Kavita Rajagopalan | January 28, 2016

Building a business in education or skills? Here’s what you need to know

Over the last year, as Villgro has expanded its work in education and skill training, our team has spent a lot of time speaking with entrepreneurs, experts in the field, teachers, school leaders and a host of others who work in the sector. We’ve tested assumptions, had some proven and learned along the way. As we commit to supporting and funding more education and skill training enterprises through the Menterra Social Impact Fund, these lessons from the field will help us work with enterprises better.
If you’re an aspiring entrepreneur setting out to build a social business in education or skill training that will positively impact students from the poorest households, here’s what we have learned:

The need is real
It’s very, very real. It’s hard to find good teachers, teacher training is fragmented and sporadic, English language learning is aspirational, teaching Science and Math is challenging, students are finishing school and college without the skills needed to be job-ready. The need for thoughtful, innovative interventions that will significantly improve the way teachers teach and students learn is greater than ever. However, the education and skill training market is swarming with businesses that are creating and selling products and services to students, parents, schools and institutes. If you want to build an enterprise in this space, think about what sets you apart, what makes your product or service better or more innovative than the others already in the market and most importantly, how are you significantly improving student learning outcomes.

Sales and distribution continues to be a challenge
If you’ve worked in or have been associated with the Indian educational system, then you know that the market is extremely fragmented. Decision makers (school management and leaders) are inundated with products, and so getting a foot into the door at schools is a time consuming tasks. Selling to schools is often concept selling, which means sales teams need to be trained to understand the product and content; additionally, they must spend time understanding a school’s problems, and resource availability before selling a product. Distribution networks haven’t penetrated the market completely beyond metro and tier 1 cities. This means that there is an immense need for high quality products and services in tier 2 and 3 towns, semi-rural and rural areas and enterprises need to find a way to enter this market.

Technology is only an enabler, not the solution
Technology will not solve all the problems in education. We cannot remove teachers from classrooms; technology can only supplement the human interventions already present. The use of technology in schools and institutes also involves upgrading existing infrastructure. More importantly, for technology to be employed effectively, teachers and students need to be trained in the optimal use of this technology. The initial groundwork may be massive, but if technology is leveraged well, the payoff might well be much larger than expected.

Hybrid models are key
As an impact investor, we are committed to working with entrepreneurs that are catering to students from low-income families, and that work with affordable private schools and government schools. However, selling to these segments poses a different set of challenges – school resources and budgets are constrained, which translates to lower product and service pricing, resulting in smaller margins. Sustaining a business on these margins is often not practical. The focus for social businesses is both high quality and sustainability. Under these circumstances, a hybrid model of selling to a variety of school segments might be the most reasonable way of ensuring success without compromising on quality.

Achieving scale is hard
Even the most successful companies working in the education sector sell to merely thousands of schools, out of almost 1.4 million that exist in the country today. This links back to the issues related to distribution and scale, but entrepreneurs need to be innovative about how they tackle the question of scale. Leverage today’s untapped CSR funding to expand into new geographies, be strategic about building partnerships, piggyback on existing channels, bundle your products or services with others selling in the space. Achieving scale is key to systemic impact and entrepreneurs need to constantly think about how this can be accomplished.

Demand side ecosystem needs to be fixed
Finally, despite the large number of products and services out there, one needs to think about why sales to schools do not happen at the pace expected. What are the various consumer segments demanding? How can you augment the school’s existing structures with a new and innovative product and service? Speak to stakeholders – that is the only way you can develop a business that is in high demand in the education sector.

Despite all of this, we are still optimistic. It is an indisputable fact that the education system needs to be fixed. We need to find a way of giving children, across the economic spectrum, a higher quality of education than they receive right now. We are seeing products and services that are innovative and that are solving real problems faced by students, parents and teachers everyday. We interact with entrepreneurs that are constantly challenging the status quo and this gives us confidence that the system can be fixed. But, we need more entrepreneurs to think about fixing the big challenges in the system, who will work relentlessly towards this outcome, and most significantly, entrepreneurs who are committed to improving the quality of education for students from low-income households.

So here’s what we are looking for in education enterprises:
* A commitment to social impact: Working with government and affordable private schools, with school dropouts and skill training institutes is challenging, but we are looking for entrepreneurs who are passionate about solving problems for these segments and are committed to building an enterprise that works with the families from low-income backgrounds.
* Innovation: We are looking for innovation in our enterprises – this can be in your product, service, business model, pricing or sales and delivery. Prove to us that what you are doing is more innovative and of higher quality than alternatives available in the market.
* Deep understanding of problem and market: Make sure you are identifying a problem that is large enough and deep enough. Once you’ve identified that problem, ensure the solution you are building relieves the pain points faced by customers and beneficiaries and creates significant gains. Finally, think about whether there is a market for this solution, and whether customers will pay for this product or service.
* Enterprises working in K-12 segment or skill training: If you are building a solution for the school market, show us how this will improve student learning outcomes. Your intervention could be in the area of teacher training, content development, certification, assessments, or any other, as long as students are getting a better quality of education. In the skill training space, your product or service needs to improve student livelihoods – this translates into increased monthly incomes for students that go through your program.

This article was originally published on Social Story.

Kavita can be reached at on Twitter @kavikavee