Startup Corner | Byju’s small city aspirations may partly explain its $8 billion valuation

Byju’s stands out by appreciating by $4.5 billion in value in just one year. That’s probably a number even e-commerce companies may not manage to achieve. In any case, Byju’s is now valued even more than Ola ($5.7 billion), and nearing Oyo ($10 billion) while Paytm ($16 billion) is way ahead.

But what makes Byju’s so attractive? There have been plenty of ed-tech startups in India who struggled to raise funds while some already shut shop failing to raise funds. A few reasons may explain why Byju's struck gold.

First, Byju's managed to turned profitable on a full-year basis. This was on top of closing financial year 2018-19 with a revenue of Rs 1,430 crore (a three-fold jump in one year). Second, Byju’s has entered the US market with its acquisition of Osmo (for $120 million). The Bengaluru-based startup is already present across West Asian countries. Third, none of the 40-odd ed-tech firms that are operating in India have been able to match up to Byju’s scale.

Four, and most important, the sheer size of India’s education market and its growth prospects are visible to any investor. According to a report by India Brand Equity Foundation, India’s education market is projected to cross $180 billion by 2020, nearly double the $100 billion now. And, more than half of which is dominated by brick-and-mortar schooling. Of this, e-learning accounts for just about $2 billion, the second-largest globally after the US. By 2020, India’s e-learning market is set to hit $5.7 billion.

Byju’s is playing in the world’s top two e-learning markets – India and the US, which is definitely behind investor interest in the company.

Byju’s is known for taking online education to masses, a feat its competitors failed to do. Besides, Byju’s solved a basic problem in India’a education system -- lack of quality teachers with a student-teacher ratio which is estimated at around 100:1 -- by providing millions of students what they need the most -- quality teachers and systematic training.

Byju’s gets around 90 percent of revenue from K-12 students and the company wants to retain focus on this segment. That makes sense. For higher education and competitive exams, students usually shift to metro cities, or at least major towns where quality of brick-and-mortar education and private coaching are of reasonably good quality. But K-12 students in non-metro markets find it difficult, since the quality of teachers and availability of study materials are not as good as major metro markets.

Even now, majority of Byju’s students are from non-metro markets. But it is yet to reach every corner of India. That’s clearly an opportunity that Byju’s will be leveraging upon.

Despite the importance investors might have given to Byju’s entry into the US – the world’s largest e-learning market, it will stay as the ‘American dream’ for the Indian ed-tech startup. Its real success lies in expanding its growth by spreading its presence in the interior markets of India, at least for the next decade or so.