Bangladesh Tech Briefing by FS: Issue 01 covers
Education is a big market in Bangladesh. While the sentiment around education remains that it should be a public good and should not be for-profit, private spending in the sector has consistently increased over the years. In fact, Bangladesh is one of the largest private spenders on education globally.
The demographic dynamic of Bangladesh, with a median age of about 26 years, makes education an even more lucrative market for the newly emerging vertical, life-long learning, resulting from the realization that people need to continuously upgrade themselves professionally in order to operate and thrive in the new work environment.
EdTech is a young trend in Bangladesh — a few years old. Then and again, edtech as a global mainstream meta trend is not that old either, although edtech has been around for a while now. Some of the most prominent edtech companies of recent times such as Coursera, Byju’s are still school-going kids — founded after 2011. Others like US-based Outschool were founded in 2015. In many of these markets, edtech is in its early days. To that end, Bangladesh is not that behind. But Bangladesh is well behind in terms of funding in the vertical compared to its peers such as India and Indonesia. Similarly, unanswered questions around TAM, business model, the regulatory environment surrounding the sector remain.
The sector did not attract much mainstream attention or adoption in Bangladesh until recently. The coronavirus pandemic has changed the perception about remote learning, at least among a certain segment of Bangladeshis. Consequently, regardless of the overall adoption of online learning, everyone now knows about online learning and Zoom class.
Interestingly, this has been the case for many other markets as well including the markets like the US and India. Take, for example, Y Combinator, the Silicon Valley-based accelerator program, that accepted the largest number of edtech companies in its most recent cohort — 14 companies to be exact. While the vertical was seen as underfunded before, edtech startups globally raised $10.76 billion in funding in 2020, a significant leap from $4.7 billion in 2019. The sector has seen its fair share of unicorns. HolonIQ data shows as of July 2012, there are some 28 edtech unicorns globally who have collectively raised over $18B+ of total funding and are now collectively valued at $84B+.
EdTech market in Bangladesh is enjoying renewed excitement and interest from investors. This could be a good thing for the nascent edtech market in Bangladesh. Similar to other verticals in the country, Bangladesh's edtech market lags behind in terms of funding.
One interesting development in the vertical is the emergence of consumer-focused edtech companies in the last few years. Before it was mostly B2B companies trying to serve the institutions such as schools with services like learning tools, learning management solutions, attendance software, etc. The last several years have seen a rise of consumer edtech companies targeting both K-12, and life-long learning verticals.
K12 remains lucrative. The vertical has seen several relatively sizable investments for the Bangladesh market. Companies like Shikho, Esho Shikhi, Online Sohopathi, 10 Minutes School among others have raised investments. Some of these companies have built excellent products such as Shikho around gamification and learner motivation and Online Sohopathi around social learning. K12 offers a ton of opportunities to successful companies. Once you have a successful K12 business, you can branch out into other verticals including higher education and other relevant verticals which Byju’s has been trying to do in India.
Life-long learning which includes companies focused around skill development such as Bohubrihi, Ostad, and several others have seen excellent adoption among a small subset of users. This vertical has a growing appeal among investors but none of the local players in the space raised significant money yet. While funding is not necessary — Bootstrapped companies like Bohubrihi have done well so far, scaling will require investment eventually. The companies in the vertical face global competition but local language and product innovation for the local users offer a solid opportunity for these companies.
While we have seen several K12-focused startups in the last three years do relatively well, none have been able to get to a mainstream adoption outside of urban centers. In fact, within urban centers adoption remains insignificant. There are reasons behind this. Almost all of these companies are young, a few years in operation at best, and have been operating with meager investment. But TAM and the business model remain a question mark until now.
The perception remains against online education, a major challenge for edtech companies in the country. Many users don’t recognize the utility of online education and rightly so. Offline and in-person education offers many benefits that existing online players can’t provide. For mainstream adoption, companies will need to invest significant effort in product—building a product that meets the needs of people instead of the narrative innovation and market education.
The digital divide is going to be another big challenge for the edtech companies that want to scale. For convenience, you can divide the Bangladesh edtech market into two: students and parents who live in urban centers and already have access to the best quality teachers and education and students who live in suburban and rural areas.
For urban students, they have all the access. Many parents would be hard-pressed to pay for an online service when they can access dedicated teachers offline and other benefits that better meet the needs of holistic education of their kids. The perception that offline is more effective, which is true in many regards if we consider the completion rate of online courses. Despite this, many students and parents are already using, and many others would like to use, an online education service for complementary learning. But it is also true that the competition for these students is high and it is a small market. TAM and business models don’t work if an edtech company only relies on urban students.
On the other hand, suburban and rural students, the main target as per the narrative of the many edtech companies, remain hard to reach. Yes, internet and smartphone penetration are excellent in Bangladesh. If you use Facebook user data as a proxy for real internet users, it shows an excellent number. But online learning penetration remains dismal for rural students. Moreover, the perception challenge that edtech startups are facing in urban centers will be hundred times harder in rural areas.
