What India’s failing edtech startups can learn from China to succeed

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Over the past year, there have been numerous articles trying to explain why edtech startups in India are failing. If you believe the rhetoric, the Indian edtech market is in dire straits with little to be optimistic about. Challenges such as long sales cycles, the number of stakeholders, and a lack of differentiated products are all cited as causes for concern.

However, there are many markets all over the world where these challenges exist, yet edtech businesses there have succeeded to meaningfully impact the lives of hundreds of millions of people. Given the struggle that Indian edtech businesses face, looking outside of our own bubble may help entrepreneurs understand what it takes to build a successful business.

Where do we look to understand edtech trends?

Historically, we have looked West when assessing trends in the edtech space. However, we have increasingly found ourselves looking elsewhere, namely China. There are a couple of key reasons for this.

Willingness to spend

Private spending on education in both India and China is consistently amongst the highest in the world. Driven by an education system that places a premium on high test scores and an employment market that requires employees to attend prestigious colleges, parents are constantly pushing their kids to excel at school. This drives the market for “fringe” education products. These include MOOCs (massive open online courses) such as XuetangX, which give users access to high-quality degree courses, language learning platforms such as VIPKIDS, which connect American tutors with Chinese children directly, and after school tuition platforms like Changingedu.

Understanding how these Chinese companies have been able to take advantage of this willingness to spend on education offers valuable insight for Indian edtech entrepreneurs.

Market size

The sheer size of the potential market for education products in China creates an opportunity that is only paralleled in India. They are the two largest education systems in the world, both experiencing between 25 and 35 million annual enrollments in higher education. In China, around 10 million of these enrolments are for non-degree awarding programs, related to vocational skilling. For an edtech business to succeed in either India or China, they must be able to scale effectively and leverage the huge market at their disposal.

As a consequence of these attractive market factors, funding for Chinese edtech companies increased from 17 percent of global funding in 2014, to 37 percent in 2015, a trend that is expected to continue. Whilst funding is not at such levels in India, it has increased year-on-year, with more and more capital available to Indian edtech businesses. Understanding how capital is deployed in China can provide a valuable lesson to Indian edtech entrepreneurs and investors.

Hujiang: an example of a Chinese edtech business

Hujiang is China’s largest MOOC provider, with an estimated user base of 110 million. It exemplifies the possible growth in a market with such favorable conditions. Xu Hua, VP of Hujiang, explained that there are two key factors that allowed Hujiang to flourish.

Quality

The first is a focus on quality content. He explained that education is “ultimately a services industry,” and that a brand is built through the quality of the service it offers. Therefore, throughout its growth, Hujiang ensured it was producing market leading content, partnering with the likes of Oxford University Press, Cambridge University Press, and Coursera. The platform brings credence to the long-mentioned phrase: content is king, appropriating a strategy focused on quality, not on cost.

Positive unit economics

“We don’t dare stop private tutoring as long as other students are still doing it”

The opportunities are there in India