Harvard Business School changed Ashwin Damera’s life in more ways than one. It introduced him to professors who would open up his mind, founders who gave him the entrepreneurship bug, a business idea for a college project which became his first startup. Even his first investors were batchmates from Harvard!
But for Damera, the real transformation came about when he realised that Harvard could change the lives of only a precious few. What about the rest?
Damera is the co-founder and CEO of Eruditus, an online education startup which makes courses from Ivy League universities accessible and consumable. Eruditus is valued at $800 million today, and has raised over $100 million from investors such as Prosus Ventures (Naspers), Sequoia Capital and the Chan Zuckerberg Initiative - a non-profit firm headed by Facebook CEO Mark Zuckerberg and his wife Priscilla Chan.
At a time when the online education space is booming and valuations doubling and tripling in the blink of an eye, it's tempting to assume that this is all there is to it. But for a large part of Damera and Eruditus’ journey, it wasn’t even about the “growth at all costs,” which they and all startups preach today. It was slow, steady, under the radar -- and it is what defines Eruditus even today.
In 2010, Damera was wondering what to do next. A year earlier, he had sold his first startup - a hotel listing platform called Travelguru, to Travelocity, which was later acquired by Yatra - one of India’s preeminent online travel aggregators today.
His lessons from the travel industry - the power of the internet, the perils of a small and competitive space, and the risk in maximising valuation (more on that later) led him to education, in addition to his HBS credentials. His co-founder Chaitanya Kalipatnapu is also an alumnus of France-based INSEAD, one of the world’s top business schools.
“See, universities have built an amazing business model around rejecting people. This education changed our lives, but how can we change others’ lives?” Damera says.
He has a point. The Ivy Leagues - Columbia, Harvard and Yale among others - accept less than 10% of the students who apply. Most students take a loan to study there, some pay it off, many don’t - with the result that the student debt crisis is one of America’s biggest issues today.
Eruditus Executive Education started in 2010, with faculty from INSEAD and the Indian Institute of Management (Ahmedabad) teaching a 10 day-classroom program in a 5-star hotel for 10-15 people. No internet, no tech, no venture capital. From the beginning, Eruditus has focused on executive education - short to long courses for experienced professionals - say with 5 to 10 years of experience - in fields such as management, leadership, banking and finance. It can either help you break a glass ceiling in your own field and take you to the next level, or help you pivot to a new field itself, depending on what you study.
From 2010 to 2015 this is all they did. They launched partnerships with Harvard, Wharton, INSEAD, the Massachusetts Institute of Technology (MIT) and others, persuading each of them, one by one. They also launched classes in Southeast Asia and Dubai.
But the model had inherent limitations. They were teaching 50-55 students, but it was expensive and could be done only during off-season for universities, when these professors would fly down for lectures. It was a gruelling schedule too. The professor would land at about 2 am, take 8 am lectures stretching through the evening for three days straight, and fly back on the third night.
But despite the challenges - of a random Indian startup tying up with the world’s top B-Schools, of crunched timings and seasonal classes - it was working. Students were showing up every time, professors were showing up every time and the feedback was good.
“They (professors) also stuck to that gruelling schedule because they liked us, and they saw value. That made us wonder whether we should look at online (classes) seriously,” Damera says.
It took Damera six years, till 2016, to get Eruditus to an annual revenue of $10 million. Growing slowly, steadily, without fuss or hype. The plan to go online changed everything, and made it the tech company you see today. But the decision was not easy.
How do you make sure teaching online has the same quality? That you don't compromise on learning outcomes for scale?
“There was a lot of scepticism initially. But I think the world is moving from credentials to skills, and building online is our chance to utilise this global opportunity,” he says.
To this effect, Eruditus also raised its first ever funding round. Six years after inception, about $2 million from Bertelsmann India Investments - the investment arm of German media conglomerate Bertelsmann.
Today, at a time when many startups raise millions before they even have a product, sometimes purely on an idea or the founder’s reputation, raising money six years in stands out.
You can almost see Eruditus as two different companies. Pre-online and post-online. Pre-funding or post-funding. While it took six years to get $10 million in revenue, in four more years, it has zoomed to $100 million revenues in FY20 - a figure Damera wants to double next year, while staying profitable. Eruditus is currently profitable on an Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) basis, a metric of operating profits. Damera says 100,000 students will learn on Eruditus this year, compared to 50,000 last fiscal.
