Beyond Byju’s, GSV Ventures sees promise in India’s edtech sector

GSV has invested in Indian edtech companies including Physics Wallah, Lead Schools and Apna and manages about $800 million in assets. 

“I think there’s a lot of lessons learned that are great for the maturity of the entrepreneurial innovation ecosystem,” Moe said on the sidelines of the second edition of the ASU+GSV & Emeritus Summit in Gurugram. “Should a young startup be sponsoring or make nine acquisitions in a short period of time? Should it be a sponsor of a FIFA World Cup paying $40 million? Shouldn’t a business that’s raising money at higher valuations have the right professional auditors… you know… it’s all those things,” Moe said on Byju’s.

He believes there is immense potential in India and the venture capital firm has plans to make follow-up as well as new investments in the country. “We’re very active here. I believe it’s a good time to be buying swimsuits in the winter.”
Still, the Indian education system has several gaps to address and artificial intelligence (AI) will be a big game changer in the country as this technology is going to increase personalization for students, lower cost and improve the quality of learning, Moe said. 

While higher education participation in India has improved from about twenty years ago, it is still half of what other places like China and the United States are, he added.

The commentary comes as the Indian edtech industry witnessed a lot of churns in the face of funding crunch which forced several companies in the space to pursue a stream of cost-cutting measures, including layoffs, shutting down offices, restructuring business models among many other things.

There is likely to be more consolidation in the edtech industry with companies that did not focus on solidifying their fundamentals, Moe said. “I think what we see is sort of this natural cleaning out of people who maybe weren’t as authentic as talented people, and that saw an opportunity that was easier and that could manifest the same thing with investors.”

In the aftermath of the corporate governance lapses in India’s most valued ed-tech startup Byju’s, investors across the industry have become wary and taken diligent approaches to ensure transparency among their portfolio companies. Some investors have taken board seats in startups and made sure that the companies have a chief financial officer or a vice president of finance after they achieve a certain point of scale.

GSV too, like many others in the space, makes a host of checks to set the record straight from the very beginning of their investment journey with the portfolio companies, he said. 

“There’s a checklist of having the right advisers, and we look at the things that young businesses often overlook. It’s having the right auditors or the right finance person who might be more capable than the size of the business requires, because you’re expected to grow there anyway,” Moe said.

He also spoke about companies chasing a unicorn status or a valuation of $1 billion. “It’s good to have aspiration… but what startups don’t necessarily realize is raising money at too high a valuation can come back and bite you. So, you want to raise a valuation that corresponds with where you’re, where you’re at and where you’re going,” Moe added. 

“Sometimes founders think it’s such a badge of heroism to have this outlandish valuation, even though their business doesn’t support it a lot of times, you see that doesn’t work out very well.”

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Published: 13 Feb 2024, 07:39 PM IST