Full Transcript

Utsav Somani: Alright, listeners. It's Wednesday August 19. This is Utsav Somani, and I'm streaming the episode number 127 with Vivek today. Vivek, welcome to the show.

Vivek Varshney (SpeEdLabs): Hi. Hi, Utsav. Great to be here.

Utsav Somani: So, Vivek, let's introduce the business. What does SpeEdLabs do?

Vivek Varshney (SpeEdLabs): Yeah. So SpeEdLabs is working on the aspirational programs for the school segment. And as we all know, there are two major aspirations for, the, for the students studying in grade six to 12. One is the career aspiration where they want to join a good college leading to a good campus placement and the starting of the career, which is their dream of, all middle class, lower income group mainly because they don't have any narrative business, etcetera. So the education is the only currency by which they can, you know, move up the ladder, social ladder, and they want to join a good college and a great, campus placement. So their trajectory comes back to facing an entrance exam after twelve. For engineering, there is JEE; for medical, there is NEET; for integrated MBA programs, there is IPMAT; and for humanities, CUET. So there are, various competitions, private, government, all of them. So this is one track where the aspirations are more towards career, and we provide the entire curriculum books, learning app, teacher app, teacher training, national level assessments, working with the schools, in this direction. So we provide all of the solutions for the JEE, NEET, IPMAT, and foundation programs, and currently working with 700 other schools across India.

Utsav Somani: Tremendous scale. I read that 150,000 students as well, you touch lives of, via your product as well. So I think that's fascinating. But I think one stat that stood out to me was grade six. People have to decide that early, and who is guiding them at this point.

Vivek Varshney (SpeEdLabs): So, while they may not be very particular whether they will go to, engineering or medical or some other direction, but the fundamental logic of, foundation courses at grade six is that you always have lot of energy and more time in grade six. Right? So if you make a dedicated efforts by learning more as per your age appropriate, things but little more high rigor, it will always help. And the logic starts that when we switch from grade 10 to eleventh, there is a sudden jump in the syllabus, difficulty. You know, people get overwhelmed, when they start preparing suddenly after tenth. So entire India, this team is, picked up over the last ten, twelve years that why can't we reduce the pressure in eleventh? Why can't we give them small steps throughout six to tenth? Some may continue the journey for competition. Some may change tracks. Some may change field also. But having some extra discipline and some extra knowledge in grades six, seven, eight is not a bad idea. That that so there's the underlying logic.

Utsav Somani: Vivek, I think I mean, a part of your journey is that you started this in 2016. So you've seen many cycles in EdTech, what we call EdTech, just to oversimplify what the industry is branded as. What are the learnings that you have when you've been building this for almost a decade now? What is broken in our education system? How are you trying to fix this? And what still needs to be fixed?

Vivek Varshney (SpeEdLabs): Yeah. No. I think, a very, very important question because, as you rightly said, I I can break into three phases. The first was pre COVID when lot of people were still skeptical about the EdTech per se, and the online education was still not, you know, as popular, etcetera. And, it was always seen as an inferior choice for majority of the students. And then, there were three years of 2021, '22, the COVID period where suddenly everyone thought that the online education is a perfect replacement of in you know, inefficient offline education. And then there were the forced choice. Many company got funded, lot of investments. Huge get, you know you know, funding, advertisement for Indian cricket team up to that level and getting all the stars, all the Bollywood top stars, everything. Right? So that was second phase.

Utsav Somani: Give me the COVID fight. We right? I mean, people wanted to do coaching studios versus Yeah. Doing delivering online direct to consumer or direct to parents or students.

