Edtech firms bet on upskilling, higher education amid funding gloom

Last week, Blume Ventures invested $10 million in Upward & Onward’s maiden fundraising round. The company runs software- and artificial intelligence-linked upskilling platform Interview Kickstart.

This is part of a broader pattern, with platforms like Upgrad securing $36.4 million through a rights issue in 2023, and Newton School raising $25 million led by Steadview Capital.

Karthik Reddy, co-founder of Blume Ventures, highlighted the lucrative business models of companies like Upgrad and Emeritus, which boast higher gross margins, adding that there are more opportunities in higher education and skilling segments as they are “largely driven by job or income orientation”, or in other words it is education for the sake of income.

GSV Ventures’ Mujtaba Wani echoed the sentiment, highlighting the enduring demand for up-skilling and higher education driven by advancements in artificial intelligence (AI) and a growing middle class, as demonstrated by companies like Emeritus, Physics Wallah, UpGrad. “Each is growing and doing hundreds of millions in revenue with healthy unit economics.”

The optimism contrasts with the challenges the sector faced over the past year, including a severe funding crunch that led to layoffs and office closures.

Last year, total funding for the higher edtech segment fell to $198.1 million from $330.8 million in 2022. Similarly, upskilling, or continued learning, investments fell to $92.1 million in 2023, from $370.4 million a year ago. Test prep saw funding decline to $12.1 million from $1.2 billion during the period.

Not only that, the failure of Byju’s, once India’s most valued edtech startup, has led to more caution among investors and a more discerning investment approach for the sector. 

While investors are actively looking at sectors such as upskilling, test-prep and certificate-based platforms, they are also being more careful about investments in the sector after the Byju’s episode, said Vivek Mehta, partner at executive search & talent advisory firm ABC Consultants. 

He added that the sector may witness more consolidation as continued investor scepticism will push only the strong ones with a clear business model to survive.

Blume’s Reddy agreed, emphasizing the need for sustainable market models to restore investor confidence in the edtech sector’s potential for growth.

Despite these obstacles, the sector remains ripe for growth, with a digital-first learning preference among learners. The integration of artificial intelligence into education promises personalized learning experiences, optimizing cost and efficiency, according to Sri Chaitanya Group’s edtech startup Infinity Learn’s chief executive Ujjwal Singh.

Online certification platform Hero Vired’s chief executive Akshay Munjal also echoed similar sentiments. The edtech startup focuses on areas including deep skills/deep tech, financial technology, game design, data science, machine learning, artificial intelligence, design.

Munjal said there is a “pressing demand” for upskilling initiatives and AI and machine learning will attract significant investments in the future as they will play key roles in personalizing learning. “With the versatility of AI across all domains, it is poised to become the new internet for the world, and each one of us will need training to create an AI-ready workforce.”

K-12, however, is an area that will continue to struggle due to the offline-online-offline shifts in education.

Some believe that technology will be more of an enabler for education without completely replacing the offline elements of learning. These sentiments are also a reflection of how companies had to adapt, realign and shuttle between offline to online and back to offline after students returned to their pre-pandemic lifestyles and resumed going to school and offline coaching centres.

“We have realized that in education, it’s not just the content or the availability of it…You need an environment where there is someone to care and motivate you.. So, a teacher plays a very important role,” Newton School’s founder Siddharth Maheshwari said. 

Backed by the likes of Gaurav Munjal, Kunal Shah and Kalyan Krishnamurhty, Bengaluru-based Newton School offers several technology-based courses for the next generation of software developers.