What will Happen to Educational Startup When Schools Reopen

The government decided that face-to-face learning in schools would be determined by respective local governments starting next year. Investors estimate that educational startup services (edtech) will remain in demand, even though the corona pandemic is over.

Based on research by Google, Temasek, and Bain and Company, education applications in Southeast Asia were downloaded 20 million times during January-August. The number has tripled compared to the same period last year which was only six million.

In Indonesia, Zenius noted that the number of users increased 12 times annually (year on year / yoy) to more than 15.7 million per second quarter. Meanwhile, Ruangguru has more than 17 million registered users, or an increase of more than two million since the beginning of the year.

Then, AyoBlajar reached 13 thousand students and 23 schools. The surge in use occurred because the government urged students to study from home to reduce the transmission rate of the coronavirus. However, students have the potential to learn face-to-face at school next year, because decisions are made by the local government.

Educational Startups Still Attract Investors

Even so, the Venture Capital Association for Indonesian Startups (Amvesindo) predicts that this sector startup will still be in demand by investors. “There are several kinds of edtech in Indonesia. So there should still be an increase,” said Secretary-General of Amvesindo and CEO of Mandiri Capital Indonesia Eddi Danusaputro, Thursday (10/12).

Based on a World Bank report entitled “Edtech in Indonesia, Ready for Take-Off?” Last May, digital education services are divided into at least 17 categories. “They are looking for as many consumers as possible first, then thinking about monetization,” said Eddi. “Monetization can be done through cross-selling, advertising, data, and others.”

Based on a World Bank survey of 35 educational startups in the archipelago, most of them offer more than one product or service. As many as 30% provide administration and management products for teachers and institutions.

Then, 27% of online learning courses and 25% career development. “The majority of edtech companies in Indonesia offer products and services that are broad rather than few but deep, such as only focusing on mathematics, science, and others,” the World Bank report said last May.

In addition, around 60% of them apply three business operation models, namely business to business (B2B), business to customer (B2C), and business to business to customer (B2B2C). The average adopts B2B.

However, only a handful of edtech startups involve the government in their business operating models. The World Bank suspects this is due to the lengthy and long bureaucratic process.

Many Business Actors Decide to Implement a Hybrid Business Model

Interviewed business actors said customer acquisition costs, aka Customer Acquisition Cost (CAC), were a major consideration when deciding to implement multiple business models or hybrids. For B2B, the fees are fixed. As for B2C, companies need a lot of money to hook individual consumers.

The majority of respondents stated that this happened because of the low digital literacy of the community. About 90% of respondents also changed their business model after identifying new gaps in this sector. “That is to achieve greater cost efficiency,” it was written.

“This change is not only due to market demand, but also customer acquisition strategies or to increase the unit’s economy as a requirement of investors.” The World Bank assesses that implementing B2B or B2B2BC makes more business sense, both in terms of impact and potential outreach. The shift from B2C to B2B is predicted to be massive in the future.

Moreover, 62% of respondents offer products for free for a certain period to attract more consumers and expand service coverage. This practice is considered to be detrimental to the company because the World Bank notes that less than 5% of users are willing to pay for the service after the free trial period.

However, 89% or 22 of 35 startup edtceh surveyed claimed to have made some income. Although, only 27% of them are profitable. “There is a fairly positive correlation between the company’s years of operation and profitability,” it wrote.