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With US$ 323m funding, 2016 a bumper year for ed-tech cos

Times of India:  December, 2016

Chennai: The year 2016 has become a bonanza for the education sector, which has received investments of $323 million — surpassing the previous high of 2014 when ed-tech companies raised $223 million. At 26, the number of deals this year was also over three times more than last year's $98 million (23 deals).

Almost half of this year's investments went to Bengaluru-based Byju's Class, founded by Byju Raveendran. The test preparation startup raked up almost $150 million this year through multiple rounds from Sequoia Capital, Sofina (a Belgium-based fund), Lightspeed Ventures and the Chan Zuckerberg Initiative, among others.

An interesting trend was that several companies with a focus on offline channels bagged funding with PE investors taking to regulated sectors.

CX Partners invested as much as $60 million in Nspira, a group firm of the Hyderabad-based Narayana Group, while the Jain Group attracted $35 million by selling a 74% stake in the real estate assets of 12 of its K-12 schools to Cerestra Edu Infra Fund. KLAY Prep Schools and Day Care raised $16 million from Peepul Capital and Kaizen PE. "Offline is thriving in a highly online focused ecosystem and that has given confidence for investments to come into the education sector," said Karthik Reddy, managing partner, Blume Ventures. The VC firm has been one of the most active investors in the education space with investments in startups like Unacademy and Flipclass. "There is huge value in building businesses that are offline-based and shifting some traffic online — businesses that use online to augment their primary channel," Reddy added.

Strategic Investors were also quite active this year, data from Venture Intelligence shows. Text book publishing company S Chand, which had raised $26 million led by IFC in 2015, has become an active strategic investor (backing several startups including Testbook). The EduPristine deal saw US-based DeVry Education Group, while Tabtor got participation from John Katzman, founder of The Princeton Review.

Skilling and employability related startups like Unacademy, Simplilearn and Edubridge were also investor's picks. "People are beginning to realise that as a country we are hugely lacking in skilling. Employability versus education is a topic that is gaining a lot of interest," added Reddy.

India's large market for e-learning has benefited startups like Simplilearn, which bagged funding (debt and equity) this year. "The challenge to keep pace with the digital revolution through quality education has enabled global investors to be bullish about the ed-tech sector. The large scope is driven not just by K-12 space, but the increasing professional skilling and enterprise training fields. While the funding bubble did burst across e-commerce, food-tech and hyper local sectors, ed-tech did not face any hindrance as such, given that the sector by default is bound to do well.