Episode 73 / July 12, 2020
Pratik Poddar, Nexus VP on the Growth & Monetization of EdTech Startups in India
Pratik Poddar having his roots back in a Tier-II city, Patna, is probably one of the youngest Principals at a VC firm in India. After having multiple entrepreneurial stints, Pratik joined Nexus Venture Partners, in 2015 as an Investment Associate and has grown tremendously since.
Some of Nexus Venture Partners’ portfolio companies include – Zolo, Postman, and Unacademy among others.
In this podcast, Pratik shares his experience of identifying potential Edtech Startups in India and adding them to his Portfolio.
01:29 – Focus on Product-first companies in the Portfolio
05:35 – How Edtech startups made themselves resistant from Covid-19?
07:46 – Edtech Companies in Portfolio – Unacademy, WhiteHat Jr., and Quizizz among others
09:58 – Monetization & Growth Journey of Unacademy with 1200+ Cr. Annual Revenue
11:08 – TestPrep Market Scenario & Opportunities in India
21:30 – Investing in WhiteHat Jr. a very new concept in Edtech
41:25 – Untapped Opportunities in early school for Edtech
49:02 – How big is the potential market for “Pay After Placement model” startups like Newton School?
52:45 – 3 Key Qualities VCs look for in Edtech Entrepreneurs
Read the full transcript here:
Siddhartha Ahluwalia 0:29
Today I have with me Pratik Poddar, Principal at Nexus Venture Partners. Pratik joined as an associate at Nexus in 2015. Congrats Pratik on completing five years in Nexus.
Pratik Poddar 0:41
Thanks Siddhartha, pleasure is about all mine.
Siddhartha Ahluwalia 0:43
Welcome to the 100x Entrepreneur podcasts. I’m very much looking forward to this conversation of two reasons particularly because of it. You know, Nexus has been performing exceptionally well. Right? It’s been a firm which we don’t talk often, its never highlighted, but this month, June 2020, two of your portfolio companies have become billion dollar. The rounds in media which are circulating our Postman has raised 150 million dollars, a $2 billion valuation. And Unacademy is in talks to raise at $1.2 billion valuation. Congratulations on the stupendous success.
Pratik Poddar 1:22
Thanks, Siddhartha. We have been lucky to work with exceptional entrepreneurs. I think one unique thing about Nexus is that most of our companies are Product-first companies and that’s the DNA of the firm. We just love founders who can build a platform-centric businesses and who’re, focused on building product first companies, and that is working well for us in these times.
Siddhartha Ahluwalia 1:45
You’re the youngest Principal in the VC industry, I would say. You have a very diverse background, unusual for people in the VC industry. Most of them come from consulting backgrounds, ex-McKinsey, but you have been an Entrepreneur Three times. You have been an ex-Quant guy at Morgan Stanley, ex-private equity at Blackstone. So first I would like to start with the thought, you know, you mentioned that Nexus is a very product-focused VC and you like to back entrepreneurs who are product-focused. What do you mean by that in-depth? Because we see all around us, you know, either there are two kinds of companies and technology either service or product. But placing in the second bucket, every company which has an app, or a B2B or consumer-focused interface, which they can use is a product-focused company.
Pratik Poddar 2:38
Yes. The product in most cases for most companies is not UI UX. In an e-commerce company, the product is not about selection, and then clicking buy and then paying. It’s about the entire experience from, discovery to order, to delivery to post-purchase. It includes the entire gamut of, of things here. So when I say Product-first, it’s not about UI UX or app based companies. It’s more about the fact that the entrepreneur is thinking about the customer experience at all points of time and ensuring that the delivery of the service is happening in a scalable tech-driven manner.
Siddhartha Ahluwalia 3:27
And what do you know? Because for every product you are backing, there are 10 other products or companies out there, so what is so special about the entrepreneurs the Nexus is backing when you think they think product First if you can go deep, what does it mean?
