Ronnie Screwvala's edtech startup upGrad eyes a global learning curve

The company wants to be among the world's top six edtech companies by 2025. Here's how it plans to get there

Edtech billionaire Ronnie Screwvala believes that in the next four years there will be five to six edtech companies in the world with valuations of $40-50 billion each. More importantly, at least two or three of them will be India-based. So, he and his team, according to sources, are working aggressively to get into this coveted list.
 
Is he being overly ambitious?  His higher education and professional upskilling start-up upGrad joined the unicorn club only in August this year with a valuation of $1.2 billion, some distance from the magic number and from most of his competitors.
 
Analysts are certain one of the slots from India has already been taken. With the Chinese government’s recent clampdown on edtech companies, Byju’s has seen its valuation soar to $18 billion, catapulting the company as the number one global edtech player ahead of Chinese giants. And optimistic investment bankers said with the company looking for an initial public offering (IPO) only 12-18 months down the line, Byju’s could well hit a $30-billion valuation by then, with many investors who had made bets in China looking for newer avenues (though there is some scepticism about this).

 

In many ways, Screwvala, who declined to comment on his plans, is looking at a similar strategy as Byju’s — become a dominant player in the country and replicate the same successful business and tech model across the world, especially in lucrative markets such as the US, Africa and Latin America apart from Asia. Like Byju’s, upGrad also plans to use the money it raised to expand into markets, acquire customers and build scale.
 
But the competition for the two spots is also going to become tougher as each player enters the other’s turf. So Byju’s, which was the king of K12 (kindergarten-to-class 12) learning, recently acquired Singapore-based Great Learning for $600 million and will invest $400 million to expand. That will bring Byju’s into upGrad territory, which says it has a market share in South Asia that is twice that of its nearest competitors. But unlike Byju’s, upGrad is not into the K12 space in a big way and doesn’t plan to be for at least the next two years, said sources in the know.   

 
But upGrad also faces tough competition from Eruditus, which focuses on the higher learning and professional upskilling segment. Thanks to a recent fund raise of $650 million with SoftBank leading the way, Eruditus has seen a huge surge in its valuation to $3.2 billion —a fourfold increase. Eruditus said it is the largest start-up coming from India in the space and aims at becoming bigger than Coursera. Unlike upGrad, which is pushing its global ambition only now, 80 per cent of Eruditus’ revenues come from non-Indian markets, 35 per cent from the US alone. Those aware of upGrad’s strategy say that by March 2022 it would be virtually the same size as its rival, based on Eruditus’ own declaration that it will have a revenue  target of $500 million by then.

 
The four-year-old upGrad can leverage the fact that it has a long run ahead to aggressively raise funds in the next few years without losing sleep over becoming a minority player. It currently holds a 55-60 per cent stake, more than double of that of Byju’s promoter Byju Raveendran, who together with his wife holds around 30 per cent. Byju’s has already raised $3.2 billion in over 20 rounds while Screwvala has raised a modest $201 million in four rounds. Unlike his rivals, he has reinvested his own money in the initial stages (he made $1.2 billion in selling his media company to Disney) rather than diluting stake to venture capital funds.  

 
Currently 70 per cent of upGrad’s revenues come from India, but in one-and-half years Screwvala aims for a 50-50 model, with a large chunk of international revenues targeted from the US. In September this year, its revenue annual run rate was at $210 million, the target is to more than double it to $450-500 million by March next year.   
The company is also leveraging the fact that the triggers for the K12 business during the pandemic are very different now. The K12 business grew exponentially because of prolonged school closures last year. But now that schools are slowly reopening, that business is already slowing. Also the market in which it operates is limited to 18 years. 

 
But higher education and professional courses grew despite the pandemic and have been growing at over 100 per cent per year. And unlike K12 learners, these customers are life-long learners from the age of 18 to 64 years — using it as a tool to change jobs, get better increments and just take up new specialisations.
 
More importantly, average revenue per user per year is far higher in this space —$5,000 compared to $500-1,000 for K12. And with more customers coming from global markets, the average revenue per user will go up even further (they are around $10,000 in the US and Europe).

 
upGrad is also planning to take the plunge in the large and lucrative Africa and Latin American markets. Byju’s has also entered the market in Brazil and Mexico with local language offerings for their K12 courses. The advantage of entering these markets is twofold. First, higher education is privatised and the company will be looking at becoming a degree-granting authority. Two, US edtech companies have not entered these markets in a big way. 
 
Clearly, the other plan is for acquisition in global markets — where Byju’s has already shown the way. But upGgrad officials said its strategy is a little different. Instead of buying a technology platform, upGrad is scouting for companies that are leading players in a geography.

 
upGrad is not in a hurry to hit the IPO route — that’s at least three-and-a-half years down the line. By that time, its management will know whether it has made it to the big six league.