School-based startups defying larger edtech trends; opportunity to double down on growth: LEAD co-founder Sumeet Mehta

Mehta’s comments follow a series of layoffs, shutdowns, and restructuring in the consumer edtech sector with companies such as Unacademy, Vedantu, and so on, letting go of employees in large numbers.

This comes at the back of a drop in demand for remote learning and technology-based education services due to schools and coaching centers being allowed to open with Covid-19 restrictions gradually easing.

Mehta believes a lot of consumer edtech companies grew at the peak of the pandemic because schools shut down and students had more time on their hands.

“We grew despite COVID, not because of COVID,” he said.

LEAD stays focused on schools with no plans to foray into test prep

He added, “Now, once COVID is gone, we're actually back to our strength, which is in school, in-classroom learning. And for the last three months, we've had our best ever months.”

Mehta said targeting schools is the best way to improve the learning outcomes of children. The company plans to stay away from tuition and test prep. He said, “It never even occurred to us that we should get into what we call the band-aid system, tuitions are a band-aid, test prep is a band-aid.”

Mehta added, “If we have to wholly transform a child, our Karmabhoomi has to be schools, it cannot be tuitions.” Initially, the company started with running affordable schools and teaching middle-school students. Later, it moved on to facilitating the existing educational institutions in providing better outcomes to its students.

Founded by  Mehta and Smita Deorah in 2012, LEAD now works on making classroom learning technology-enabled. This involves tracking teacher and student progress, managing school operations on the cloud, and providing digital resources to make learning more engaging.

“The core plumbing of a human being gets developed in a school, six hours a day, five days a week. So if we have to really think about systemic transformation, the natural answer is to work within schools and transform them,” said Mehta.

LEAD joins the unicorn club

In January, LEAD raised $100 million at a valuation of $1.1 billion, catapulting it to the coveted unicorn club of internet startups. LEAD raised the money from existing investors WestBridge Capital and GSV Ventures. Earlier in April 2021, the company had raised $30 million from investors.

LEAD is India's sixth online education unicorn after Byju's, Vedantu, Unacademy, Eruditus, and UpGrad.

Prospects ahead

Mehta said that while building LEAD despite what happens in the external market, both founders have been focused on achieving solid unit economics, and growing profitably. Mehta said, “I'm somewhat of a traditionalist, I don't understand negative gross margin businesses.”

On the company’s roadmap to profitability, Mehta said, “As we hit the 8000, to 10,000, school mark, we're going to be profitable even at the EBITDA level,” Currently, the company works with more than 3,500 schools in Tier two and three cities.

Also Read: Startups should prioritise profitability amid funding winter: Unicorn founders

“We are well on track, I think in a couple of years, we will be EBITDA profitable,” he added.

The co-founders said they believe the company is built to outlive them. Deorah, who is the co-CEO of LEAD, said, “I definitely always imagined this to be an institution that stays forever and lives far beyond us as individuals. Hence, eventually, I think the more likely path seems to be towards an IPO.”