Learning curve: Edtechs at a crossroad

• The Indian edtech sector is facing competition on all ends — access to funds, evolving technology and more.
  
  
• Large universities, both Indian and international, are going for hybrid models – increasing competition to edtechs.
  
  
• Experts are divided on how exactly conversational generative AI can impact the sector but a disruption is certain.
  

The Indian edtech players had a dream run during the COVID-19 pandemic and it even continued to do well as things opened up. However, things are becoming more challenging by the day for the sector now. Apart from the warmth that face-to-face interactions offer, technology itself – in the form of artificial intelligence (AI) – is changing the way children or even adults learn — making the fairly young edtech sector seeking a pivot for its next growth push.

“There is nothing fundamentally different that edtechs are doing. One product is not much different from another. In addition to that, the sector has too much competition directly and indirectly,” says Anirudh A Damani, managing partner at Artha Venture Fund.

Abhimanyu Bisht, general Partner at Capfort Ventures also believes that the basic edtech model of taking classes online will not survive anymore, and newer business models will have to come in. He believes that a hybrid model is the way forward for edtechs and that the sector needs to evolve.

Hybrid models have competitors

To be fair, the 4,500-odd companies in the edtech sector have been regrouping after the pandemic bust – like Byju’s, which went offline quickly after it acquired Aakash Educational Services, which has a large brick-and-mortar presence. Byju’s is now planning to take it public.

Unacademy, Physicswallah and others too quickly expanded offline. But a large-scale shift in strategy might fall short of backers as venture capital (VC) funding in general has been slow — and for edtech especially, the fall has been much sharper.

Funding to this sector peaked in 2021 at $4.2 billion, and fell by a sharp 40% to $2.5 billion in 2022 after the funding winter set in, according to DealStreetAsia-Data Vantage. In the first quarter of 2023, the sector raised only $100 million, as per Inc24.

VCs say that most of the funds to edtechs are in the form of seed funding. “There are a few startups that are gamifying learning or establishing community-based learning models and chasing newer models,” says Bisht. He, however, added that the valuations in the sector are now cognizant of the many headwinds the sector is now facing.

Rising costs

Apart from funds, another area of worry for the edtech players is the rise in established offline players chasing the hybrid models better and more efficiently. One such example is Indian School of Business (ISB) of Hyderabad that went online in a big way and is now offering certified courses online.

“A brand like ISB offering online courses can help students save on time, cost and more. There is also competition that comes from foreign universities which offer online courses,” opines Damani.

Even if edtechs go hybrid successfully, large universities with deep pockets can build a tech stack and outdo them. “The level of competition will only increase from local classes, private tutors and much more,” Damani says.

ChatGPT, the new teacher

The next wave of disruption in the sector — like in most sectors — might come from generative AI such as ChatGPT. A sentient AI that can respond to a user in natural language and can answer queries has all it takes to become a smart tutor.

It has concerned all the stakeholders in the education system — from teachers who are worried about children using it as a home work tool, to large colleges that might now have to rethink their basic coding courses as AI can code better than humans.

The biggest hit, however, might come to AI’s closest cousin, the edtechs. While a few edtech players say that they can use AI to build and offer personalisation, Damani believes that generative AI models are easy to copy, and hence, again, not a great differentiator.

“Limited partners and fund managers today keep asking – how can we make money in this space and build a sustainable business? As of now, I do not see how,” he says.

Bisht, however, believes that there is some play left in the AI game for edtechs. “How can a fifth grader use an AI directly? An edtech (company) can use a layer of edtech around it to build a personalized offering,” he explains.

Only time can tell whether AI can enable or disable the edtech sector, but it will have to unlearn and relearn many concepts to keep up with the changing times.