Vivek Varshney (SpeEdLabs): Yeah. And so because they were the forced choice. Right? The students could not go to school, and parents wanted them to still learn. So they say, okay. Why not try online? And those numbers, you know, were very, very large. Like, everyone downloaded the apps. Number of hours consumed per student per day was five ten x of the normal, times. And investors also thought that the inflection point has come and people are changing their consumption behavior, but it didn't happen. Right? So as a result, towards the end of twenty twenty two and the funding winter started hitting and, while the PMF was still not there. So people were not ready to consume more, people not ready to pay more, etcetera, etcetera. And the world moved back to the offline, Xerox, printed material, all of that. And then the third phase, I would say, is '23 to '26 where, all players respected the choice that students want an offline support also. Student want online support also. Student wants printed books, supervised learning, etcetera, etcetera. And, eventually, people started focusing a lot more on unit economics, getting profitability, etcetera. So if you look at last three years, a lot of education company turned profitable, a bit profitable at least, if not bad. So these three phases and, we have been in all the three phases. So first phase, we were smart. We didn't burn a lot of capital. I was sure that online time has not yet come, so I didn't go very hard on this. Second, we made pretty much similar mistakes as a lot of players. We raised, $4,000,000. We spend a lot of money in CAC. We tried to scale faster, you know, and I think the common mistake was that everyone was trying to scale before the PMF. They were trying to price without considering the unit economics, and we also made the same mistakes. And as a result, we went through a tough phase. And then '23, we decided that pure tech still may not be the right choice. So we blended with the full solution including books, which I think took off for us. And we scaled from ten, fifteen thousand students to one and a half lakh, in three years. Became operationally profitable for the last two financial year, FY25 as well as FY26. Improved margin from 3% to 11% last year, and, this year, we are targeting about 16% EBITDA margin. So things that the scale, some things get fixed by scale. But, these are the three learnings and, you know, a very exciting three phases of the sector.

Utsav Somani: Oh, thank you so much for being honest on air, and congrats for hitting that level of scale and profitability. But I think, you mentioned some products. Right? What is the offering now that SpeEdLabs brings to the market? Is it I mean so I read that you have books where there are QR codes embedded in it. There's something that I read about AI and adaptive learning as well. So maybe explain those concepts to us just so that we are aware of is it just buzzword heavy, language that it's just marketing what's already out there, existing packages and new shapes and forms, or is there technology actually being used that is improving outcomes?

Vivek Varshney (SpeEdLabs): Yeah. No. So I think, adaptive learning was our initial product because I believe that every student has different, capabilities, and learning style. And, unless we give give them the right analytics and personalize their sequence of learning curated question bank, they are they are learning at much lower productivity level, much lower efficiency level. Right? So we use the algorithms, which were using the question score, which were using the user score and trying to keep the questions in the approximate zone of learning for the students. Now when we wanted to implement it separately, students were confused whether to follow a book or to practice online. And then we blended both. So in the books, we created a lot of QR's, which open personalized learning assignment for everyone. So for example, there is a book, and we are learning, let's say, Newton's laws of motion. So the theory remains same for pretty much everyone. Then people go through couple of examples, and then they do some common questions which are printed on the book. And then there is a QR for adaptive practice.

Utsav Somani: So, like, a copilot for studying, basically.

Vivek Varshney (SpeEdLabs): Copilot for study. So if you and I are scanning the same QR, we'll get different questions because our learning score is already captured in the history of, app. So while there are printed common questions, which are common for everyone, but, personalized learning starts after the common questions. So we what we learned is that we can't take out the book from the student's life. And, that's the that's the starting point. We can't bypass it.

Utsav Somani: And, see, the entry point or the metric that you must track is the revenue, students that you're touching and the number of schools that you have. But how do you measure outcomes in your case?

Vivek Varshney (SpeEdLabs): Yes. In our case, outcomes are, measured in third party assessments. So there are national Olympiads, various Olympiads. If the students who are learning through our programs, on an average, outshine the rest of the India, then we can say that with evidence, there is a success. So out of the schools that are partnered with us, if for any Olympiad, the national selection rate, for level one to level two is, let's say, 5%, Our students, achieved around 12% selection rate for level one to level two. So this is pure objective, a way of saying that something different happened here. And because the base was also not as small. Like, I'm telling you this data point on 300 plus schools.

Utsav Somani: Wow. But, I mean, so how much of your offering is actually tech versus how much of it is just content, you know, delivered to the right person?

