Online to offline: Upskilling startups vie to launch new-age colleges in shift from edtech model

As investors cut back funding, the upskilling and higher education vertical faced a reduction in the flow of funding too.

Life has come full circle for edtech in India.

In 2020, every new-age tech startup you read about, especially within edtech, championed the online model. A copious funding flow and rapid internet adoption amid the COVID-19 pandemic, fueled this ecosystem, helping education go almost completely online for nearly two years.

In 2022, as COVID restrictions eased and society transitioned back to the physical world, edtech was among the first sectors to face challenges, as demand for online learning plummeted. Cracks started to appear in the massively funded kindergarten to standard 12 (K-12) segment with many companies conducting large-scale cost cuts and some even shutting down.

On the other side, the upskilling and higher education sector thrived. Stakeholders in this space believed that, given the part-time nature of skill-based learning, the vertical would sustain with an online model.

Fast forward to 2023, and many highly valued companies within the upskilling space are now offering courses for the post K-12 category, such as undergraduate and postgraduate programmes, predominantly offline, even featuring residential campuses and longer durations of six months to four years.

GSV-backed edtech unicorn PhysicsWallah and Tiger Global-backed upskilling soonicorn Scaler are among highly valued tech startups to have launched such “new-age colleges,” locking horns with top tech institutions in India. A unicorn is a startup valued at over a billion dollars and a soonicorn refers to a company that is expected to become a unicorn soon.

New-age colleges here refers to modern colleges run by startups, that provide students with hands-on, experiential learning. Their curriculum involves industry leaders as educators, while technology facilitates smooth and better functioning of the system helping in curriculum upgrades, evaluations, peer-to-peer learning, and assignments, among other things.

Offline to online to offline

Imran Rashid, the chief business officer of PhysicsWallah, said that the unicorn’s upskilling vertical PW Skills initially focused on short-term skilling programs for its users, who were primarily college students in their final year, or professionals in the initial stages of their career.

“We wanted to find a method to engage students at an earlier stage, right after standard 12. We could not do that with just the short-term courses, as we realised that post standard 12, students preparing for the job market may seek more extended courses. And unlike short-term programmes, these are meant to be more extensive and require a different approach than purely online delivery,” Rashid told Moneycontrol.

In July, India's newest edtech unicorn, PhysicsWallah, followed Tiger Global-backed Scaler to launch a four-year residential programme in Computer Science and Artificial Intelligence (AI) with a batch of about 100 students.

“The amount of learning that we could see in six months in our online setup has been achieved in just two months offline. For undergraduate education, we have understood that offline does make a huge impact,” said Abhimanyu Saxena, co-founder and CEO, Scaler. This comes nine months after he announced the launch of Scaler’s undergraduate programme back in March.

While these might be the more popular names, they are not the only players moving in this direction. Nexus-backed edtech startup Newton School and a few other early-stage companies, including Saama Capital-backed Digiaccel and Y Combinator-backed FunctionUp, also operate in this segment.

In fact, the idea of a modern college was introduced by a bootstrapped startup called Masters’ Union, founded back in 2020.

Pratham Mittal, CEO and founder of Masters' Union, said the shift towards offline education for upskilling and higher education players is driven by venture capital-backed companies shifting their focus from growth to profitability.

Mittal's family runs Lovely Professional University, a prominent private university, which is based in Punjab.

Mittal went to great lengths to explain that his startup wasn’t an ‘edtech’ but should be viewed like any college.

“Many companies have realised that they should be improving traditional education, and that they will not be able to make money online. They are all looking to turn profitable and hence they will all run colleges and they have already started to do that now,” Mittal told Moneycontrol.

As investors cut back funding, the upskilling and higher education vertical faced a reduction in the flow of funding too.

Moneycontrol reported earlier that this year, start-ups in the K-12 space had received just about $25 million till August against $1.7 billion the previous year. To be sure, funding to higher education and upskilling platforms also plunged 65 percent to $258 million, but that is far lower than the 98 percent drop in K-12 and test prep.

While the decrease in funding for upskilling and higher-ed was less pronounced than in other sectors such as K-12 and test prep, it did compel companies in the segment to also seek opportunities in more profitable models.

Economics of the model

Karan Bhagi, Founder and CEO of Digiaccel, highlighted that the Average Revenue Per User (ARPU) is significantly higher for offline programmes offered by his company.

“For our online programmes, the fees starts from Rs 70,000 -80,000. We have online programs that go up to Rs 2.5 lakh. But ARPUs are go upwards of Rs 10 lacs- for a PGP offline programme,” he said. Digiaccel offers postgraduate programmes in management with a focus on developing digital skills for learners.

