Edtech funding in India takes a cue from China, but a slippery road lies ahead

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Edtech startups in India have raised US$85 million in disclosed funding so far this year, according to data from venture capital analytics firm Tracxn. This is over two-thirds of the US$120 million invested in the whole of last year, and more than thrice the total amount in 2014.

Admittedly, it’s skewed by a US$75 million funding round in test prep and tutoring portal Byju’s in March – the highest round for any Indian edtech startup. On the other hand, the amount of funding is undisclosed in 14 of the 26 edtech deals to date in 2016. So the total amount invested is probably closer to US$100 million, and the rate at which deals are coming suggests that their number will easily cross the 50 rounds of last year.

Global edtech funding has been on a high since last year when US$3.5 billion was invested into the sector. Interestingly, there appears to be a shift toward India as VCs eye its large population of 1.3 billion people and their rapid adoption of smartphones.

India’s share of the global edtech pie in 2015

• Total global investment in edtech startups: US$3500 million
• Investment in India’s edtech startups: US$120 million
• India’s share of the global edtech funding was 3.4 percent in 2015

India’s share of the edtech pie in 2016 (Jan to May)

• Total global investment in edtech startups: US$823 million
• Investment in India’s edtech startups: US$85 million
• India’s share of the global edtech funding stands at 10.3 percent thus far in 2016

Tracxn data shows that India accounted for only 3.4 percent of the total global investment in edtech last year, which was dominated by China’s US$100 million investment rounds in 17zuoye and TutorGroup. This year, however, over 10 percent of the global edtech investment of US$823 million to date is in India.

China is obviously the biggest market for edtech, with a similar exam-oriented culture to India’s. But with signs of a cooling off in China, the next big edtech market beckons for investors.

This is good news for Indian edtech startups, but it can be a double-edged sword.

The post-funding blues

Three experienced edtech entrepreneurs shared similar misgivings about funding in this space. “Looking back, we made a mistake chasing funding too early,” said Piyush Agarwal, founder of test prep startup Superprofs, at a recent edtech meetup in Bangalore, organized by Headstart Network.

The million dollar question

To follow the herd or stand out?