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Edtech firm Vedantu in talks with Coatue Management for a USD 100 million check

Edtech companies in the first half of 2020 received USD 795 million in funding, compared to USD 108 million it attracted in the same period last year.

Bengaluru-based edtech startup Vedantu is reportedly looking to scoop USD 100 million from American hedge fund Coatue Management at a valuation of USD 600 million.

Vedantu is one among India’s many edtech startups that are riding high amid the pandemic and the slump it has brought upon. Last week, Indian edtech unicorn Byju’s, which is also the world’s most valuable edtech startup, got Silicon Valley fund Bond on its cap table at a valuation of USD 10.5 billion.

According to a local media Economic Times (ET) report, if the Coatue Management investment in Vedantu goes through, the edtech firm’s valuation will double from the previous funding round, which was closed last year. To date, Vedantu has raised USD 85 million from high-profile investors like GGV Capital, Accel, Omidyar Network, Westbridge Capital, Tiger Global, and others.

Vedantu isn’t the only company having secret rendezvous with global investors. Its biggest rival, Unacademy, is in discussions to raise fresh capital at a valuation of USD 1 billion from existing and new investors. WhiteHat Jr, an 18-month-old edtech firm that teaches coding to kids, is also reportedly in process of raising money at a valuation of USD 350 million from hedge fund Tiger Global and other investors.

As such, the online education sector in the first half (H1) of 2020 has received USD 795 million in funding, compared to USD 108 million it attracted in the same period last year, a whopping 636% year-on-year increase.

Globally, Coatue Management has backed high-profile companies such Uber, retail and online group buying service provider Meituan Dianping, and food delivery platform Doordash. Its Indian bets include food delivery firm Swiggy, cloud kitchen company Rebel Foods, and fintech startup BharatPe.

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Investors believe education is the only sector that would see sustained user spending despite the slowdown as Indian parents usually don’t compromise on their kids’ education. Ever since the pandemic has made it difficult for most schools to function normally, the traction on digital education platforms has been rising.

According to Tejeshwi Sharma, Principal at US-based investor Sequoia Capital, the edtech market for grade 1 to 12 standard (K-12) is estimated to be about USD 500 million, while overall K-12 tuition segment is about USD 13 billion. This essentially means there is only 4% digital penetration in the segment, which leaves out a huge market that can be tapped.

Similarly, Sharma, in a recent tweet said, the overall test preparation market is projected to be USD 8 billion, while the test prep edtech market is expected to be about USD 200 million, which translates into 2.5% penetration.

In seven years, he said, edtech market in India would reach USD 5 billion, with the combined market capitalization of USD 30-40 billion.

Last week, Vedantu invested USD 2 million in Instasolv, a doubt-solving app for high school students and for those preparing for engineering college entrance exams. The investment gives the edtech firm full rights to acquire the app. Vedantu claims that the number of subscribers on its platform has reached 1.1 million and Instasolv would allow it to tap into tier 3 and tier 4 markets.