For those operating within the ecosystem for some time, an established brand name could also result in lower Customer Acquisition Costs (CACs), Bhagi argued.

In an earlier interview, Scaler’s Saxena told Moneycontrol that he believes the new undergraduate institute will provide higher margins, thanks to the longer duration of courses and lower customer acquisition costs.

PhysicsWallah, Rashid claims, also has an added advantage as it has a constant flow of potential learners for its UG programme, through various test-prep programmes, including JEE, NEET, and others, that it already runs as part of its core offering.

“Although we initiated this venture in June-July, leveraging our established funnel allowed us to start the first batch this year. Moving forward, this funnel will be instrumental in attracting more students and expanding seat intake,” said Rashid. He added the programme’s four-year residential nature also promises continuous flow of revenue.

However, owing to the capital-intensive nature of completely residential colleges, it could turn out to be tougher to scale. Hence, while some, such as Scalar and PW have built out their institutes in leased spaces, others, including Newton School have partnered with existing universities to offer their programmes.

“Some opt for a capital-intensive approach by building their infrastructure. In contrast, our model involves strategic partnerships with universities, leveraging their existing infrastructure. This allows us to focus on our core strengths,” said Siddharth Maheshwari, the Co-Founder at Newton School.

Digiaccel’s Bhagi believes that despite being capital expenditure-intensive and time-consuming to scale, investing in an offline campus will contribute to building trust and ensuring high-quality learning outcomes.

While such companies are effectively entering the arena ruled by top tech and business schools in India with this model, they believe their “modern-colleges” hold an edge over legacy Indian brands such as IITs, and IIMs.

Changing the norm

“Many students recognise that even prestigious institutions, including IITs, often fall short in preparing them for the industry. For instance, when it comes to AI, traditional institutions have been slow in integrating it into their curriculum. Even when they do, the approach is often outdated,” said Maheshwari.

Maheshwari’s upskilling startup launched the Newton School of Technology, a four-year-long B. Tech. programme in Computer Science and AI, in partnership with Gurugram-based Rishihood University.

“In contrast, our commitment lies in consistently updating our curriculum every six months. We actively engage with industry experts to gain insights and incorporate the latest trends and advancements in AI,” said Maheshwari.

Scaler’s Saxena is also confident of standing out by delivering exceptional placements. “Our ultimate differentiator is about the real outcome, which is … ultimately going to be placements. Our programme might be four years but after 18 months phase one ends and we will be putting all these students in a one-year internship,” he said.

More importantly, while these claims could only be open to judgement months from now, if you take a step back, these modern colleges don't seem significantly different from the traditional ones that have been around for years.

With the absence of a remote learning element, this trend raises a question: where does technology fit into this niche segment of edtech?

Tech in edtech

Digiaccel’s Bhagi believes that in an offline setting, the role of technology is smaller compared to its online counterpart, with parts of it still occurring in the form of gamification and simulation-based learning.

“While it's not zero, the reliance on technology is significantly lower. Students in our curriculum engage in building businesses and making decision-driven simulations, such as running an E-commerce category on Amazon. These simulations are gamified, allowing students to replicate decisions and assess their impact on top-line and bottom-line objectives,” said Bhagi.

Bhagi highlighted that more than the integration of tech in the backend, the company excels in training its students in tech tools like ads consoles for Google, Meta and Amazon, analytics tools and prototyping tools like Figma and Canva, making them industry-ready for digital-first roles.

However, Scaler’s Saxena said that while the focus remains on providing high-quality education, the new institute's learning pedagogy is very different from how it happens in a traditional one.

“Students in Scaler School of Technology (SST) experience a highly interactive environment, using the same tools employed in our online classes. They may physically share the same space, and the tools we have to help them, for example, to pose questions through a shared interface, facilitating real-time problem-solving,” he said.

Newton School’s Maheshwari agreed and said that the company has attempted to replicate its online practices in an offline setting. “Technology is indispensable for achieving the scalability and efficiency required to provide students with the best possible learning experience,” he added.

Masters’ Union’s Pratham believes that a lot of edtech companies will enter this segment and will build these modern colleges in the next one to two years.

Importantly, most of these companies initiated their residential college-like ventures less than a year ago. While there is a clear trend of companies returning to the offline model in the post-pandemic world, it remains to be seen if more choose to take this route. And time will tell what aspect of the once-feted online model remains and what becomes a thing of the past.