Serial Entrepreneur, K Ganesh recently raised $19 million in funding from US publishing major Pearson and it existing investors, Lightspeed Venture Partners and Manipal Education and Medical Group (MEMG). Ganesh started his career as the co-founder and CEO of IT&T Ltd, an IT and network services company, which was sold to iGate in 2003. His other ventures are BPO company CustomerAssets, and business analytics company Marketics.
He started CustomerAssets in mid 2000 with a funding from SoftBank and Newscorp. In May 2002, ICICI acquired CustomerAssets and the company is now publicly listed in India as FirstSource Solutions. Marketics was acquired by WNS Holdings in 2007. Ganesh has also served as the CEO of Wipro British Telecom/Bharti British Telecom. VCCircle's Ruchika Sharma spoke to K Ganesh on the recently raised funds, his expansion plans, and his strategy for India. Excerpts:
Could you explain your business model?
We are into two businesses. One is TutorVista.com which is a virtual business and the model is a consumer internet services business model. We serve over 10,000 students across the globe, primarily in the US and they pay us a subscription fee of $100 a month for unlimited one-on-one tutoring. We have close to 800 teachers in India working form their homes. 90% of our students are from the US and the balance are from 48 different countries. We market, advertise and spend our marketing dollars only in the US. That is one part of the business.
The other part of our business is called Manipal K-12 Education. We have it for the India market, wherein we do three distinct businesses. One is ICT (Information Communication Education) in schools, under which we go to schools and supply full ICT Solutions and charge on a per student per month basis. This is very similar to the EduComp’s business model.
The difference is that we don’t do very large government hardware projects. We do only private schools. The other business in India is that we run are technology leveraged Edurite Tutorials wherein we do physical brick and mortar model like the career launcher or like the physical coaching centers. We coach for 9th to 12th for board examinations or medical or engineering examinations. They are physical brick and mortar centers where the students come in but in the center we leverage technology. We currently have 40 centers across Karnataka.
The other thing that we do is schools and schools’ management. We acquire schools and manage them. We don’t necessarily acquire the real estate but we acquire the managing rights, brand it, employ the teachers and train them and put our content and curriculum. One of them is a school called Manipal Sharda School, Mysore. In ICT in schools we are present in over 200 private schools and about 2,000 government schools - that’s over a million students with our products branded Edurite. We do the schools and Schools management under the name of Manipal Schools because we have Manipal as an investor.
We started TutorVista 3 years back. One and a half years back we acquired Edurite which has been developing digital content for the last 8 years. We renamed it as Manipal K-12 Education.
How is the partnership with Pearson expected to benefit TutorVista? What are the Synergies between the two companies?
A 90% of the student base for TutorVista.com comes from the US and since Pearson is extremely strong in the US market, every student uses multiple of Pearson’s products and services. For example Pearson has got books, Student Information System (SIS), it has one of the most popular assessment tools- Stanford Assessment. So a US student is exposed to Pearson products in more than one way, which means that they have a great access and inroads into the student base across multiple assets.
Now for TutorVista.com, with 90% of our revenue being currently from the US market, Pearson gives us the access and the reach. Secondly, Pearson had got world class content and assessment that we can leverage combined with TutorVista’s internet platform and its Indian teachers. So then, we can offer a full solution to our US students in an affordable and a convenient manner because we are combining Pearson’s content and expertise in the US market, our digital DNA and our Indian teachers. From Pearson’s point of view, they get to offer services and digital online capabilities by using us.
Where do you plan to use the money that you have raised?
We will be using it for expansion on TutorVista.com’s site. We want to expand to other geographies like UK and Australia in the coming year. We also want to launch online global English programmes, which will be launched in all non English speaking countries. We already have 600 students from Korea who learn English from us even though we don’t spend a single dollar there. On the Indian side, we would be expanding Edurite Tutorials to more schools. We would also use the funds for acquiring more schools.
What is the total amount of money that you have raised till now?
We have raised close to $38 million till now in three rounds. Our series A was done three years ago when we started the company, which was led by Sequoia Capital. Our series B was raised 2 years ago, which was led by LightSpeed Venture Partners and participated by Sequoia.
What is your game-plan for India now?
We see that in India there is a huge opportunity for the basic K-12 education. So we are very bullish on the schools and schools’ management because the need is very strong. Secondly, in a lot of areas, especially class 2 and class 3 towns in many states the students don’t get access to education as the children in metros get.
This is possible only by using technology. Unfortunately, because of the internet and PC penetration being low in India, we cannot follow a TutorVista.com model directly in India. It cannot be a 100% online model. The strategy in India is to use technology, make it hybrid and make it a brick and mortar leverage technology model. We do ICT in schools like our Edurite Tutorial model. So its basically about heavy use of technology to leverage and obliterate the challenges of lack of infrastructure that we have in India.
