India is still one of the world's most exciting markets for education technology investors, says venture capital firm GSV Ventures, sounding an upbeat tone for a sector still reeling from massive layoffs and a funding crunch.
US-based GSV invests only in edtech startups around the world and manages about $500 million in assets. In India, its two most prominent investments are in test preparation firm PhysicsWallah and LEAD, which provides digital infrastructure to schools. Both companies are valued at more than a billion dollars.
"It is way too early to be negative. India is still the most exciting market for me along with the US. These are very early days for the Indian edtech market," Deborah Quazzo, managing partner at GSV, told Reuters on the sidelines of the Emeritus-GSV Leaders Summit in New Delhi on Monday.
Edtech startups in India have laid off thousands of employees in the past year and have been unable to raise funding as a slowdown gripped the market.
Companies that have cut staff include SoftBank-backed Unacademy, Tiger Global-backed Vedantu and Byju's- India's biggest startup valued at $22 billion.
Yet Quazzo said the downturn has also resulted in a shakeout, enabling successful companies to expand market share while others exited.
"Companies earlier purely online have now gone hybrid, increasing their market sizes. Earlier companies were not operating sensibly. In that case you shut down, that's just how it works," she said.
Increasing digitization, a young population and expected growth in per capita income in the coming years all make India an attractive market.
GSV is eyeing investments in sub-sectors such as upskilling and the K12 segment - for kids from kindergarten to Grade 12 - among others, Quazzo said. It has invested about $90 million in India so far. Its US investments include Coursera and Masterclass.
Indian edtech startups raised $2.6 billion in 2022, down 36% compared to the previous year, according to data provider Tracxn Technologies.
"There are companies doing a lot better than what you see on the surface," Quazzo said. "Some specific companies may have problems but the market is still very attractive."
The Indian government is also "pretty constructive" on education policies, a key factor that encourages investors like GSV to invest, she said.