The edtech space in India has been in the news for all the wrong reasons. Outlook Business speaks with Ronnie Screwvala, chairman, upGrad, about the real problem areas in the sector, why the sector suddenly seems to be going downhill and how upGrad has been able to keep itself grounded. Edited excerpts:
You created one of the most successful media conglomerates (UTV). What made you get into the edtech space with upGrad?
When I wanted to start off again around 2013 (after divesting UTV to Disney), I wanted to look at something that would be part of the new economy. Something that could be very disruptive where I could bring my strengths of brand creation, scaling and experience as an entrepreneur. Education was right up there on my list of things. One could see how broken the education system was in the country.
Even in the western markets, nine out of 10 students complain about student loans. I wanted to change that so I researched for a year, met a lot of people and eventually co-founded upGrad. Education, to an extent, like the media, requires a lot of engagement, storytelling, communication and self-confidence so it was a natural progression for me.
What was your philosophy while starting upGrad? What was the problem that you wanted to solve?
Lifelong learning. Unlike a decade back, today, everyone knows that just because you went to school and college, does not mean that is going to see you through your entire life. Things have changed completely for every single person in the working population who is not in agriculture. Which is why a lot of women are coming back into the workforce in many ways—the percentages are local and remote, but they are.
So, the problem here is whether we really want to solve this, how do we augment the entire lifelong learning process so that education is no longer an event that ends when you graduate.
Edtech, which was an investor’s favourite until last year, seems to be losing its sheen. How do you see the future of edtech in the current scenario?
The future of edtech could not be brighter. It is exactly what everyone set out to do five-six years back. The mayhem and craziness was what happened two years ago. Now is the sane time. It is exactly the opposite of how people are perceiving it from the outside. The craziness was when a few companies got funded by a few investors at ridiculous prices and now they have to square it out themselves.
So, you cannot take that level of immaturity that crept into the system, both for fundraising and for fund giving, and put an entire sector at risk. Lifelong learning is here to stay. In the workforce, it is only getting more relevant and most people know that they need to be much more skilled and much more specialised. The skilling revolution is happening around the world. Even employers are understanding that students picked from universities are not fully employable, so they have to do few courses. That is where edtech is coming in.
Layoffs have happened because of overstaffing. If you get excess money, what do you do? You hire people, spend it on marketing and take up cricket rights. There are about 600-700 edtechs in India and about 10,000 around the world. Just five-six of them have laid off people and they will be on crucifixion because of being at inflated prices, not the others.
Are edtech start-ups getting impacted by the physical opening of schools and colleges?
The K-12 space that was pumped up because of the pandemic is certainly impacted. The college learners, higher education and the working professional space, not at all.
Today, 50% of the people taking undergrad degrees online are not coming from K-12, they are people in jobs who possibly could not take a degree before. In case of college students, those who are doing their BCom or BA are not employable, and they are doing their augmented online courses. We are getting an incredible response to our campus learning courses and bootcamps because people want to understand digital marketing, product management, data science and machine learning. These courses are not taught in their college curriculum, but they know that if they take even a three-month course, they will be smarter when they graduate.
This year, India will be the largest country in the world where people will have aspirations to study abroad. That aspiration level has happened because of online education. For example, through our study abroad programmes, a student can pursue the first year of his course in a foreign university online. So, the three years that parents used to spend on moving abroad can now become one-and-a-half years. This study abroad segment—already at $40-45 billion—will triple this year.
What has upGrad done right so far? How has it kept itself insulated from the upheavals?
A few things, actually. First, for the first five years, we did not raise any money. It was not a bootstrapped company under any circumstances because whatever money was needed, it had. It set an incredible discipline for us that we are not doing it for capital—capital is fourth in our list of five things to make a company successful. The minute you have that DNA, you build a much more long-lasting company. Second, our average revenue per user is much higher than the K-12 sector. In the K-12 sector, it is about Rs 30,000-50,000; for us, it is about Rs 4-5 lakh. Third is really focusing on outcomes. For us, outcomes are the only conversation we have in our meeting rooms, not valuations.
Do you think it is time for start-ups to focus on profitability rather than raising rounds of funding?
Profitability obviously is a needed environment. There is no question about that. Having said that, it does not mean that all businesses need to be profitable in the first or second year itself. Some businesses might take three-four years to get profitable and there is nothing wrong with that. There is no balance sheet for start-ups, there is a 10-year amortisation. So, for the first three or four years, you will have a cost item where your asset has been built as a long-term brand. It is not as much about profitability as it is about the right cost.
What kind of innovations is upGrad doing in terms of products and strategy?
There is no change in strategy. We had been very clear, from four years back when we started, that we want to build an integrated edtech company—not just university relationships and degree programmes. We wanted to cover anyone from the age of 18 to 58. The integrated model for us has really worked well and is our differentiator.
A lot of consolidation is happening in the start-up space. How do you view that?
I think it is a good sign because there are a lot of entrepreneurs who reach a stage very early and may not want to be bogged down with fundraising. They are all super smart people who know that they would not be able to scale beyond a particular point and if consolidation is to come under a larger umbrella where two plus two is equal to four and more, it makes a lot of sense.
Is upGrad exploring education on the metaverse?
It has a romanticism about it but we need to be practical. Today, people come to us online because we have created a space where you can pop a question and nine of your fellow students will answer. That, to me, is metaverse. I do not think we need to wear dark glasses to get its romanticism.