Understanding The Economics Of Edtech Startups

I spoke to a few early-stage EdTech startups over the last few weeks. I had multiple questions answered. Here I am looking at the unit economics of such platforms.

The economics is mostly dependent on the student-teacher ratio. And that defines the whole experience as well.

There is broadly 3 range of ratio here:
1. 1to1 – WhiteHatJr.
2. 1to Few – Cohort based. GreatLearning.
3. 1to Many – Recorded classes. Byju’s.

The cost of acquiring a user(learner) is the same for everyone. The gross margins are 20% to 92% depending on the student-teacher ratio.

A 20% margin business for a non-branded teacher is impossible to break even. In D2C, 70% gross margin is supposed to be healthy. The same should apply here.

What would work well?
A hybrid model, where pre-recorded classes are followed with a few cohort-based workshops and then 1-1 doubt solving. This is the ultimate package that removes the creators branding requirement also. And gives control to the ed-tech platform.

Problems as compared to offline education
1. A 1-hour recorded video is about 3hrs of live class equivalent. Generally, recorded videos are condensed & edited, which results in poor learning because there is no buffer time to make notes or to think.

2. Chat for doubt solving is flooded with 100s of students. The rate of resolving doubts is poor.

There are 3 types of learning and all 3 are measurable in their own respects. :
1. Certificate-based – Mostly upskilling courses.
Branding of the certifying institute. – GreatLearning has Stanford, IIT etc.

2. Outcome-based – Competitive exams for admission.
The past success of institute – “AIR 1 is our student”.

3. Hobby Learning – ECA.
Branding of the teacher – Check Frontrow – Celebrity teachers.

All the 3 above are socially tangible.

Unlike learning and gaining knowledge. If you are just curious and have the capability to “learn on your own” – Youtube is enough. Alas, most of the millennials haven’t been taught to learn on their own. We need to be guided.

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