“Had we raised money in 2010-11 it would have been problematic. Raising money much later gave us time to build our product, understand the market, and honestly, stay under the radar,” he adds.
And staying under the radar was important, perhaps even essential. What makes Eruditus unique? What stops anyone else from tying up with the same colleges and offering the same courses? What is their ‘moat’?
Damera laughs. “Common question. Question that every investor asks. We built these relationships silently. These relationships and our monetization are our strength. If a university can build an online vertical by themselves or with someone else, I say that we can help you market this globally, not just in your country. We can grow your pie 3-5x, and we can both share in the upside,”
The decision to go online intertwined with online education opening up globally. Between 2012 and 2015, Coursera and EdX, both of which offer free and paid courses from top institutions, blew up. But both of these focus on short-term and more specific courses. To offer an MBA online, as Eruditus offers, requires a whole different approach from a company.
Eruditus decided on a cohort-based approach. Unlike a Coursera where students can learn at their own pace, Eruditus sets deadlines and has live classes. Everybody is part of the same course.
And the results are interesting. Damera says two-thirds of students make a career change one year after completing their Eruditus program, and before the pandemic, a person starting a new job after a full program with Eruditus was earning 33% more than he did in his/her previous role.
Currently, students from the US account for 33% of the company’s revenue, followed by India (16%), Latin America and Europe (15% each), with China, Southeast Asia and the Middle East making up the rest.
Like others in the sector, the Covid-19 pandemic has taken Eruditus from being on the fringes of a large sector, to the ‘next big thing’, virtually overnight, as millions of students are learning from home, unable to go to schools or colleges.
In 2020 alone, online learning firm Byju’s valuation has gone from $5 billion to $11 billion. Unacademy’s valuation has gone from $500 million to $1.45 billion. Eruditus then, from about $400 million in early 2019 to $800 million today, almost looks tame.
Negotiating a $100 million fundraise over the last few months, he could have pushed for Eruditus to become a ‘unicorn’- startups valued at over a billion dollars. But the Damera of 2008 may have thought that way. Not so the man in 2020.
In 2008, Damera’s Travelguru was nearly acquired by a large travel aggregator for $75 million, already higher than its valuation from just a few months ago. Travelguru had two months of cash runway. An agreement was signed, and the money was nearly wired, when Lehman Brothers declared bankruptcy. The American financial services giant’s closure was the domino that triggered the global financial crisis of 2008 and a period of recession. So Travelguru’s deal fell through, and its internal investors - Sequoia Capital and Battery Ventures came to fund a bridge round, but at a lower valuation of $60 million. Damera said no. Still coming to terms with a deal falling through and an economic battering at large, he wanted the original $75 million valuation.
A year later, Travelocity acquired Travelguru for a much smaller sum, and in 2012, Yatra bought Travelguru for about Rs 100 crore.
While the sale took Damera to his next venture - Eruditus - and things eventually worked out, he hasn’t forgotten the incident or its learnings when Eruditus closed its funding at an $800 million valuation.
“Today I don’t care about maximising that extra valuation. There’s a larger purpose. I’m not saying I don’t want to be a unicorn. It is great to be one but it doesn’t make a difference whether that happens next year or the year after that, as long as I’m doing the right thing for the company,” he says.
Today, after seeing the highs and lows of multiple industries, building quietly and then raising money from marquee investors, some still doubt the company’s eventual size, or the sector’s true potential.
“I don’t think universities are too happy sharing revenue with them, and there is always a doubt of whether this can be a multi-billion dollar company,” says an investment banker working on the education space, who did not want to be named.
But does Damera doubt himself, or the company’s potential?
“If any entrepreneur tells you they don’t have self doubt, they're bloody well lying!” he says.
“I have zero doubt about the market size. But the challenge is to see how fast we can grow today without compromising on learning outcomes. Can we grow from $200 million (revenue) to 400 and then to 800 year-on-year? The category is big enough so I am pushing for that,” he adds.
But Damera then zooms out, because while it is easy to look linearly at a company’s growth and attribute its success to a series of masterstrokes from its founders, investors and employees, which is never the case.
“Forty percent of all success for any company, in any industry, is timing.
Timing and luck are a big part of why these things work out, and nobody does anything by themselves. This is my last startup so I just want to make it big,” he concludes.