Managing Editor of CNBC-TV18 Shereen Bhan is in conversation with Byju Raveendran, Founder and CEO of BYJU's, and Sandeep Naik MD - India at General Atlantic, to find out the potentials in the education technology or EdTech space in India.

The coronavirus pandemic has brought EdTech in the spotlight and most institutions are resorting to remote teaching, which seems the only way for them to continue educating children.

Here’s the complete transcript of the conversation between Bhan, Raveendran and Naik:

Q: You placed this bet in 2008, well before edu-tech was legitimatised or was in fact the buzz word. Now given what we have seen happen through these COVID times, this model is now being looked at with a lot more seriousness. Investors are considering this as the next big opportunity. Tell me about what this COVID time has told you about the strength of the model and where it could lead you?

Raveendran: We were always convinced about how technology can be used to enable and solve all the large scale problems which we have, not just in India but in most of the emerging markets. When you look at the big challenges in education -- core sector and important sector -- whether it is access to teachers -- I am not even using the word ‘good teachers’ -- or whether it is the format of learning which is driven by fear of exams where students just memorise, replicate, forget or whether it is personalisation, which is - even in a classroom of 20 students, it is impossible for a teacher to personalise… Solving it in the physical world by building schools and by having enough teachers inside classrooms, it is almost impossible because we already have a very suboptimal teacher-student ratio 1:35.

That is where using smartphones and using apps and creating content in a format which students respond to… Like offer through devices which they are friendly with because if you look at the current generation, they are digital natives.

Now contrary to what people think - you can increase their attention span provided you get the format right. So what we have seen in the last few weeks is that 6-9 year olds - their completion rates are -- you will be surprised to know -- as good as or better than 15-17 year olds. The only reason can be that 10 years is a huge gap and the next generation - for them, the spending time on the screen is almost a primary habit. But a huge shift in behaviour is what you can see in the other stakeholders, whether it is teachers getting used to using online learning or teaching tools or parents accepting this as even more of a mainstream format, maybe because they don't have an option today but it is here to stay.

When I say it is here to stay, I expect on the other side of the crisis. It is not that it will stay 100 percent online, neither it will go 100 percent offline, but good things happen in the middle, it is never about two extremes and hopefully we will end up... Like ‘every crisis is an opportunity’, this is that inflection point for education and like some of the other core sectors where technology was always finding it difficult to disrupt -- positively disrupt. So we will end up with the blended model which will combine hopefully the best of both. Because there are some things which can never be done online and there are a lot of things which can always be done better online, so looking forward to it.

Q: Several important issues that you have raised there and I liked the fact that you talk about this being the inflection point as far as the edu-tech business is concerned and you are right that today you are seeing an almost 3X increase in the number of users, students are spending about a 100 minutes per day that is the kind of engagement that you have seen versus 71 minutes per day previously. So as you rightly pointed out perhaps this kind of engagement may not be sustainable post the lockdown lifting, but it does open up a big opportunity. Now can you explain to me a little bit more on what this blended offering is likely to be, what shapes, size, form it is likely to take?

Raveendran: If you ask me the future of learning - there are two things to it. One - how you offer it, second- how the students are going to consume or receive it. Offering wise if you look at it that is where I used the word blended model. The teachers who are getting used to the benefits of online learning and on the flip side of it we also run the risk of some of the teachers, lot of institutions just looking at online learning as the crisis management tool. There we run the risk of them getting exposed to suboptimal models of online learning. When I say suboptimal models it is like - when you do things like really fast and keeping short-term in mind chances are that you won't see the - because it is not that all online learning are equal.

Because what has taken years for us to develop and which got evolved in to a model which is liked by the students, you can't replicate that in the matter of few days or few months. Lot of teachers are struggling to get used to it but I am sure it is just a matter of time before they become better at it. Then the really blended model will be an asynchronous format of learning where students will have an option or flexibility to learn what they want, when they want and how many ever times they want combined with the synchronous model where they interact with teachers, interact with other students online or offline because as I mentioned there are some things which can only be done offline.

Now all these hard skills like maths, science, coding I strongly believe that to impart that knowledge online is a very powerful medium. When I say online - online or digital it is not just about online and live. It is about using technology or leverage technology to create all the new age formats which gets attention of the students whether it is movie like videos or game like interactions.

Now the synchronous format is also important to have that discipline or that schedule in learning and the combination of both is what I meant by a blended model. The advantage is like on the online side of it what most of the people don't realise is a personal screen like this is not necessarily a distraction most of the times, it is other way around. It is almost like - I use the word every student has a front row seat now. In a classroom of 30-35 there are backbenchers and they can hide. Here I am using that positively, students can see the screen properly, and they can actually focus on what is happening on the screen and where it matters. So that might be the reason why we see high engagement and very few dropouts even in lower grades.

