The fateful Forbes article, if you go by the dysphoria, seems to have sealed the fate of all education-related startups. They are all doomed. Why? Because e-learning is dead! Why? Because Educomp is in trouble.
I hope when I put it that way, the ridiculousness of the tremors in investor, startup and media community becomes a little more obvious. Fine! Educomp has been the poster-boy of education and e-learning in India. But if Yahoo! being in trouble has not meant that Internet, online content and online advertising are dead. Educomp being in trouble can hardly mean that the business of education is dead.
What these FUD-rumour-mongers need to do it is to come down from their pedestal, stop taking a 100,000 ft high view of things and get into some nuances and bother their heads with some details. If we go by the article, Educomp’s troubles seem two-fold:
- It diversified too much in search of quick growths, in areas that were not quite its core strengths (even if it all fell under the umbrella of education), could not manage the capital requirements, did some financial engineering to continue to make it look good, but ultimately could not avoid getting noticed by share market, investors and sensational journalism.
- It’s original idea of “smart classes” was not taking it too far. From the anecdotal evidence schools were not adopting it and from the accounting evidence, they were not paying in time, if at all.
If #2 happens and there are investors and large number of employees to manage and give answers to, I would not be surprised that haphazard, hasty response results in #1. What startup investors really need to be concerned about is #2. Is there still an opportunity to bring value to education system using new technology, products and offerings? Or have all hopes died with Educomp?
Once you get past all the marketing jazz and buzzwords, what was Educomp’s offering? Multimedia content for school syllabus. Delivered over CDs. This is one of those concepts that sound right at a high level. Everybody in the world is wary of only “theoretical” knowledge spouted at the kids. What we need to show kids is how stuff actually work. What better way than animation, audio, video, right?
Possibly! But did someone do a field test to see which concepts are best explained through animations? What kind of animations manage to work better than a teacher explaining it in the class or the good-old textbook? Was there any measurable evidence of better learning outcomes? And given what matters the most to Indian parents, did the kids’ performance in exams improve? Beyond the ads, did jumping mathematical formula, instead of the one written on a boring board, really make kids more excited about going to the schools? Did teachers think that their lives became easier, or did they find it difficult to finish the syllabus while multimedia content took its own time to play and kids still sneered at everything in the classes?
All said and done “Smart Classes” are not about “technology”. The only “technology” involved is the use of multimedia content creation tools. The rest, and the most, of it is content play. And who is creating the content? Are these education researchers, who have an insight into how children learn? Or are these thousands of animation diploma-holders, who are going through the same “boring” textbooks and putting some graphics and sound around the same old content? My educated guess is that it is the latter.
Why should it be surprising, then, that the users did not adopt it? That nobody cared to research if the offering would work for them and it did not work? And that when the ultimate users (teachers and students) did not adopt it, buyers (management) stopped paying for it?
Content is not about technology. It is, unfortunately, tougher than technology. If it has to work, it can not be created trivially. Investors and journalists like to jump on the sales number. Those numbers can create initial euphoria. But if you are not monitoring how effective your actual offering is for the users, sooner or later the euphoria will die down. Accounting tricks and clever financial engineering is not going to make up for the basics faltering. The return in financial markets are governed by the value created in the market for real goods and services. It does not matter how complex we make the financial system, there is no evading the basics in the long run!
Educomp bet on usurping the educational content, did not do a great job of it despite creating some sales & marketing success, and instead of taking feedback and improving on its core idea, made some bad (in the hindsight, at least) diversification decisions. They are in a soup. They might be able to come out of it, or they might sink.
But this doesn’t prove that education does not need technology. Or even better content. There are real problems surrounding the quality and scalability of education. Someone needs to do a better job at these and create real value, which can justify the investment a customer would make in buying their offering. And if you are an investor, don’t run away from education sector. Or any sector for that matter. Instead of starting and ending with macro numbers, forbes articles, valuation in last round and valuation in next round, take some time to get into the details. Put yourself into the shoes of customers and ask these simple questions
- Will I pay for it?
- Will I pay enough for it?
- Will enough like me pay for it?
Then put yourself into the shoes of the founders/team and ask
- Will I be able to deliver what enough customers will pay enough for?
- Can I create the team, if it doesn’t already exist?
- Can I develop the technology/product/content?
- Can I provide support after sales and keep getting revenues?
- Can I do all this for a price that is lesser than customer’s life-time value?”
After these “small, little” questions have been answered, feel free to do the due-diligence on “stuff that really matters from 100,000 ft”.
I seem to be spouting things from Management textbooks. But I have kept the finance textbooks aside for a moment. Too few investors seem to do that.
This is true not just for education, but for any sector. And education, dear world, is definitely not dead! We have a large population of people looking to improve their lot in life through education. It is for us entrepreneurs to figure out how to make a profitable business out of it. The key will lie in creating something of value before creating newer buzzwords.
P. S. Disclaimer: I am working with Aurus Network, which is in Education domain (but is NOT a competitor of Educomp). This is, however, not a marketing article!