What does the Magic Quadrant tell us about the state of the Indian Ed-tech startup scene?

Courtesy: Unacademy

Who would have thought that Harsha Bhogle and Dhoni would talk about breaking barriers outside of cricket?

As the Ed-tech world soars to new heights, we see companies like Byjus, Unacademy, Upgrad turning into unicorns one after the other. The Indian EdTech Industry is valued at $US 750M in 2020 and it is expected to grow by 39.7% by 2025 (IBEF). This list of ed-tech startups is long and inexhaustive. However, there are a few key players that are dominating the market. It would be interesting to position these startups in the current market and see where they are headed.

Gartner’s framework — the magic quadrant aims to achieve exactly this! It divides the market players into the following category.

  1. Niche Players
  2. Challengers
  3. Visionaries
  4. Leaders

These are measured against two parameters — completeness of vision and the ability to execute. It captures a snapshot of which company/firm/player is doing well in comparison to its competitors. The segmentation of these players into niche, visionaries, challengers and leaders is decided based on some set standard scores within Gartner.

Source: Gartner

We can use this model to better understand the Ed-tech startups in India. As we do not have much information about these companies’ financial statements. It would be difficult to make conclusive inferences on their ‘completeness of vision’ or ‘ability to execute.’ Therefore, it would not be wrong to just simplify and pick two parameters that could more or less, project the characteristics of Gartner’s parameters (completeness of vision and ability to execute). We do have access to the following metrics.

  1. How much funding do these startups receive? → Completeness of vision
  2. What is their operating revenue for a given year? → Ability to execute

So here is some information that we gathered. All values are in ‘million dollars’

Startup revenue and funding

Although we can already see that Byjus dominates the market, we still don’t know which of these other startups could be a potential challenger. Do heavily funded start-ups always do better? Could there be a startup that has phenomenal sales even with nominal funding?

At this point, we still don’t know how we could divide these companies into 4 categories that Gartner prescribes. We have to come up with a scale of our own. One way to do that could be to take a range of approx 100 to ~30000 million dollars and divide it in the following way —

  1. A niche player has funding of <$ 500 M and revenue of <$ 1500 M
  2. A challenger has funding of <$ 500 M and revenue of >$ 1500 M
  3. A visionary has funding of >$ 500 M and revenue of <$ 1500 M
  4. A leader has funding of >$ 500 M and revenue of > $1500

Now that we have set our standards, we can proceed to more fun things…

It is now R time!

library(tidyverse)
library(ggthemes)
library(ggplot2)
#create tableFunding<-c(3470,880,813.5,477,290.9,88,69,69)
Revenue<-c(23810,648,100,1623,4.7,36.1,571,2443)
Startup<-c(“Byjus”,”Unacademy”,”Eruditus”,”Upgrad”,”Vedantu”,”Classplus”,”LeadSchool”,”Cuemath”)
Edtech<-data.frame(Startup,Revenue,Funding)
Edtech
#Adding if else condition for ratingRating=if_else(Funding<500,
if_else(Revenue<1500,”Niche Player”,”Challenger”),
if_else(Revenue>1500,”Leaders”,”Visionaries”))
Edtech<-cbind(Rating,Edtech)View (Edtech)Edtech=subset(Edtech,select=-c(Rating))#Now time to plot ! Yeppieeee!ggplot(Edtech)+
geom_point(aes(Funding,Revenue,col=Startup,size=Funding,group=Startup))+
facet_wrap(~Rating)+ ggtea::matcha_d()+
labs(title=”Magic Quadrant: EdTech Startups in India”,
subtitle =”Completeness of vision|Ability to execute “,
y=”Operating Revenue (in million dollars)”,
x=”Funding (in million dollars)”,
caption=”FY19-FY20")+
scale_x_log10()+
scale_y_log10()+
geom_text(aes(Funding, Revenue, label=Startup),nudge_x = 0.25,nudge_y=0.3,col=”#437c80")+
scale_size(range=c(5,20),name=”Funding”)+
guides(color=FALSE)

Here is the graph…

Magic Quadrant for EdTech Startups in India

Insights

We have a graph that depicts the position of each of these players based on the funding received and their operating revenue. While we know that these two measurements may not be enough to judge their performance, we can still draw some inferences to understand the current state of the ed-tech world.

  1. We see that impact of the pandemic has fast-tracked the use of technology. Lead School (it is a platform that offers an international standard curriculum for children) is one of the latest entrants in the world of unicorns due to its phenomenal growth during the pandemic. It may not have received as much funding amongst niche players but it continues to outperform them in generating operating revenue.
  2. Byjus is a clear leader with hefty funding and operating revenue. Meanwhile, they even managed to find their way into the Indian T20 dressing room. This attributes to their strong marketing strategy. They are literally unheard of!
Source: BCCI

While Covid-19 halted the entire world, the pandemic was the rocket fuel for these ed-tech startups. The post-pandemic boost is welcoming and it would also mean we see more of SRK, which may not be as bad after all!

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