Upskilling platforms see robust demand for courses amid edtech slump

Upskilling

During the first wave of the Covid-19 pandemic in 2020, Jitin Sharma (name changed) found himself at a crossroads. Employed as a software engineer at a fintech start-up in Bengaluru, he sensed his daily work becoming increasingly repetitive.

Seeking a way to break free from the monotony, Sharma, 29 years old at the time, made a pivotal decision and undertook a data science certificate course through Scaler, an online learning platform, which cost him about Rs one lakh.

“I had been wanting to upgrade myself for a long time, but I did not have an option to leave my job as I had family commitments,” Sharma said.

“By late 2019 I thought I had made enough money to take a break and learn. I always wanted to do data science. But then Covid ruined my plans,” Sharma added.

Sharma, who had been admittedly hesitant about online education platforms, knew his options were limited as universities and physical campuses were shut due to Covid. But the affordability of the online course seemed enticing, prompting him to take the plunge.

After completing the 10-month course, Sharma immediately got a job offer from Microsoft. The new position came with a substantial 70 percent salary increase. Buoyed by this success, Sharma seized the opportunity to continue enhancing his skills, enrolling in another upskilling course in Artificial Intelligence (AI). It further propelled him to a senior role within the big tech company.

“For me, education meant attending lectures on campuses. But thanks to the Covid lockdowns, I gave it a try in 2020 and it worked very well in my favour,” Sharma said.

“I took another course last year in AI and that has further benefitted me. I did not have to leave my job for this. Every night I used to take out some time, which was doable and I could finish it at my pace. Going forward, I would love to keep myself updated with the ever-evolving technology,” he added.

Sharma's journey strikes a chord with many professionals who were introduced to online learning during the pandemic as a means to improve and upgrade their skills. Subsequently, they have remained committed to exploring a wide range of courses available through edtech platforms.

Lifelong learning

With working professionals continuing to explore the option of so-called lifelong learning, demand for upskilling courses on edtech platforms has stayed robust, in stark contrast to other online learning avenues like K-12 and test prep that have been experiencing a decline in the wake of the post-Covid pull back.

“The necessity for people to upskill has remained unchanged. This demand is primarily fuelled by the dynamic shifts in technology, perpetually driving alterations in business operations. Fields like data, AI, cloud computing, cybersecurity, and software engineering are in a constant state of flux, pushing individuals to enhance their skills,” said Mohan Lakhimraju, founder and CEO, Byju-owned Great Learning.

“Adults have realised the feasibility of online learning, which was underscored during the pandemic. With remote work becoming common, individuals had more time at their disposal and witnessed others engaging in online education. This collective experience dispelled uncertainties and transformed online learning from an unfamiliar concept to a known approach,” he added.

He explained how online learning has provided an opportunity to individuals who can't afford to take a hiatus from their jobs to upskill or pursue advanced education while continuing with their jobs. As demand for upskilling courses has remained robust, these platforms have witnessed strong growth in their revenue numbers in the previous financial year, which was otherwise difficult for online learning platforms.

Robust financials

SoftBank-backed Eruditus, upGrad Education and Great Learning have projected robust growth for FY23. While these companies are yet to file their audited results officially, their founders, in media interactions have said that they see their revenues growing in the range of 60 to 100 percent in FY23.

Eruditus’ Founder and Chief Executive Officer, Ashwin Damera, told Moneycontrol in an interview last week that the company closed FY23 (2022-23) with a 60 percent growth in its revenue. Eruditus follows a July-June financial year. He further said that in 2023-24, he expects another 40 percent growth.

“The scalability portion in our business is high because our TAM (total addressable market) is so big,” said Damera.

“Because we operate on a global scale, we are able to play in many markets simultaneously. This expands our TAM significantly. We also figure out what courses work well in which markets and we can then expand those,” he added.

Demand for upskilling continues

Just like Eruditus, Mayank Kumar, Managing Director of upGrad also predicted a 100 percent year-on-year growth for FY23. The company, backed by Singapore’s Temasek and James Murdoch’s Bodhi Tree, also claimed to have completed 22,000 placements in FY23, in what demonstrated robust growth for the year.

Mohan Lakhimraju, of Great Learning, meanwhile, is hopeful of an over 60 percent growth in FY23, according to a media interview. Lakhimraju declined to comment on specific numbers. Disprz, an enterprise SaaS learning & skilling platform, which raised $30 million in its Series C funding earlier this month, also sees its revenue growing 100 percent in the current financial year, albeit on a much smaller base of about Rs 35 crore.