Pratik Poddar 3:45
So it’s actually when you hear about it, it’s not obvious, but when you are in that room, it’s very, very obvious for most companies for most high-quality product entrepreneurs, that I have met during the entire discussion, for every problem, you are proposing, all startups have risks. So during the discussion, we’ll discuss about all the risks as well. For every problem you are proposing, the thought process is very product driven. And it’s a founder skill that we truly, truly crave for. In most cases, a lot of these guys will not be thinking about solving problem by throwing money at it, or by throwing people at it. And I think that is a unique, trait that I find in a lot of Nexus entrepreneurs, that we love backing.
Siddhartha Ahluwalia 4:36
Thanks Pratik for sharing that insight. So let’s dive deeper into the only sector which has seen a huge uptake in times of COVID when everyone is adviced to sit indoors and not move out of the house, even though lockdown has opened, but today as in June, we see India at fourth number in terms of number of COVID cases. And the Economy seems to be, you know, not back on track. I have my argument. But the Edtech sector is seeing a different wave or tailwind like none other sector has seen, like before. There have been parallels to payment and Demonetization. But today’s is very different for the Edtech sector, I would say, the tailwinds are more stronger. It’s the only sector which has seen a huge inbound growth in terms of the number of users, as well as huge monetization. So can you share your thoughts on why is that happening right now in the Edtech sector?
Pratik Poddar 5:38
Yeah. So I think there are a few things that happened in the ecosystem over the past 3-4 years. That made the timing right. So it was a confluence of smartphone ventilation increase. faster internet because of Jio, payment infrastructure being large enough, and payment penetration in the country being large enough. So because of these reasons, there was already a set infrastructure for education companies to grow on. Now because of COVID, of course, because people are sitting at home, the only way to learn is to learn online. And people have been forced to think about learning online. And when they’ve experimented it for some time, you realize that hey actually good, it’s not at all bad. I would argue over time, people should think about Edtech, as even better than the offline education that they were getting, because of democratization of content from the supply side, because you can get the best supply of content very easily now, given the large distribution of a lot of education companies. And as creation tools are improving, and as people are learning how to create better quality content, its just that, you probably will get a better teacher who’s creating better content in the online world. So there is no reason for you to even think about going to the offline world. So this is a large social experiment that we are going through. And it seems to me, that the experiment, is the result of the experiment is clear, that online learning is as good or perhaps better as offline learning. And, so we should, we should see a massive shift in the perception of how people think about online education.
Siddhartha Ahluwalia 7:38
So Nexus has a huge view on Edtech and that’s why we see a number of portfolio companies. So can you take our listeners through the portfolio companies of Nexus in the Edtech sector?
Pratik Poddar 7:49
We are early investors in Unacademy, which started as a live test prep platform and later expanded into K-12 and other categories. We are early investors in Whitehat Jr. which is a K-7 education company where you are teaching coding or logical reasoning to kids. We are early investors in Quizziz, which is a global tool for teachers to engage with students better and they are present across many, many schools in Southeast Asia, the US, and now in India as well. We are invested in Newton School, which is an upskilling company, where you teach coding to college graduates and make employable and high-quality coders for companies to hire. And we’re investors in turtles in Talent sprint, which is an upscaling company, where people who are already doing jobs and they want to reskill and upskill and, get better jobs or do better in their company, can learn and acquire job ready skills. So, we are investors in lots of education companies across the stack and this is working out well for us, especially in these times.
Siddhartha Ahluwalia 9:40
So as you shared you know, Unacademy is one of the leading test prep and right now entering into K-12 segments in India. Can you share about some traction numbers of Unacademy? Where are they right now? And where are they in terms of monthly revenues?
Pratik Poddar 9:58
Yeah, so Unacademy started monetizing in February-March last year, and then they’ve grown very fast. And I think now they are doing about 100 crores a month booking. Which is just phenomenal it’s perhaps the second-largest revenue-generating Edtech company in the country.
Siddhartha Ahluwalia 10:20
So if we amortize that, its like 1200 crores of yearly revenue. From here on I believe it will be much more. This is what you are reporting current month or the last month. And the Test prep sector in India particularly which Unacademy has been able to crack it has been one of the largest sectors in India like Bansal classes in Kota for IIT, Chanakya in Delhi for IAS, Alan for medical / NEET exams. Can you throw some light on this sector before it was getting replaced or disrupted by Edtech companies? How big was this sector? If you can show some numbers on it?
