COVID is a blessing for Edtech firms as they see massive jump in VC fund

Venture Intelligence data shows that during January to July 2020, investors infused $998 million in 31 deals. The total number of deals reported in 2019 was 42 worth $404 million.

Venture Capital (VC) investments in edtech start-ups have almost tripled during January to July 2020 to $998 million, from $310 million, a year ago.

Edtech is the most funded sector in 2020.

Investors say most of the edtech companies are seeing 3-5X rise in free audiences and anywhere 50-100% growth in monthly revenues due to Covid.

Venture Intelligence data shows that during January to July 2020, investors infused $998 million in 31 deals.

The total number of deals reported in 2019 was 42 worth $404 million.

Edtech stands out as the key sector to have received a strong vote of confidence from PE-VC investors post the Covid outbreak.

Most of the new capital has gone to already well known startups in the space - including Byjus, Vedantu and Unacademy.

The investor focus has also noticeably favoured the less regulated segments like tutoring and test preparation, says Arun Natarajan, founder Venture Intelligence.

Byjus Classes topped the chart as the company raised $500 million in 2020 in two tranches.

Tiger Global and General Atlantic invested $300 million and $200 million in January and February 2020, respectively.

The other top VC investments in the sector include Steadview Capital, Blume Ventures, Nexus Venture Partners, Sequoia Capital India, General Atlantic's investment of $110 million in Unacademy.

It was followed by GGV Capital, Coatue Management, WestBridge, Omidyar Network, Tiger Global $100 million in Vedantu.

The third top deal was Foundation Holdings, Kaizen PE, Others investment of $47 million in Toppr.

The increase in investments comes on the backdrop of massive boost in online education since lockdown.

Sajith Pai, director, Blume Ventures said that EdTech has emerged as one of the clear winners (along with e-grocery).

Margins, which were healthy earlier too, have got even better as advertising or customer acquisition spends have plummeted.

It is attractive as it is one of the few sectors that Indians are happy to pay for, and where the gross margins are so high.

"A challenge for the sector and one I think they will handle is the expected post-Covid drop off as physical classes pick up.

Retention will become a big area of focus. Still we expect at least 50-60% of the new adopters to stick with the digital platforms given the good experience, and for the increased audience to become a new normal," he said.

This crisis has brought online learning to the forefront and has helped parents, teachers and students alike to experience and understand the value of it, Byju Raveendran, founder and CEO, Byju's, had said.

“We have the opportunity to positively influence how teachers teach, students learn and school’s function.

"The ‘Classrooms of Tomorrow’ will have technology at the core, empowering students to cross over from passive to active learning.

"The result will be a combination of the best of both online and offline educational offerings," he said.

Note: Companies are double counted if they fall in more than one sector. Eg: If a company is an AI-based Fintech Companu, it would be counted under AI as well as FintechVamsi Krishna, CEO, and Co-Founder, Vedantu said, "During lockdown, everyone is talking about LIVE classes and it is the best time for us to drive more adoption and strengthen our brand is the best destination for LIVE classes. On top of adding new categories, we will use the funds to invest into content and technology to create the world’s best LIVE teaching-learning experience.”

Vedantu's total fundraise crossed $200 million and the company's valuation stood at $600 million, making it second most valued Edtech company in India after Byju.

Rahul Kishore, Managing Director, Coatue, said, "Online learning adoption in India is at an all-time high setting a new benchmark for the rest of the world.

"As we continue to focus on driving high-growth ventures, our investment in Vedantu marks our entry into the Indian EdTech market.

"This move underlines our strategy to partner with companies that are strategically positioned for high growth & scale.

"We are excited to partner Vedantu in their next stage of growth."

Photograph: Anindito Mukherjee/Reuters