Disprz Co-founder and CEO, Subramanian Viswanathan, told Moneycontrol that its enterprise business is particularly expected to witness strong demand. Enterprise business is when a company pays upskilling platforms on behalf of its employees to upskill them.

"It's a problem that every CEO today recognises, because the world of business is changing very fast. There are so many technological disruptions, unless you stay on top of your functional and technological advances, you will not succeed in business,” Viswanathan told Moneycontrol.

“Businesses realise this, and they have the mandate for upskilling that today's enterprises will pay for. And therefore, you can build large global businesses by selling learning related solutions to businesses, you can take different approaches to it," Viswanathan added.

Strong investor interest

With strong continued demand for courses, strong growth numbers and optimistic projections, upskilling and higher education platforms have continued attracting strong investor interest, according to founders and investors Moneycontrol spoke with.

"Around a year-and-a-half ago, during our initial fundraising round, many institutional investors struggled to fully grasp our industry. This concept was novel to them; they were discovering the existence of such a niche space and recognising the demand it fulfills. I must admit that conveying the essence of this industry to various VCs was indeed quite challenging,” said Harkunwar Singh, Co-founder at Novatr, a Y-combinator backed edtech start-up focused on upskilling within architecture, engineering, and construction.

“Now I have been meeting with investors regularly over the past year and there's a mix of edtech-focused venture capitalists (VCs), and sector-agnostic institutional investors who generally seem to hold strong confidence in the upskilling domain," he added.

Singh’s comments corroborate the funding data. Funding to higher education and upskilling platforms saw a lower drop in 2022 compared to 2021 than K-12 and test prep platforms. According to data collected by Tracxn, upskilling and higher education platforms secured close to $750 million across 116 deals in 2022, down from $1.1 billion across 151 deals in 2021.

Upskilling and higher edtech startups

Funding to K-12 and test prep platforms, on the other hand, nearly halved to $1.7 billion in 2022 from over $3 billion in 2021, Tracxn data showed. Further so far, this year, start-ups in the K-12 space have received just about $25 million against $1.7 billion in the previous year. To be sure, funding to higher education and upskilling platforms has also dropped by 65 percent to $258 million, but that is far lower than the 98 percent drop in K-12 and test prep.

K12 and test prep edtech startups

“The importance of upskilling has risen significantly. Many recent graduates or individuals with technical degrees find themselves outdated in the light of regular advancements in technology. People are compelled to upskill to remain relevant, contributing to its popularity,” said Anirudh Damani, Managing Partner, Artha Venture Fund an investor in GetWork, a marketplace for skilled workforce.

“Many upskilling startups have been around for four or five years, and I've seen pitches for the last five years. It's just that now, since edtech isn't profiting from K-12 and test prep, this has caught investors' eyes,” he added.

Moreover, Eruditus is in the market to raise about $120-150 million and is getting very strong investor interest, Moneycontrol had reported previously. The SoftBank-backed edtech is aiming for a mix of primary and secondary share sale and has appointed investment bank, Avendus, to advise it for the same.

“Upskilling and higher education companies have continued growing well over the past two years, maybe not as fast as they were during Covid, but their growth is still pretty strong,” said Mujtaba Wani, Principal at GSV Ventures, an edtech-focused venture capital firm that has invested in four edtech unicorns in India including Eruditus.

“What matters is, based on what you are charging, or what you are promising, are you able to deliver a return on investment to your customer. If a customer is paying several thousand dollars for a bootcamp or for some kind of an upskilling course in a degree, you need to ensure they complete it and get a job outcome or a promotion if that’s what’s being promised and these guys (upskilling platforms) have been successfully doing that,” he added.

The enticing upskilling market has also prompted companies like PhysicsWallah and Unacademy to bet big on upskilling and higher education. PhysicsWallah entered the upskilling segment last year by acquiring iNeuron.ai, a platform that offers over 600 courses across 12 verticals including data science and web development.

The company has also earmarked Rs 120 crore for investing in upskilling, Sudhanshu Kumar, CEO of PhysicsWallah Skills (PW Skills) had said in May. PW Skills was launched as an integrated platform for upskilling after iNeuron.ai acquisition. The company also recently launched a residential undergraduate programme for engineering in Bengaluru.