India’s largest Ed-tech platform Byju’s is in late-stage talks to acquire Doubtnut, an app-based doubt solving platform for classes six and above. The Sequoia Capital-backed Doubtnut has been offered an all-cash deal, with a valuation at just north of $100 million.
In the mid-2019, Doubtnut was all set to enter the big leagues. It had just raised $400k+ in a funding round led by Sequoia Surge, a rapid scale-up program for start-ups in India and South East Asia. The app crossed 7 million monthly active users from just two years of operations, securing a close third place with Byju’s and Unacademy in the frontlines, while even surpassing the daily user numbers of Byju’s for a brief time.
So, what changed in the last year?
Doubtnut – an Overview:
Doubtnut is the second start-up by Tanushree Nagori and Aditya Shankar, both alumni of IIT Delhi. Before starting Doubtnut, they ran a successful coaching business called Class 21A, to prepare students for competitive exams. They prepared video solutions for the topics that they could not cover during the classes and delivered them to the students via WhatsApp. Soon, the numbers piled up into hundreds of small videos resulting in a vast repository that was at their disposal. Having discovered a niche in the ed-tech space, they soon pivoted from running a profitable coaching business to focus on the elephant in the room, building a multi-lingual, video-first, doubt solving engine targeting students with low accessibility to quality teaching. The platform utilized WhatsApp to funnel new users to provide quick solutions to their doubts.
Why are doubts important in the Ed-tech space?
Ed-tech offers many advantages compared to the conventional method of teaching, but a reasonable doubt solving mechanism is still their Achilles heel. Doubts are easy to solve during physical classes, where the faculties are available for a fixed time in a day. However, applying a similar feature in an environment where the core proposition is to facilitate 24×7 access to quality intuitive education can be counter-productive. All major Ed-tech engines – Toppr, Vedantu, etc., solve doubts manually, by using a chat function. Companies either took a long time to resolve doubts or had to rely on mass recruiting tutors, who spent their time to solve them. Even the ones that did it correctly struggled to support multiple languages. Doubtnut cracked the puzzle by approaching the problem from the opposite end. Instead of creating video content for doubts, it built out a repository of thousands of questions from the most popular science prep books. Focusing more on providing quality content helped the start-up build a brand around itself to boost user adoption.
Where does this piece fit into the puzzle?
Doubtnut and Byju’s use strategies that are in stark contrast with each other. Byju’s has a yearly subscription for test prep with pricing in the ballpark of $250, targeting audiences from metro cities, with high disposable income. But the biggest roadblock for them has been the lack of access to a non-metro audience, who would find the price point inaccessible. On the other hand, Doubtnut focused more on providing a free quality doubt solving platform with 80-90% of userbase from Tier-2 and Tier-3 cities. The doubt solving engine was a iche, but the start-up ran into trouble when they tried to monetize it. As much as people wanted an efficient doubt solving platform, they also need a full-fledged Ed-tech company like Byju’s to fulfill their needs. Doubtnut currently has around 13 million monthly active users, with total revenue of $23,170 and losses account up to $20,500 during the 2019 Financial year. Therefore, a successful acquisition
would help Doubtnut fix this problem. Meanwhile, Byju’s would hugely benefit from the massive organic user base that Doubtnut brings to
the table. The product would also be a good value addition to the list of features that Byju’s already offers and would help the company save millions of dollars, which explains the high valuation.
Byju’s has recently acquired the coding education platform White Hat Jr, for $300 million, marking its fifth acquisition, and is on track examining new companies that show promise to fit with their long-term vision. The Ed-tech space has seen around 13 buyouts and funding rounds worth $954million in just the last eight months, a whopping 83% increase from 2019. Increasing mergers and acquisitions in this space may lead to the rise of a few strong companies in the future.