Pratik Poddar 11:10
Yeah. So reports say that test prep market in India is a $8-10 billion market. And you mentioned a lot of names. And there are other names for other exams as well, and there are many decently sized city-based, state-based companies there. At the end of the day, it’s a very local business. And people travel from across the country, but at the end of the day, it’s a very, concentrated in one city or two cities or cities. So at the end of the day, the way I think about it, is a lot of exams that we have in the country are really a gateway for middle class or lower middle-class people to get opportunities. And that is everyone in India, is trying to either become a civil servant or get into the top engineering colleges, top medical colleges, CA and so on. So, there is huge demand for preparing for these tests because this is seen as a ticket out of lower middle class, middle class, upper middle class to transcend orbits in socio-economic status. Now, the challenge you always felt and I went to one of the top coaching institute’s in Kota for preparation for JEE. So, when you step into that world, you realise that there is a clear caste system. All of us took an exam based on the marks in that exam you’re divided into different classes. Although all of us are paying the same amount of fees, the person who got better marks is getting access to more motivated teacher and is sitting with more motivated students. And of course, then he has a higher chance of success than the people who did not get that opportunity. Now, in two cents Edtech just breaks all that shackles and broken experience which does not make sense. Over time as the markets are expanding, the new supplies is getting created. Earlier, if you’re good at teaching and you know the concept, you have to go to one of these coaching Institutes, to teach and then only impart knowledge, but now you could sit at your home and teach students. So suddenly the market has expanded because education has now been made accessible and affordable, which has led to new supply creation, which just expands the market phenomenally.
Siddhartha Ahluwalia 14:12
But there’s an argument that in Edtech because of scales of 1:1000 i.e. 1 teacher to 1000 students in a batch, in LIVE class especially, there is no personal attention like they used to be in offline classes at Bansal because you have been Bansal, I’ve been at Bansal for IIT-JEE preparation, where the batch sizes are 60-100, a teacher could see in the student’s eyes. How do you replace that? Is it replaceable? Or are we just ignoring that part?
Pratik Poddar 14:43
So yeah, the way I think about it, is that it’s not right for us compare 1-on-1 here, because the way I think about it, is when in Bansal classes when you had 60 students in one room, I’m not sure if the teacher was able to talk to every student anyways. And in top batches, that attention was better, but as you go down in the value chain, you will realise that the experience was different, not as good. In all of these Edtech companies where 1:500 or 1:1000, learning is happening. It’s not that it’s only content where managed learning is happening. You have TAs and mentors who are helping you learn as well. So, it is really the paradigm of education that changes, that the lecturer is different from, doubt solver who is different from mentor, which is effectively unbundling of the different rules that the teacher standing on the podium in the offline coaching institute’s were doing and that is why experience here could actually be better because you’re learning from the best teacher who knows how to teach. Who has a deep understanding of the subject and pedagogy. By solving your doubts or for getting that personal attention or learning about the nuances, it can be done by a more distributed set of teachers. And that model perhaps is better a model. The other aspect here is based on top of these platforms, you could do peer-to-peer learning, you could do better assessment and you could, have real-time feedback on the class and the concepts. So, again, because of technology, we are able to expand the gamut significantly more and not just focus on the small class and trying to deliver on that in that paradigm.
Siddhartha Ahluwalia 16:58
So, as you shared, you know earlier in the podcast like Unacademy is doing 100 crores in monthly revenue. When did it become mainstream for consumers to pay for education on mobile? When did this shift happened? It’s a very sudden shift and people don’t believe that this has already happened and where is it going from here?
