Varsity blues: upGrad struggles to make its mark

“Education is a lot about storytelling. At the core of it, that’s what it is”, says Ronnie Screwvala, the co-founder of edtech startup upgrade. As we sit across from each other at a Gurgaon hotel, it quickly becomes clear that storytelling is the order of the day. Screwvala is talking about storytelling as a tool to reshape careers and ambitions, but he is, at the same time, weaving a story himself. The story of four-year-old upGrad.

When upGrad started in 2015, it was an unusual move for Screwvala, who was known more for his endeavors in media and entertainment. Just three years prior, he had sold his media conglomerate UTV—which he had built over two decades—to Walt Disney for Rs 2,000 crore ($281 million). To venture into the education space then, seemed odd. But the entrepreneur in him sniffed an opportunity to build a company from the ground up, much as he did with UTV.

The market in the segment

“The more we looked at it, the more we said there is no 200 million [users] market in this segment anywhere in the world,” says the media veteran, explaining his rationale.

But while Screwvala had business-savvy and funds, he needed someone with experience in the space. He found that in co-founder Mayank Kumar, who had close to 10 years of experience in the education space. Eventually, upGrad was launched as a platform offering long-term courses—ranging in duration from 9 months to two years—aimed at professionals looking for further specialization. While upGrad delivers these courses, the content itself is provided by industry sources and academic institutions.

Over its lifetime, upGrad has seen around 10,000 students pass through its virtual classrooms, gradually building up its reputation, credibility, and, of course, its top line. For FY18, the company earned revenues of Rs 36.4 crore ($5.1 million). While this represented a significant increase from Rs 13.9 crore ($1.9 million) in revenues in the previous fiscal year, it only tells half the story. UpGrad’s losses also went up, from Rs 18.8 crore ($2.6 million) in FY17 to Rs 31 crore ($4.3 million) in FY18.

Growing itself over all the world

Thus far, upGrad’s journey has largely been bankrolled by Screwvala himself. But for the last year, as the company looks to grow not just within India but outside as well, upGrad has been in the market for external funds. “Having invested Rs 130 crore ($18.2 million) over the last four years without realizing much, he has thought of monetizing some of his investments,” says a source. The fundraising, however, has not materialized.

In the meantime, other edtech startups have found funding easy to come by. Test prep platform Unacademy raised $21 million in mid-2018 from the likes of Sequoia India and Blume Ventures. K-12 and test prep-focused Byju’s, meanwhile, has been flooded with funding, raising a whopping $540 million in a private equity round led by South Africa-based Naspers in December 2018. Even as recently as last month, Mumbai-based Eruditus, which offers short-term executive education programs, raised $40 million from Sequoia India and Bertelsmann.

So, why has upGrad failed in its fundraising efforts? Edtech industry sources say that investors have found upGrad’s valuation expectation—$400 million for a Rs 36.4 crore topline—hard to swallow. It’s not like it is the largest e-learning company in the higher education space either.

While Screwvala says that funding is no constraint for upGrad, and Kumar says they aren’t in a hurry to raise funds, the fact that upGrad is still in the market for an investor means that there is a disconnect between how upGrad sees itself and how investors view it. The question is, which perception is right?

Vertical limits

To understand upGrad’s current situation, it is important to understand that the Indian edtech space—projected to be worth almost $2 billion by 2021—is far from homogeneous. To begin with, there’s the K-12 space. The K-12 sector is the investor’s darling, something that could be attributed to the high importance attached to school education rather than lifelong learning in India. Byju’s, the $4 billion-valued edtech unicorn, is a testament to this.