Vivek Varshney (SpeEdLabs): So from a student learning behavior point of view, I would say 60%, content and books and the printed material because that's what is followed in the school as a curriculum. And teachers reference it. Everyone has to have it. And, more importantly, parents feel right if there is a tangible thing in a product offering. And 40% on the tech. And when I say tech, it is a tech for teachers as well as tech for the students. So now, you know, on an average, every month about one lakh presentations are viewed by teachers. So that teacher goes to the classroom, and they refer our presentations which are loaded in his pack to deliver the program, which are more structured, more methodical, better content, allows them more time to deliver better. They have lot of preloaded assignment, test, customized test on a flick of a button. So in less than ten seconds, you can generate a new assignment and send it to the students. Similarly, students have lot of evaluations, self evaluations. So after every exercise, there is an OMR. You fill it on a daily basis. Scan it. It, evaluates, gives you the feedback. It sends the feedback to your teacher also. It also figures out, let's say, out of 30 questions, you made errors in eight questions. It, finds what were the concepts behind those eight questions, and it creates an a new assignment of 10 questions for you to improve on those those concepts. So lot of tech happening, but everything is blended with the books because what, at least, I learned is that, majority of India is still not ready for pure tech.

Utsav Somani: Interesting. And, I mean, I have hangover from the Educomp era where I think most of the industry, thought that was a tech one point o where you're selling to the schools. Right? So how do you think about selling to schools? Because in your case, I believe it's the same case where you're selling to schools as the primary buyer. Right? It's not the parents. It's not the student.

Vivek Varshney (SpeEdLabs): So in when you sell to school, there are three things. Right? One, you can sell infra, which is, you know, TV, projector, computer, lot of these things which are which is practically what Yeah. Educomp was doing trying to do at least content blended with infra, but the school was viewing it more like infra. The second is prescription books that you have to teach Hindi, or you have to teach Marathi, or you have to teach English. There are 30 good publications. You figure out what works for you your school well. And these are not demand driven. So so the student is not saying that I want this particular book or I want this I want to learn Hindi. They have no choice. Right? They have to study Hindi or English or Marathi or science because it is part of the board curriculum. So second is prescription, which is very competitive and slightly less differentiated market. Right? But a a a recurring business where all the schools pay, students pay, everything is clean, sorted, stable. What we are coming in in an optional aspirational programs. So we we are, right now, let's say, 10% of the market because we cater to a particular demand. So here, you you need a student awareness, willingness to pay, propensity to pay, need, and the school's capabilities to deliver such program. So so lot of, checkboxes have to be ticked, and then the competition is slightly less here. So there are publication houses. There are pure tech companies who just give an app, and then we are the only one who give everything.

Utsav Somani: System. Sort of like a combo with the book and then the QR code.

Vivek Varshney (SpeEdLabs): Combo. Like, there is no other company like us.

Utsav Somani: How do students end up paying, like, for a course?

Vivek Varshney (SpeEdLabs): Very affordable. Very, very affordable. So we have priced our products, in the range of 3,000 to 5,000 per year per student. And for if you are thinking about career, if paying a thousand rupees extra per year can change the outcomes significantly in your life. I think I think, every Indian, especially the middle class and the lower class, would over index on education. I am from that category from a small town in UP. Did entire education in in the UP board, took JEE exam in the I've gone through that journey, and I think we should all over index on education. We should not under invest.

Utsav Somani: Like And you graduated from IIT Kanpur, I believe?

Vivek Varshney (SpeEdLabs): Yes. So I undergrad I did my undergrad from IIT Kanpur in mechanical engineering, did my MBA from IIM Lucknow in finance, then worked with Morgan Stanley, Deutsche Bank, ICICI Venture, Private Equity Fund for about eleven years, and then I started it. So if I look back, single point in time whereby parents decided to over index on education, change their entire trajectories. I think saving ₹1,000, ₹2,000, ₹5,000 in a year is is not worth it.

Utsav Somani: Amazing, Vivek. And thank you so much for sharing all of this. I have a couple of questions to wrap up this segment. Like, so what does the future of classroom in India look like? And do you think competitive exams are headed in the right direction where we're over indexing on ultra competitiveness when we should be measuring students against different, sort of a more wholesome approach if there is any available.

Vivek Varshney (SpeEdLabs): So I will answer it in two parts.

Utsav Somani: Yeah.