Pratik Poddar 17:23
Yeah, interestingly, I would argue we are we are still at day-0 here. Of course, because of as we discussed, because of improved smartphone penitration, improved internet penetration, payment, infrastructure, etc. There is some shift. But if you take a 30,000-feet view, you will see that, the total penetration of Edtech in the test prep market is maybe less than 2.5% or less than 3% because there’s the total market is already $10 billion. And, Edtech in test prep would be perhaps $200 million dollars types. When you look at K-12, you will see that the penetration is perhaps, less than 4-5%. So, we know that, there’s a, long road ahead and as we discussed earlier the market-size expansion would also happen. So, this is really day-0. And we are just seeing the early-offerings right now. And I strongly believe that in the next 5-10 years, we should see multiple $5-$10 billion revenue companies coming out of India, in education, because this is the need of the hour and we don’t have the fundamental infrastructure created by private companies or by the government. So, a lot of value that will be captured by startups and entrepreneurs working in this space.
Siddhartha Ahluwalia 20:49
Fantastic! You know, Gaurav has been on the podcast, though we see him as an entrepreneur right now like one of the best entrepreneurs in the country today. But back then, you know I can only imagine from your conversation, what it would have been like to sit in the same room and try to whether we should do the deal or not do the deal.
Pratik Poddar 21:12
No, there was a limited question. It was more about how can we close the deal. It was never about whether we should dothe deal or not.
Siddhartha Ahluwalia 21:22
Coming on to your next portfolio, which is doing very well – White Hat, Jr. was recently in the media that they are raising a $50 million round. Can you share how did you discover White Hat? How did you develop thesis? because it’s a very unconventional sector. They were not replacing anything in the industry, Uncademy was replacing the offline IIT coaching, test coaching and now K-12 but White Hat is a new concept. How did you came in touch with the founder? What were your thesis when you invested?
Pratik Poddar 21:56
When you meet Karan, you will understand, his aggression. And, you can see that he’ll deliver with speed and precision. So when we were chatting about White Hat for the first time and again it was an idea stage company, the discussion was more around – (A) Building the team around Karan because at that point of time he was the single founder, who had just started the company and (B) It was around where this can go, because there is a real risk that this could be a niche, rich-people-product. And while we were discussing with Karan, we were able to uncover it. So while we were iterating on the idea with Karan we unearthed that the market is, yet to be created, there is a lot of latent demand, in the market and when you’re talking to people, you’re getting a sense that this is one course that they want to take for their kids. And you will also see that there is an appetite to pay and the third thing, is that there is no second best alternative. Now, when, these things are there, you know that there is a potential to expand the market. If you can create a right offering and Karan being a superb marketer and superb operations guy, we had detailed discussions and very deep discussions around – How do you convince the parent? How do you convince the student? What is the mindset that the student has? What would be his priority? How do you ensure a delightful experience to the student and and how would the parent who is really the payer, think about it. It just trying to get deeper into the skin of the value prop and, education fundamentally is a high margin business. Because at the end of the day, you are selling aspiration, you are selling hope and as we have been working with Karan over the past 18 months or so, our confidence in the company has only grown, our confidence in his execution ability has only grown. And the question around the demand constraint is not even discussed, because we have learned that its a supply constrained market and you just have to create high quality teachers and because your experience is superb, students will talk about it with their friends and the market expansion happens drastically in such a market where, there is this too-latent market.
Siddhartha Ahluwalia 25:40
So, what stage was a company when you invested? Whether it was just Karan building a prototype or he had some users? And what was your first check like in the company?
Pratik Poddar 25:49
He had just quit the job. And he was iterating on the idea? Yeah, so there was no product, no experiment. No, team. He was just One person trying to think of an idea. And, for many of our companies Turtlemint and Paysense, we have done that. And, it has been phenomenal for us.
Siddhartha Ahluwalia 26:21
And What was the cheque size? When you invested?
Pratik Poddar 26:26
It was a Seed cheque.
Siddhartha Ahluwalia 26:34
And it was I believe followed by a $10 million cheque?
Pratik Poddar 26:39
So, so we co-led a Series-A round with Owl Ventures & Omidyar Network, after the company showed some traction and there was product-market fit. And we were able to build a very, very high quality around Karan. And I’m so amazed by two things that Karan has done in the past one and a half years. One is he has built super high quality around him. It’s just amazing that such a early stage company is able to hire and build such a rockstar team and the second is the aggression and the speed of operation. So, yeah, we were lucky early-investors.