For example, a recently published Education Watch Report 2020-21 by Campaign for Popular Education (CAMPE) suggests that various distance learning initiatives by the government for K12 students amid the pandemic remain largely ineffective. Of all the students surveyed for the report, 69.5% did not participate in the online classes. 57.9% of the students could not join the classes due to a lack of devices. Another 16.5% said they did not enjoy online classes.
As you could see, many students in suburban and rural areas don't have access to data or devices to access online education. Moreover, mobile data remains of poor quality and expensive for users outside urban centers. One founder of a K12 focused edtech startup tells us that students often count the price of mobile data along with the price of the course which makes the course quite expensive. Edtech companies will have to find ways to deal with these challenges through partnerships with telcos, government, and introducing other incentives for the users.
On the internet, everything has to be of global standard. Competing with international standards is likely to be a challenge for the local players precisely because of the lack of investment. This is more so for the edtech players playing in the skill development and life-long learning segment because accessing international content in these areas is feasible for local users. Coursera and other players are there.
The regulatory environment remains unclear. What happened in China of late makes it even more complex because as I mentioned earlier the public perception around education remains that it should not be for profit. If regulatory space shrinks, K12-focused startups are likely to be affected more than the life-long learning-focused ones.
The sector needs to attract more investment. As Anchorless Bangladesh founding partner and CEO Rahat Ahmed rightly pointed out to TechCrunch, “Bangladesh has one of the largest allocations of private education expenditure as a percentage of disposable income in the world, but lags behind countries like India and Indonesia when it comes to edtech funding.”
Like many other verticals, edtech startups did not receive much attention from investors until now. Without investment, you can’t invest in the product, innovation, and marketing. And without innovation and marketing, growth is not possible. There’s a vicious cycle there. TAM, business models, and regulatory environment for edtech are not clear in Bangladesh as yet. It is hard to attract serious money without those things. Even if you attract money without those things, it can eventually dampen investor perception once companies with high expectations underwhelm. While this talk of precaution is too early for Bangladesh, it is true that the case for a huge TAM for edtech remains unclear.
It is great news that Shikho has raised some decent money from some of the veterans in the vertical. This could be the beginning of something for the edtech industry in Bangladesh.
Deals and launches
Evaly: Ecommerce company Evaly has announced that it is raising BDT 1000 crore from local conglomerate Jamuna Group at an undisclosed valuation. Evaly has been in hot water of late over its poor customer service and is currently under investigation by the ACC for alleged embezzlement of several hundred crore taka of customers and merchants money.
The Jamuna deal, if it comes to fruition, is likely to put the company into a relatively better position. However, a TBS report yesterday said that Jamuna Group remains unspecified about the deal. On the other hand, Evaly Co-founder and CEO Mohammad Rassel said that the investment is a fresh equity investment and that both companies will formally announce the details of the deal soon.
Evaly has built a large business using an aggressive marketing tactic where it offers as much as 50-100% discounts on products. While discount-driven growth strategies are commonly used across the world by companies — tech and otherwise, Evaly, however, has made a bad name for the delay in both order fulfillment — the company takes months to deliver some products, and refund to customers and in paying its merchants. However, interestingly, while the company has many detractors — customers and merchants who suffered and industry insiders who see Evaly destroying the ecommerce industry, it appears to have an equally good number of followers and tacit supporters.
Shikho, a Dhaka-based K-12 focused edtech startup, announced yesterday that it has raised $1.3 million in a seed funding round, the largest for any Bangladeshi edtech startups so far, led by Anchorless Bangladesh and Learn Capital and participated by Wavemaker and Ankur Nagpal of Teachable. We covered the news with some nuances here.
Dorik, a Sylhet, Bangladesh-based no-code low-code SaaS company serving global customers, became the number one product of the day on ProductHunt after launching a new version of its product on July 27th. Dorik is an interesting product and taps into a globally rising meta trend namely no-code low-code software.
Trust Axiata Pay (Tap), a new mobile financial service (MFS) provider, launched its operation yesterday. The company was formed as a subsidiary of Trust Bank in May 2020 and is jointly owned by Trust Bank (51%) and Axiata Digital Services Sdn Bhd, Malaysia (49%). Registered under the Bangladesh Mobile Financial Services Regulations 2018, the company will operate as an MFS provider and a payment service provider (PSP) in Bangladesh. Tap is the third MFS company by a bank. The other two, bKash is owned by Brac Bank and Upay by United Commercial Bank.
About Bangladesh Tech Briefing
Bangladesh Tech Briefing is a newly launched newsletter from Future Startup covering everything you need to know about the fast-evolving tech industry in Bangladesh, from the companies to the people to the deals. Start reading for free and share if you enjoy it.