, respectively. As recently as June, K-12 video streaming service Byju’s arguably became the country’s biggest start-up of any kind with a $340 million raise at a post-money valuation of $16.5 billion.

But as in China, the big money has belied the non-commercial, public-service heart of the sector. In this light, one of the latest investments appears to be among the most philosophically sound to date. ABC World Asia, an impact investor with ties to Singapore’s Temasek Holdings, has led a $100 million Series E round for Vedantu at a valuation of $1 billion.

With the exception of the Chan Zuckerberg Initiative backing Byju’s in 2016 and Eruditus in 2020, there has been surprisingly little pure impact investment in Indian edtech. This is despite COVID-19 exposing significant learning gaps along economic and geographic lines, exacerbating a host of perennial challenges around teacher quality, school closures, high drop-out rates, and leakage of funds.

ABC sees itself as a flagbearer for the idea of impact investment targeting Asia. It set up its debut fund last year, with an LP base of Temasek-related entities contributing S$405 million ($298 million) to the cause. Vedantu is the second investment in India – agtech start-up Cropin received backing in January – and the country is expected to be a key target market going forward.

Much of the decision-making process with Vandatu was about what appears to be a focus on education outcomes over other, perhaps more marketable, scaling milestones. While the company may not reach as many students as some of the bigger names, it claims to have the largest user base in the live-teaching category where it specializes. Most platforms rely on a combination of live and recorded materials.

“If you’re attending a class and you have a question, you have a chat picture option where you can key in a doubt. You can also take a picture of a question and upload that and ask the teachers to solve that, similar to what you would do in an offline class,” says Sugandhi Matta, chief impact officer at ABC.

“If you go to a lecture in an offline institution and you don’t understand something, you put your hand up. They’re replicating that feedback system online.”

There is also a significant focus on reaching lower-tier urban areas where internet access is not as reliable. The service is available at a bandwidth as low as 300 kilobits per second; a typical video-call tool such as Zoom requires more than twice as much.

The plan includes expanding the English-only curriculum into vernacular languages and building up capacities around measuring impact results. This will include support compiling metrics around access, geographic distribution, affordability, and student performance before and after using Vedantu.

Matta notes that education is a unique product in the impact paradigm, with students, parents and society at large representing a complex stakeholder balance. There is also the question of the teachers, which can be easily and wrongly marginalized in an edtech investment boom.

“One of the great positives of edtech is that kids can access high-quality teaching from wherever they are. But there’s a lot of investment that needs to go into training teachers, making them adept at teaching online, which can be slightly different from offline,” Matta says.

It’s an open question how an impact-focused growth strategy will fare in an edtech space as competitive as India. Other players in this space include Classplus, Toppr, Next Education, and Cuemath, as well as Upgrad, which entered the unicorn club last month with a $185 million investment featuring Temasek. The Singaporean investor also joined Unacademy’s latest round.

ABC sees the market as big enough to share, however, with some 260 million children enrolled in K-12 and room for improvement in the industry’s student engagement techniques. “Historically, even offline education has never manifested itself as a winner-takes-all market. So, it’s great that there’s a number of players innovating and providing better options for students,” Matta says.

Does that mean ABC would consider investing in other edtech companies in India? “For us, better education is a key impact theme. We will continue to opportunistically look at things in this space in all of Asia.”

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Technology
• Consumer
• South Asia
• Expansion
• India
• Education
• TMT
• Impact investment
• Temasek Holdings