Siddhartha Ahluwalia 27:25
And Pratik, Can you tell us about the ticket size of WhiteHat Jr.? What’s it charging a parent? And who are these parents? Like which income group do they belong to? Are they the top 1%? Top 5% of India? What’s their average monthly income like?
Pratik Poddar 27:39
Yeah, so, just to give you some market landscape, there are 22 million kids in the country who paid more than 30,000 rupees a month to school fees. The education market size is increasing faster than you and I would would imagine. The appetite to pay is increasing faster than you and I can imagine. As the incomes are rising, the most impacted expense out of pocket is education for people, as we discussed today for people, that’s an aspirational spend. And, all of us have grown to learn that education will create riches for us.
Siddhartha Ahluwalia 28:30
So 22 million people you shared that, they’re paying 30,000 rupees per month for their kids education in school.
Pratik Poddar 28:44
So the market for WhiteHat is really across the board. We have about 50-60% of parents from tier-I cities, while others from tier-II & tier-III cities. We have people coming from, business backgrounds, from salary class, from government jobs. So, it’s across the board. And from our perspective, there is clear demand, because a lot of these guys want their kids to get the unique skills, which gets them a leg up in their career. And, so there is no fixed pattern, that this is the customer segment that will work and the others will not work. And, there’s huge demand. It’s a really supply-constraint market right now.
Siddhartha Ahluwalia 29:50
And it must be tough to, get trained computer and programming teachers. I believe in a country like India where everybody aspires to be a software developer!
Pratik Poddar 30:02
That’s the beauty of the product, that the technology enables you to learn without learning from deep software programmers. So, the teachers that are there on WhiteHat are super successful at what they are doing. Because they have the empathy, they have the curiosity, they have the hunger, but the skill set required around content and domain can be acquired because of the technology layer and the content layer WhiteHat provides. And that is the beauty of the model and that is where I say that the market expansion happens because the supply has now been democratised.
Siddhartha Ahluwalia 30:51
And usually a parent starts their kid in a WhiteHat course when they are in the seventh class?
Pratik Poddar 31:00
So it is from class 1st to class 7th types, and it is almost evenly distributed. So, it’s actually very early in their, journey. And the pitch to the parent is that earlier your kid was playing games, now he would make games. Would you want your kid to be the CEO at when he’s 13. And, what the kid really learns is he gets to build something for the first time. You know, you and I did perhaps read much later, but the first time you build something with your hands, its just magical and, the way you think about life changes when you start building things because you certainly feel that you’ve got this power that you can actually affect things are not just consume. And that is what WhiteHat potentially provides to a lot of kids and the way I think about it, that if, if even if a few percentage points of students become lifelong builders, because they got access to such a course when they were young, we have created real value in the world, because we will have so many builders created out of the system, because its just that they were exposed to such high quality workshops and experiences early on in their lives.
Siddhartha Ahluwalia 32:33
And is WhiteHat opening up to other streams also besides computer programming?
Pratik Poddar 32:38
So the intent is always to capture the, higher order of thinking space and its just that business-wise it just makes logical sense, that it’s an easy way to expand into other categories and either up-sell and cross sell to the same student or because, it’s a family decision. One kid might be interested in one course, where the other kid might be interested other course. So they will expand to other categories like robotics, space etc. But the intent is to be very very focused and and make sure that everything we launch, we deliver high quality experience to the parent & the kid. So we do not want to spread ourselves too thin and just ensure that every class is a phenomenal experience for the kid.
Siddhartha Ahluwalia 33:40
So coming back to the Edtech sector when you’ve shared so much insights about your portfolio companies. You know you shared about different buckets in Edtech, one is just students from 2n class to 7th class, how they are seeing Edtech and the parents in India are seeing Edtech. And even in recently published interviews with Sundar Pichai, CEO of Google, he said that his dad spent his one year salary sending him to US, that’s like a eye opener for parents that, they’re already investing, but what can it do, you know, the education to from a lower middle class, to becoming CEO of one of the largest companies in the world today? And it empowers Indian parents so much you know what, they couldn’t achieve, through their lifetime they kids could because of education.
