In this article originally published on SocialStory, Kavita Rajagopalan talks about the education sector, its trends, challenges and opportunities:
Tell us about your portfolio. What characteristics do start-ups need to have to be part of it?
Our work in education is focused on the school (K-12) and skill training segments, particularly enterprises working in urban areas. We look for enterprises that are solving critical problems in the education system through a product, service or business innovation.
As a social impact incubator and funder, we evaluate enterprises against two important criteria before taking them into our portfolio – 1) will the enterprise directly benefit people at the base of the pyramid, and 2) will the product or service directly impact student learning levels (in the K-12 segment) or increase employability and monthly household incomes (in the skill training segment).
Are these organisations financially lucrative? If yes, then what steps were taking to create a successful enterprise?
Villgro works with enterprises at very early stages, sometimes even when the product or service is still being developed. While the end goal is definitely creating enterprises that are sustainable and scaleable, some of our portfolio companies are still refining their product or service and business model. The key to our work is collaborating with enterprises to run some well-planned, lean experiments to refine the value proposition and prove that revenue streams are viable. A lot of our work with enterprises is focused around these areas, and both Villgro investment managers and mentors spend significant time working with enterprises to ensure their long-term success.
How do you feel about the education sector in India?
I believe it is certainly a time of great optimism for the education sector in India. The problems within the sector are well known and have been documented extensively. But, over the last few years, we have been seeing a lot of new and exciting ventures in the space. On the one hand, there are enterprises working within the system and working to deliver content to students more effectively, improve teacher quality, and on the other hand, there are some really innovative, out-of-the-box ideas that we are seeing that we think will have a transformative impact on the ecosystem. These enterprises are also harnessing technology in really critical ways. Our hope is that all of this will result in improved quality, better learning outcomes and more opportunities for BoP households.
What are the most common misconceptions about this sector?
I think there are a few misconceptions about the sector. People tend to see education as a traditionally non-profit sector; we believe there is a strong need for sustainable, scaleable enterprises and this is more easily achievable through for-profit enterprises. There is also a tendency to believe that high quality in education cannot be achieved at low costs. I think we are seeing school chains and enterprises that are delivering extremely high quality at low costs and this is the model that we need to propagate.
Most of the edu startups are involved in big international schools or schools where it's easy to make profit. But what about the remaining 99% of education sectors?
Any enterprise that we incubate has to be driven by a mission to work with students from the economic base of the pyramid. This means that in the K-12 segments, our enterprises are working with affordable private schools and government schools. In skill training, enterprises are training students from low-income communities, school dropouts, etc. We understand that this is a hard segment to work in, and sales and delivery to these segments take more time. But, we also think that the greatest impact will happen if educational quality to student from these segments is rapidly improved and therefore, any support from Villgro is only targeted at achieving results in this segment.
What system do you put in place to ensure social responsibility from the organisations you impact?
As a funder and incubator working specifically with social enterprises, social responsibility and impact is a significant driving factor in all of our work with the company. This starts at the diligence phase for the enterprise, where we evaluate potential social impact. Once we bring an enterprise into our portfolio, we set impact metrics for the enterprise, with specific time-bound milestones. For example, with a skill training company, we will track the number of students who complete a course, who get placed in jobs, average incomes and average tenure in a job. We are constantly tracking this data, along with the enterprise, to make sure we are meeting these goals.
What does it take to set up an enterprise in education?
As with any enterprise, I think it is really important to identify a key problem that you are trying to solve. In education, this might be a quality issue or an access issue, but it is really important for founders to pick one specific aspect out of the broad problems with the system. Spend time with people who understand this work well – talk to teachers, principals, students and parents to understand their pain point and develop a solution that really addresses this problem. With K-12 companies, specifically, it is important to catch the school cycle, so any pilots and experiments that are being run need to align with this time frame.
In what all capacities do you assist edu companies that you work with?
We offer all enterprises a combination of four inputs, depending on the stage and needs of the company. We provide seed funding that can be used for a variety of purposes including product or service development, experiments with the business model and pilots. All our enterprises receive high-touch mentorship from both Villgro staff as well from seasoned entrepreneurs and sector experts. We also assist enterprises with their talent needs through the Villgro Fellowship, and finally we provide enterprises access to Villgro’s networks that will enable their progress.
How much and how is technology playing a role?
I think in education, as with every sector, technology is going to play a key role in helping an enterprise scale. But, that being said, I think it is important for companies to think about how technology can be leveraged for specific aspects of the business, rather than developing technology solutions and then thinking about how to deploy this. Developing an app is relatively easy; ensuring that the app is actually impacting learning is a very different proposition. Once you begin developing a solution to a specific problem, think about how technology can help you take this product or service to market, and how it can achieve scale for the enterprise.
Where do you see these organisations most struggle?
A lot of our organisations struggle in getting the product or service out to users and beneficiaries. For example, in skill training, enterprises are finding that student aspirations are very different from placement opportunities available. While there are employers willing to hire fully trained masons and plumbers, these areas are not of interest to students, who would prefer training in other areas. Therefore, it is a struggle to balance both these aspects carefully while building a business. Enterprises also struggle with the first few sales; affordable private schools are extremely price sensitive and so there needs to be a very quick and clear value proposition for schools before they will adopt new products or services.
What is an unexplored area? What can entrepreneurs do to innovate more?
There are a whole set of areas in education that still need structured interventions which are scaleable. In the K-12 space this could be in the area of assessments and data analytics, after-school programs, remediation programs or even in the area of teacher training and certification. All of these areas are fragmented today, with multiple smaller players working in different geographies. In skill training, there has been a large focus on soft skill areas, and there is a need for hard skill training (like construction). There are also auxiliary services that can be explored, like financing for schools or parents.