Humans are always learning – from the time that we are born, and learn about the colors around us and pick up the language our family speaks, to when we are older and learn how to be better at our jobs. We also learn from different places – schools, teachers, peers, books, parents, and now, the internet. This continuous learning process across several age cohorts makes education (both online and offline) a vast space, comprising several sub-sectors.
Education is also a critical sector, given that advances in education result in enhancement in human capital and development of society. In addition, education is being rapidly impacted by technological advances and has emerged as a hugely important and influential sector in the post COVID world. Through this time, technology in the form of online learning, has helped us keep the education clock ticking, as schools and universities shut down around the world.
Blume’s recent EdTech Report sense-makes this vast and vital sector and breaks it down into simplified ‘sub-sectors’. This article looks at all the ways in which EdTech in India can be sliced and diced to better understand the various business models possible.
In this report, we break down EdTech into three categorizations:
- By age – from kids attending daycare to working adults enrolling in upskilling;
- By regulation – from the regulated space of schools and colleges to the unregulated private market; and
- By distribution – determined by asking ‘who is selling to whom and how’?
These three categorizations are used because together they provide the most comprehensive lens on the sector. While several other categorizations are possible (1:few vs 1:many teacher ratio, curricular vs non-curricular content, short term vs long term courses, affordable vs high end pricing, live vs pre-recorded lessons, etc.), our framework combines age, regulation, and distribution to build a cumulatively exhaustive way of thinking of EdTech.
(1) EdTech by Age
While people are learning throughout their life, what they learn, how they learn, and why they learn changes as they grow.
It is important to focus on the age group a company is targeting, because that determines their:
- Distribution model – should we sell flexible online classes or conduct summer camps?
- Marketing channels – should we advertise on social media or give vouchers to working moms?
- Revenue potential – how price sensitive is the customer?
- Cost of customer acquisition – will this service spread through word of mouth, or does each customer take time to find and onboard?
The chart below outlines how education is structured in the four broad age categories – toddlers learning before schooling, students in K12 schools, students in university, and working adults.
(2) EdTech by Regulation
EdTech can be thought of in two buckets – regulated (‘formal education’) and unregulated (‘informal education’). The regulated sector is under the strict purview of the government, making it a tricky space to operate in.
By law, schools in India are not allowed to pay out profit dividends to their owners or trustees, thereby making them not-for-profit enterprises. In addition, the government regulates schools and colleges by mandating accreditation, controlling the syllabus, regulating fee structures, etc.
This regulation, combined with the limited willingness to pay among schools and colleges, as well as the bureaucratic nature of these institutions, makes the formal sector a difficult realm to build a business in. However, we are increasingly seeing some interesting models emerge in this space. Some well known companies in this space include Educomp, XSEED, and EduSports.
Interestingly, the same trend is not true in the west – where EdTech companies serving the formal sector have seen great success already. This is likely due to the larger fee revenue collected by colleges abroad (thus leaving them with a higher willingness to pay) and higher amiability to using third party technology amongst schools and colleges. Successful global plays in this space include iClicker, Turnitin, Clever, Piazza, Classdojo, among many others.
In contrast, the informal sector (in which most startups including the likes of BYJUs, Unacademy, Vedantu, etc. operate) is allowed to make profit, charge unregulated fees, and decide their own syllabus. Most of the well known EdTech plays in India have been in the informal sector.
(3) EdTech by Distribution
Distribution model refers to how and to whom the service (or product) is being sold.
The company could be selling to other companies (or schools) in a B2B model (eg: Uolo, Educomp), or to students directly in a B2C model (eg: BYJUs, Unacademy). The company could also be using the school (or college / tuition center) as a platform to sell to their students via a B2B2C approach (eg: Classplus, EduSports).
A few companies have also cracked both B2B and B2C distribution channels simultaneously like UpGrad, which sells to both consumers and corporates for upskilling, and LeverageEdu, which sells to students entering college and to universities.
A new model that has emerged in recent times is the unbundling of formal education. As the name suggests, unbundling broadly refers to breaking up a set of services normally sold together (‘bundled’) into various smaller services sold independently (‘unbundled’). This is commonly seen in the aviation industry where airlines are removing the provision of free meals and inflight entertainment to lower the cost of the flight – i.e. unbundling add-on services out of the overall bundle of a flight experience. In the context of education, this refers to schools and colleges outsourcing a service that they should be providing (eg: AlmaConnect unbundles alumni relations, Guvi unbundles advanced courses such as Python, Machine Learning etc.).
If we stack up the nature of the sector (formal or informal) and the business model that is possible, we get the following combinations.
Blume’s EdTech framework
To arrive at our framework, we analysed each of these three categorizations independently, and then stacked them together to get a holistic view of the EdTech landscape. Combining these categorizations, we get the following framework that we term as Blume’s Edtech Matrix. The image below shows our framework, the 18 sub-sectors, their estimated market size (as of 2025), and the key startups that fall in these spaces.
The Edtech Matrix outlines 18 sub-sectors, which range from online classes for kids (i.e. B2C for kids under 10 in the informal sector) like Flintobox, to technology that improves college level teaching (i.e. B2B for adults aged 18-22 in the formal sector) like Turnitin. We have estimated the market size of each EdTech sub-sector and estimate that by 2025 the overall EdTech market in India should grow to ~ $4B.
Finally, the three lightbulbs in the framework represent the three immediate opportunity areas we are looking at:
- Continuous Education;
- Test Prep and College to Jobs; and
- Unbundling of Formal Education.
Parts 2 – 4 of our EdTech series over the next few weeks will double click into these three sub-sectors.
No report, especially one in a fast-moving sector like EdTech can be treated as final or definite. The EdTech market and landscape is evolving rapidly. We continually update several elements of the EdTech report as we get to learn about new developments and trends. Please do let us know if you feel it can be improved, and if you find anything incorrect. We will be happy to correct it. We are also happy to get your feedback on the report, and look forward to hearing from you.
Blume’s EdTech Report
Blume’s report in the EdTech space builds on our experience of investing in the sector over the last 10 years, as well as our interest in exploring new sub-sectors within the industry for future investments. The report covers our framework on the sector, including how the sector stacks up, what the different sub-sectors within EdTech are, and what the estimated size of each sub-sector is. Our framework (below) looks at the different areas within Edtech – based on age group served (preschool to upskilling), jobs to be done (test prep to corporate training), and the regulated vs unregulated spaces. The framework also categorizes the sector based on the different distribution models possible – B2B, B2C, and Marketplaces. Based on our estimation, the overall education market in India currently stands at $135B, of which $750M represents online education. Assuming current levels of technological and behavioral change, and the impact of COVID-19, we expect the online education market to grow 5x to $4B by 2025. The report also covers the upcoming opportunity areas we are tracking, including (1) phase change and test prep for students graduating from college and looking for jobs, (2) online upskilling for adults looking for higher salaries or different jobs, (3) OYO-fication of pre-schools and education services for kids under 8, and (4) unbundling of formal education and B2B services to schools and colleges. We also talk about the dynamics of building a business in each of these areas, and the early stage companies we find interesting in these spaces. Finally, we briefly look at the China market which has established itself as a global leader in EdTech, and the social and technological forces that led to its rise.
The report can be found here. This is intended to be an ever-evolving document and market sizing calculation, which will change as we learn. We are happy to discuss the report and learn from your experiences and knowledge. If you have any questions or comments, feel free to email us at email@example.com or firstname.lastname@example.org .