Vivek Varshney (SpeEdLabs): First part is that, you know, India is not, you know, homogeneous set of people. Right? It's, extremely heterogeneous both in terms of, demographics as well as, social income, disparity, etcetera, etcetera. Right? So so if I were to think about the people who could afford, who are living in metros, could afford more, even can consider high end private universities or going abroad or whatever, I think for them, definitely, having this kind of fierce, competitive environment is not neither possible and not required. I think they are blessed with slightly more resources, and they can focus on more rounded personality, more balanced world viewer, and and achieve what they can achieve out of that. But the second part is the reality of 80% of the India, where the schooling system is very fixated on academic outcomes. And, if there's

Utsav Somani: very deep rooted in our system that

Vivek Varshney (SpeEdLabs): Not just us. Yeah. Not just us. I mean, I I would expand beyond ourselves. When I say India, it's like India, Korea, China. Lot of these countries, majority of the middle class, lower income class, they have only one way is to get into top end government colleges because that's what they can afford. Right? You can't afford 10 lakh rupee annual fees, in top end private colleges. So if you have to go to the government colleges, then obviously, the seats are less and the sprints are let's say, the ratio is 2% selection rate. Then 2% selection rate for anything in life is a fierce competition. And I'm not saying it is right or wrong, but I am saying it's not going away anywhere. Like, I when I got into private equity, even for, MBAs in finance, getting into private equity is a 2% game. So a lot of things in life are low selection, ratio, and people are fiercely competitive in their own ways.

Utsav Somani: Alright, Vivek. Wishing you and the team at SpeEdLabs a very, very best ahead. Thank you so much for coming on our show.

Vivek Varshney (SpeEdLabs): Thanks, Utsav. Thank you very much for your time.

Utsav Somani: Alright, listeners. That's the one and only guest for today, but I have a couple of things that I wanna share my screen and show you today. So one of our members at offline, Bushesh Kurana, who's a very dear friend, he's been on TON as well to host a master class. He's tinkering with a lot of AI tools. You can go check out our streams previously to, see his episode. Shiprocket just went for an IPO today. What a listing. 47% up on just day one. This is just tremendous. So kudos to the team. They've truly powered. I mean, we're all, recipients of Shiprocket SMSes from time to time when we order something on any of the ecommerce platforms, and they've really embedded themselves to be a key infra player. There's one very interesting tweet that I read, and I think a lot of people have been talking about how AEO and GEO actually get, you have to embed yourself in the world of Reddit, where Reddit was literally one of the highest performing, sources for getting credibility around your brand or the website or the product that you're offering. And suddenly, in the last, I think, few days, I think August 14 was the cutoff when Reddit actually went from 15% to 0% in ChatGPT citations. That is big. Somebody must have built an agency around this. Somebody must have done so much work in getting their reputation on Reddit up. It's notoriously hard to get a credible profile growing on Reddit. And now, apparently, ChatGPT pulls sources from trusted companies like Salesforce. I thought Salesforce was a CRM company, but, apparently, not so much. Google, Shopify, and other, citations, from, like, other sources. So I think something for founders we're building, for this world of AEO and GEO or the generative engine optimization, should, I think, pay attention to. Then I've got a project that I wanna give a shout out to. Ashutosh reached out to us. Ashutosh and Suraj have built something known as fanout.sh. I think it's pretty cool. We highlighted a couple of projects on our last stream, and folks really loved it. So Dhruv and I are gonna try and bring up projects that we see which are exciting. People are hacking together interesting stuff in hardware, software, and shipping projects at a much faster pace. It feels really cool to, I mean, have something like this. I mean, I wish I was younger and I had more time to learn some of this stuff. AI research system in-depth, system design in-depth, advanced ML mathematics, open robotics is coming soon, inference engineering. And you can pay and, I mean, have access to all of their tools. Like, study with me, we covered EdTech today. So people are really doing a lot to bring education to people, and I think what's missing is self motivation. So I think if you have access to tools like this, offerings like this that Ashutosh and Suraj have created, with Fanout, I think go spend time on them. Something might pique your curiosity and, might maybe be the career path that you choose next. So, yeah, with that, kudos for building this. Thank you so much, and we will see you on Friday. Thank you. Bye bye.