Pratik Poddar 34:43
I totally agree. In fact, you know, again, it’s not about being the CEO of Google. I’m sure you would have also gone through the same journeys, that, both of us, whatever, you have done in life, whatever small we have done in life now, it is not small considering where we started from.
Siddhartha Ahluwalia 35:07
I’m from a city called Meerut. It’s a tier-II tier-III town near Delhi. I got educated in Meerut, after 12th, I spent one year in Kota.
Pratik Poddar 35:20
Yeah, so all of us, levels have been pushed across orbits and have explored things that our parents or our elder brothers and sisters did not have an opportunity to explore, because we could, ride on the education curve and create opportunities for us, that was not there for everyone. And that’s why education is a great equaliser that someone like Sundar, who comes from a humble background, would become the CEO of Google. And in our own ways, that’s true for both you and me as well, we are able to do stuff because of education and what we were able to build out of it.
Siddhartha Ahluwalia 36:10
So, just to take a pause there, I would love to share with our listeners your background, which city do you come from and your family background? What does your father used to do or does?
Pratik Poddar 36:20
So, I was born in Patna, majority of my family is still in Patna. We as a family come from Rajasthan, Poddar, is a sandhi (joint) of Pod + Dar. And we were originally ship traders, “Poddar” means ship traders. But a lot of us shifted to Patna 40-50 years back and I was born in Patna. And did my early education there. And then the family moved to Jaipur, where I completed my high school and my father is a businessman, like everyone in my family. So, we are a joint family. Across the board, we have 55 brothers and sisters. And most of my family members are businessmen and running shops, running factories, having trading agencies and so on. Very early on again, I was privileged actually that most of them started working in the shops, when they were very young. So when you’re in class 10-11 you go to school and you complete your degree. But you start going to the “Gaddi” (Seat of Business Owner) and you start learning the tricks of the trade. Because I was too studious, when I was very young. And, because I had the opportunity given the family had started to do significantly better. By the time I was in class 8-9th, I had the opportunity and the freedom to explore other things. And I loved Maths then. When I was in class sixth, I would complete the books of the math book of class seven and and I would just get the fun out of it. So, I wanted to be an engineer. When you are told that you should like maths then you should be an engineer and that’s how my journey out of the traditional business familly started. Of course after my engineering and after working as Quant. Analyst for some time, I tried to go back to my roots and try to build a business but looks like it was it was too difficult for me and I’m back to the professional side since last five years working at Nexus.
Siddhartha Ahluwalia 39:31
Like for many people, like what the sector which we are talking about, education changes your life completely. Thank you Pratik for sharing personal anecdotes and coming back you know, to our conversation. So there is the sector you know, which WhiteHat is focused on from class 2 to class 7th, adding programming skills and allowing children to build something first time in their life. Then there are your portfolio company focused on – 11-12, IIT-JEE and other test preps,. What are some other sectors which you think, they have still a large opportunity in India, but entrepreneurs have not been able to crack in Edtech?
Pratik Poddar 40:27
So, either way, so I, I break the sector into different verticals. One would be K-7 + PreSchool, which is about very young kids. The motivation at when you are very young is not about getting marks or it’s not about getting a job. It is from the parents side to manage kids better and to grow their thinking better. K-7 to K-12, it is a lot about marks and outcomes in the school exams and at some level developing skills for them to shine in the real world when they graduate towards it. The next level is about the end of K-12 and post college. It’s a lot about test prep, which as we’ve discussed is a larger market. And the fourth segment is continuing education. That after you have graduated, how do you continue to evolve your skills and learn and grow in your career. So in my mind, a lot of work has been done on K-7 to K12 and test prep. And, we can now clearly see that large companies will get created in a tech space in these two verticals. I think there is a lot of opportunity in K6-K7 and in the continuing education space, which has not been captured as much yet. And, I’m super excited about that. So, in the first vertical the constraints, I put on myself is it has to be outcome driven, although it