How much will this sector grow in the next five years?
While some areas of the education sector, such as schools, have been growing at 4-5 per cent a year, others like multimedia content, pre-schools and vocational training have been growing much faster at 20-30 per cent. Overall, the education sector is estimated to be a $40 billion market projected to grow at a compounded annual growth rate of about 16 per cent for the next five years.
What are the challenges exclusive to education start-ups?
Education businesses either involve building educational infrastructure (schools, colleges, learning centres, etc), or creation of educational intellectual property (IP) such as educational content, books, training manuals, etc, or both. This can be capital-intensive and time-intensive. Other education start-ups that focus on manpower-centric training could face the challenge of scalability. Innovation is essential and technology will play a key role for successful start-ups.
How long does it take for a venture to turn profitable?
To set up a school, you require a large amount of investment in land and infrastructure, and the gestation period could be one year, the time it takes for the school to be ready, students to join and revenues to start flowing in. The capital payback period could be three to five years. A pre-school business, on the other hand, has lower capital requirement and break-even cycles, but to scale up such a venture might require significant marketing expense. Businesses focused on educational IP, content or technology solutions are less capital-intensive but require investment in IP creation and product development before sales kick in.
Could you offer some tips to upcoming entrepreneurs?
Entrepreneurs should be able to identify a clear market need, a large and growing market size, an innovative business model that addresses the need and sustainable competitive advantages. The entrepreneurial team should be passionate, focused and committed. They need to keep a check on costs and come up with business models that lock in customers for long periods, creating a revenue stream.
Shantanu Prakash is Managing Director, Educomp Solutions