Would you be looking at making more acquisitions in India?
Yes absolutely. We are looking at making acquisitions in India. I can’t talk more about it because the talks are in the early stage. But we do feel strongly that acquisition is the way to go. We are looking at acquiring schools and schools’ managements in India. There are many schools that have been operating for many years but are not able to scale because they lack capital and technology and they lack the management bandwidth.
We can bring in all our strengths because we have trained over 3,000 teachers over the last three years. We understand the India curriculum because Edurite has been in existence for 8 years and has been developing curriculum in India. So we feel that there are lot of schools out there that have done a great job of coming up to a certain stage.
Now in order to leapfrog the current challenges and opportunities, they require capital, management bandwidth, technology and a lot of content. We are able to bring all of this and the corporate processes of scaling to these schools. The other area of acquisition is geographical in terms of states. We started the Edurite Tutorial in Karnataka, where we have 40 centers currently.
Now we are looking at some of the other states where we can look at acquisition as a method to gain local management talent and footprint. There are a lot of passionate entrepreneurs who are very strong in education but they don’t have the capital or the ability to scale nationally. We can bring them together under one platform and scale nationally. That is what we did with Edurite.
What all states would you be targeting for the acquisitions?
We have not yet decided on that. Obviously the larger states where the population as well as the education propensity are large. We are typically looking at large states. We are looking at all kinds of cities - tier I, II, III but we are not looking at villages or rural areas.
How and when do think you will exit TutorVista?
Not right now. This is my fourth venture. I am a serial entrepreneur so I get this question asked frequently. I started 3 other companies before. I started them, successfully scaled them and sold them to listed companies or taken them public. Obviously since we are venture capital funded, we want to create value, give exit opportunities to our financial investors. That is my main concern. I am not looking at an exit right now. It’s too early to say how I will exit. We will first build value and give an exit to the financial investors.
Considering that 90% of your revenues on TutorVista.com come from the US, has the recession in the US hit your revenues?
No, the recession in the US has not affected (the revenues) at all. There are two reasons for this. One is that even though we are the largest online tutoring company in the world, we still are an extremely small portion of this student population. There are a total of 20 million school kids in the US and we have about 10,000.
So we have such a miniscule portion that the macro factors don’t really affect us. But the positive aspect is that we are seen categorically, because the recession is very strong in the US, this is the time when people are looking for affordable solutions. About 8-9 months back our conversion used to be around 1% but now since it is the recession and people value affordable services and they are looking for cheaper solutions, our conversion currently is 5-6%.
In recessionary times affordable solutions will become more popular and luxury items will suffer the most. So for us, it (recession) has affected us extremely positively as our conversion rates have increased by almost five times. But I would humbly say that we are still a small player for the macro factors to affect us.
Globally, how are you reading the e-tutorial sector?
Globally, like the number of the internet users and like the acceptance of e-commerce and advertising, e-tutoring or e-learning is cumulatively increasing. And during a recession, it is more expensive to travel and physically commute, this comes as a very cost effective way of learning. So if you can do anything on the net, it is much easier.
So in terms of internet penetration and acceptance of e-commerce and web as well as a method to reduce total cost, I think e-learning and e-tutoring sector will only keep on expanding dramatically. The number of people online is going to go up next year, and in three years it will go up more dramatically than it is today.
How is the sector doing in US?
In the US, the sector has done well. If you look at the stocks of online education companies like Capella or University of Phoenix online, their stocks have pretty much gone up or remained flat whereas the financial services and automotive stocks have gone down. And that is one important indication why education and especially online education stocks have thrived.
The reason is simple that when there is recession, the job opportunities are less and they use this opportunity to pick up more education. They go to companies like the University of Phoenix online. And the enrolments have actually gone up because alternate opportunities are low. The other thing is that the companies which have distributed or are cutting down their travel and stay budgets, are doing more and more training, certification, re-training and skills up gradation online. All of this has only increased the attractiveness in the US.
Do you see more consolidation happening in the e-tutoring sector?
There are not many players at all in the e-tutoring sector. We are the largest in the space and in the US there is a company called tutor.com, which is Intel Capital funded. But it does not do what we exactly do. We do a $100 per month subscription using teachers form India whereas they do a library model.
They do a B2B model and we do a B2C model. But they also do online tutoring so to some extent you can call that as competition. So I don’t really see any consolidation happening in the sector. We have the capital and we would love to acquire but there are no companies of size and scale in the e-tutoring sector so you can’t even look at acquisitions. So the opportunity is not really there unfortunately.
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