is for kids, the kid should feel that he has built something or he has done something and the parents should also feel that there is some real outcome associated with the learning. Otherwise, this might not be the popular opinion, but in my mind for most people, if you are not giving structured output, then it becomes entertainment and entertainment has value. But then monetization would take a different route and the outcome expected and the job to be done would be very different. And so it should be considered differently. But if you are thinking of yourself as an education company, then the focus on outcome has to be there for sure. And, in my mind, a lot of again, this is personal bias. Might be might not be the popular opinion that people do not pay for content as much. But people pay for learning, people pay for the package. And it’s like the way the way I think about it, is that how much money you have spent on books over the past 15-20 years of your education versus how much money do you spend on schools and colleges? The mindset is very different, when you’re spending on learning and that is why the profit pools exist today. So, with these constraints in mind, super excited about both curricular and extracurricular verticals. And on continuing education, I think, there is tremendous value in professionals learning and upskilling on the on the for their current job or for their job shifts. And, you know, everyone talks about it, that the only thing constant in the current world is change. And because the markets are continuously changing, you always have to be at the top of your game, you always have to be willing to the skill and and change careers. And that is where continuing education comes, comes very handy. And in my mind, that market is also that market will also expand over time, as we get higher quality pedagogy and high quality output delivered across different verticals. Mind almost surely companies in both K-6 and Continuing education would be very vertical focus to begin with, that you will deliver high quality output for one vertical, whether it’s coding learning, as you’re growing in your job. You almost surely didn’t start vertical first and then eventually become more horizontal and create a brand and become given more holistic experience across different verticals. But to begin with, we focused on one vertical output driven and and able to create actionable outcomes and ROI for the people paying money for it.
Siddhartha Ahluwalia 46:07
So correct me if I’m wrong here. So once a kid enters college, there are not many Edtech companies serving for that person between 18 to 22 or they are not known yet if they are building?
Pratik Poddar 46:24
There are lots of companies working in that category. So there are a lot of b2b companies, which are providing, there are a lot of technology companies providing software for colleges. The second level is there a lot of b2b services companies, whether it’s a brand or whether it’s whether it’s B to B to C, or whether it’s whether it’s purely B2B at the right level, like the different models. But there are a lot of companies enabling colleges to provide higher quality education and there’s a very interesting model where you could provide live education or recorded education, but online to students in a college, because the challenge with many existing colleges, the supply of high-quality teachers is not there. So, you could provide education the on a screen. While there could be TAs and mentors in the class, who could, who could help their students grasp learning faster, and the advantages of the offline world, which is peer to peer learning, structured offline, time-based, forcing function that all of you are together in one room and the camaraderie and the life skills you learn by being in one room and staying in a hostel. All of that can also be embedded by removing the barrier of not being able to get high quality supply of teachers. So I’m sure there are many, many interesting models out there. And I’ve met lots of interesting companies in following different models for and, and we should, we could see large companies being created in that space as well. But from my perspective, the reason I picked K-6 and continuing education above that is that in many cases selling to colleges has not been as easy because most of them were a governance structure in a lot of colleges are very convoluted. But But hey, entrepreneurs will create companies despite the challenges and when we see signs of that, then maybe my perspective on the order of the success of the spaces might change.
Siddhartha Ahluwalia 48:57
We might see a Nexus company in that space in coming years. And you have Newton School, which serves like, after college for students, or even professionals who want to come into coding or enhance their coding skills, and it’s more outcome-driven charge. After they get placed, yeah. Do you see that becoming a billion dollar space in India?
