Coaching centres are like shrines in this country. They are everywhere. A 2015 government-appointed committee conservatively estimated the coaching industry to be worth Rs.240 billion ($4 billion). Analysts, unofficially, estimate this figure to double by 2025. But only a small percentage — operating in the scale of TIME, FIITJEE or Allen — can offer students the convenience of online classes, with custom-made software. The rest are mom-and-pop establishments that clock attendance on ledgers and hand out photocopied tests.
Start-ups such as Classpro, Classplus and Proctur have sensed an opportunity in this. They are selling software as a solution (SaaS) to these ‘old-timer’ centres, charging anything between Rs.5,000 and Rs.50,000 per package, digitising every aspect of their running in user-friendly manner, for the not-so-tech savvy tutors. The three young companies together serve around 10,000+ centres and, with their solutions, the centres can charge their students 10-20% more on their fee, according to an industry veteran. It has meant changing entrenched practices but the growth in their user numbers shows that there is definitely demand, however slow growing that demand is. Manit Jain, chairman of FICCI Arise, a think-tank of stakeholders who represent different facets of school education, explains why the three players are in a lucrative business. “It’s a universal phenomenon, where in you have helicopter parents that want to enroll students somewhere or the other irrespective of the need, due to social pressure. This encourages a parallel industry that runs on pure obsession combined with a genuine need for some,” he says.
The first on the scene was Classpro, in 2011. Two years before that, the founders Vijay Suryawanshi, Deepak Dargade and Jayesh Gopalan had opened 3 Cube Computer Institute at Malad (Mumbai) right after finishing their graduation from the city’s Vivek College. While running the centre, they realised it wasn’t easy to keep track of fees and expenses, and that they needed a software to help with this. They put together a solution themselves, which helped them expand their operations quickly, and thought that maybe they could sell this to other centres, too. On doing market research, they found that others were also managing with spreadsheets and manual registers, thus, being unable to track fee installments or student progress, or even engage with parents effectively. Gopalan estimates that around 30% of classes shut down within three years because of inefficiency and poor service management. That’s how they decided to close down their coaching centre and focus on Classpro.
Personal experience is also what got Nishant Agarwal, founder of Pune-based Proctur, started. His sister is a tutor in Delhi, and he saw her struggling to run her classes (sending lessons and messages, and taking attendance) manually and alone. At the time, Practo, the health information app was picking up pace and that caught Agarwal’s fancy. “I wanted to do something similar for coaching centres,” he says.
They started with a solution for daily operations (such as inquiry management and sending reminders) for individual tutors, like his sister, and got a lukewarm reception. They had 80 clients on board. Operational software, by itself, does not make for great business. The money is in the teaching modules. That would explain why Classpro took off faster. It started with ten paying customers and, today, they have more than a thousand centres as their clients. Its FY19 revenue was Rs.15 million, and its annual revenue run rate for FY20 is Rs.20 million.
Proctur caught on to this pretty fast, and they launched educational solutions starting with Examdesk, which helps conduct tests online and gives feedback to students. By 2020, it had two more solutions — Proctur Live and Proctur LMS (Learning Management System). The former enables coaching institutes of all sizes to teach live online in an interactive manner while the latter allows a coaching institute/tutor to have multiple sources of income by helping them sell their various services such as test packages and live classes. With these new solutions, the number of clients has increased 200% YoY, and today, the number stands at 1,400 in more than 125 cities with close to 10,000 tutors using Proctur.
To avail any of these services, a client pays anywhere between Rs.10,000 and Rs.30,000 each year in fixed costs, depending on the number of centres they have and modules that they opt for. On average, a client spends Rs.25,000. The company’s revenue crossed Rs.10 million in FY20, double its FY19 revenue of Rs.5 million.
Proctur and Classpro offer pretty much the same solutions, except that the former allows tutors to sell study material separately, even to those who have not subscribed to their coaching modules. Classplus, which was founded later than these two, in 2018, decided it had to provide something substantially more. Therefore, it went mobile-first. It was also because browsing habits of Indians had changed with cheap internet. “After Jio, the country’s choice of data consumption is actually mobile,” says the start-up’s co-founder Mukul Rustagi.
It is the only start-up, among the three, that has raised funding — a total of more than $13 million from RTP Global, Blume Ventures, Sequoia Capital India’s Surge, Spiral Ventures, Strive and Times Internet. “2016 is a watershed year. Anyone who started post-2016 designs everything from a smartphone point of view and takes full advantage of the functionality of the phone,” says Sajith Pai, the investment lead from Blume Ventures.
Murali Talasila, partner and innovation leader at PwC India and an edtech analyst, is sceptical about cheap internet’s power to cause faster adoption of such services. “Even though affordable internet has made life easier, teaching online is a whole new game... These start-ups also need to convince people to move online and, in that sense, a lot of market creation has to be done,” he says.
Rustagi and Bhaswat Agarwal met at a JEE coaching centre in Delhi in 2007. They trained together for their entrance, did their electrical engineering in separate colleges and went their separate ways. Agarwal worked with Microsoft India as a tech strategist for educational products, where his role essentially was to seed solutions in schools and universities and partner with hardware vendors, and design solutions that teachers in universities and schools can use. Rustagi worked at the front-end trading desk for a company called Futures First. Both had always wanted to be entrepreneurs though.
After two and a half years of regular day jobs, they decided to heed their calling and started XPrep, an educational software company that provided online learning solutions. It shut, but the two could not shake off the feeling that they had walked into a gold mine. “98% of students in India end up studying at tuitions — at the Vermaji and Sharmaji of each locality,” says Rustagi. The personal connect of these tutors is something platforms such as Byju’s or YouTube video classes couldn’t replicate. These local tutors had that unique advantage, but they end up doing everything and aren’t technologically savvy, and therefore could not scale up. Rustagi and Agarwal thought that they should be allowed to focus on teaching, and the start-up could digitise the rest of the operations. That’s how they came up with Classplus.
That idea paid off, as within two years, Classplus had close to 3,500 coaching centres on its platform. It aims to reach 100,000 centres by next year. PwC India’s Talasila says that expansion won’t be easy for any of these start-ups, especially into small towns. “The fear of the unknown is very prevalent there,” he says. He believes that, while urban tutors are comfortable with using multiple apps, those in the smaller towns may not be so technologically suave and may therefore choose to keep their business small. A set-up like Byju’s has a gigantic sales team to drive user habits. Perhaps, these smaller start-ups may need such ‘feet on the street’, according to him. But Jain of FICCI Arise is confident of more hybridisation of classes. “Parents and tutors alike will realise that not all tuitions need to be fully physically done. It guarantees safety for the kids, apart from the wastage in time and money in travelling to far-off centres,” he adds.
It will surely take time and money to change behaviour of tutors and students, in adopting online solutions. Since there is only so much value these start-ups can add to the learning and operating process, they seem to have chosen a hard business to be in.