Pratik Poddar 49:24
Yeah. So, it also, this is a unique space and unique opportunity, because there’s this very, very high supply of people who want to learn. See, I think 6.5 million people graduate out of colleges in India every year. But the number of new white collar jobs being created every year is maybe maybe less than 10% of that. So unlike US, where the college education is not a compulsory thing in people’s minds. In India, many folks time go to colleges, and so the supply is high. But most colleges are not able to impart job skills to people. And after you’re graduating you’re not ready for a white collar job. Now, that leads to a gap in the market where can you create high quality education service for them, where you are unbundling all the other experiences of college but just taking out the, vertical, where you are helping students learn the skills that are required to be successful in the job. And Newton School has catered into that supply. On the demand side, the demand for software engineers is increasing superfast. And we do not have enough supply in the country. In fact, the global demand is also increasing very fast. While the supply of talent pool across the world is a challenge, and as remote work becomes the becomes the new standard. The software jobs in India will actually increase even more. Now, in that scenario, Newton school is is positioned right to capture a supremely large supply very high demand market, which just needs a layer of education assessment and training in between and to make that matching happen on the on the is a bit. I don’t think it is the definition of the problem and the solution. It’s just a better monetization solution. And it defines, it ensures that the alignment between the two parties happen and for content or for or even for learning when you do not know whether the other party is incentivized to get your job or not. You would not pay more than 15-20,000 or 30,000 rupees. But when we are talking about the company taking the risk, the guy will get a job and the company delivering on its promises because of its high, high quality pedagogy and high quality hiring network. Then you can extract significant more value, maybe 5x or 10x of that. And that’s where I think the that’s that’s the, new innovation that has happened across the world. But in my mind, I say is just, it’s just one payment instrument. And I’m sure a lot of these companies will evolve new different different payment structures for different levels of students and multiple, very large companies should get created in the space because the demand and supply are both very, very much.
Siddhartha Ahluwalia 52:39
Thank you so much for sharing that insight and coming towards the conclusion of the podcast, you know. What are the qualities you know if because you have invested in so many tech companies and seeing a huge amount of success. What are the qualities you know, that you are looking for in Edtech entrepreneurs? who are solving in Edtech? like one you already shared that they have to be product focus, any other insights which you have which which will be useful for our listeners?
Pratik Poddar 53:18
We have been super super bullish on education as a space. I often say this that education is one market, which has both scale and monetization. Some verticals have space some verticals have monetization, but education is one vertical, which is phenomenal that way and I truly believe that we should see multiple multi billion dollar revenue companies being created in education out of India. And and I also make this argument often that in US the Edtech companies are catering to a very thin sliver of the market because of the existence of public and private infrastructure of education. In India, the entrepreneurs are creating are really creating the infrastructure from bottoms up, full stack and that is why phenomenal value will be captured in India, like that happened in China. Because, there’s very high demand and there’s no existing infrastructure. Now, when we look at education entrepreneurs, as you mentioned, we think about the product first approach and the scalability of the model. You know, it’s not as easy to get customers love, because at the end of the day, from a customer’s perspective, there are almost always many options for him. And we look for that maniacal focus and customer obsession for creating high quality experience, by the founder. And a lot of it is about positioning and creating the package which is easily consumable for the parent and the kid. So we try it iterate and brainstorm on those aspects, a lot, more. The other aspect that we discussed a lot is around the focus on outcomes and observable outcomes, because it is important that there is some goal associated with education for people to be willing to pay and and how does the founder communicated? How does the founder is understanding nuances of the demand. And the third aspect is it requires a very complementary team. In most cases, it’s a lot about content. Sometimes marketing operations is a very complicated business that way, because you have to be great at multiple things. So, how does the founder think about building a team? Can he build a high quality and the team sustained through tough times? These are some of the questions we often ask. At the highest level. When we evaluate any investment, we look at market, we look at approach and look at team. In most cases, it’s team first. So we talked about the customer obsession of the founder on the team front markets, in general are either large in education or if not, in my mind, a lot of times market get created. And I’m happy to have a discussion on how that would happen. So bookish market size is perhaps the wrong number to look at, when you’re evaluating education companies. We are more bullish on, I actually advise entrepreneurs often to, to be a leader in a very small market, but have the beachhead to be the best in that market. And either expand that market or then get into allied markets and, capture a large category from some other care. But it’s important to have focus and be the winner in your category one, number two will almost always surely get poor quality customers and would have more difficult to build a company.
Siddhartha Ahluwalia 59:07
Yeah. Thank you so much Pratik, it has been wonderful to have you on the podcast. Thank you for sharing your experience, insights, and your journey working with Edtech entrepreneurs.
Pratik Poddar 59:18
My pleasure, Siddhartha, thank you for taking the time. Thank you for inviting me. And it was super chatting with you. And we have been surely lucky over the past few years, investing in super high-quality entrepreneurs who are on the path to building very large companies, and it will be good for the ecosystem. Thank you very much.