On the other side, now behaviour wise teachers are getting used to it, parents are accepting it better, students obviously they are always early adopters, but all stakeholders accepting the format will help us to go more mainstream. When I say us, I am talking about online learning, not as a replacement of school system. It is never a replacement it is actually a good complement because what cannot be done online effectively is very important live skills. I always talk about the most important skill being empathy, you need to interact and now there are people who talk about even the interactions in person can be done digitally or on online. To some extent it is true because maybe that is why a lot of journalist like you it is more than a crisis you are using it as an opportunity to talk to whoever you want across the world and bringing them to the Indian audience.

Q: Post COVID will everything dramatically change? Edu-tech was already around but this has given it an exponential acceleration. Do you believe that this is likely to happen across a bunch of other sectors as well?

Naik: We have been a huge supporter of education technology because we have strong conviction around digitisation of education and to democratise access to quality educational content and we have supported entrepreneurs all over the world. Byju is one of the most successful entrepreneurs that we have backed.

However when it comes to crisis, time is a great teacher but unfortunately it kills all its pupils. A French composer had mentioned that, when a crisis hits you, you cannot just sit around and not adopt to the new normal. These kind of recession shocks accelerate massive shifts. This particular shock is sufficiently large and in many areas you will overcome the natural inertia that resided in systems and people and accelerate change that was already underway.

Behaviours and adoption have been accelerated by almost 4 to 5 years. This is a catalyst for positive change in terms of efficiencies, inclusion as well as overcoming the physical barriers.

You are seeing a generation above us - the older people coming online. You are seeing people who never thought that they would go online for quality of service or for convenience, being forced to adopt to online technologies versus the consumers that just chased deep discounts and values.

What we are seeing has been a great boon. I had been a conservative when it came to consumer technology investments and I have stayed away from it barring educational technology which I believe is one segment where people who actually pay to get the best content and best service.

However, I have post the crisis, become a big bull in consumer technology companies. Consumer technology companies were burning huge amounts of capital to acquire customers, to get them to understand what their apps do and then get their behaviour changed. This phase has completely shrunk.

So to answer your question, there are going to be changes across the board. This is going to cut across many segments of consumer technology, be it online grocery delivery, food delivery, digital fitness, telehealth, education technology, and I can go on and on because we are exploring across all of these segments to back phenomenal entrepreneurs.

Q: You said you have become the big bull of consumer technology and that is largely because of the easy migration that you envisage because of the COVID times that we live in and customer acquisition is perhaps going to be easier and will involve less cash burn but does that also mean that you are going to see the fittest and the strongest at this point in time survive and what will you then place your bets on?

Naik: In a crisis, the stronger comes out strongest and the fittest and the best entrepreneurs who focus on a single thing and put their head down and execute will win. Fortunately, we made a few bets in companies pre-crisis. So what we are currently doing is, we are looking at consolidating the space in investments that we have already made because in this crisis many of your competitors, many of the companies in your adjacent sectors are going to have a very tough time and if you have backed the best entrepreneur and you have backed the best company and you have the capital to really help them consolidate the market, those are the opportunities that are high priority opportunities for us right now.

Secondly, because of this change, there are going to be new companies that didn't get the time of the day before they will really come into their own going forward. By that I mean, if you think about telehealth, it has been around for a while but nobody ever thought that you could consult a doctor over a video conference call and get 90-95 percent of the medical advice and still go on with life. People are now forced to do that, people have got comfortable doing that and people are seeing the benefits of that. Similarly digital fitness — you are going to see a lot of the fitness models move over to the digital side and as people adjust to the new normal, they are finding the new normal much more efficient than the previous one.

Q: Let me come to the point being made by Sandeep on this building for Bharat. As you look at the next expansion phase, how will you do that? For instance even during this COVID-19 crisis there has been constraints for people who may have only a single screen or a single smartphone at home, they may not have the income to be able to get a smartphone or a laptop and make that available for the children at home, so on is that constraint but otherwise what is the plan as far as expansion is concerned - regional languages, what are you looking at to build for Bharat?

Raveendran: For Bharat that you are mentioning, I always say that there is a challenge of digital divide in terms of students who do not have access to any screen. I have seen reports where around 70-75 percentage of students have access to smartphones. So, solving the digital divide is still going to be a challenge, especially if you want to make sure that all of them have access to education. Solving the access issue is the first challenge, and then improving efficiency on what you offer is the second challenge. Taking care of this digital divide which is talked about everywhere -- not just in India, where students who are going to a good school, have good teachers, and access to a device -- is that solving this in the physical world is almost impossible. Our best bet to solve these challenges at scale is where we can use technology as an enabler, use smartphones or screen distribution and ensure that more students are getting used to learning this way.

Coming back to the digital divide, the top one third -- those who have access to good schools and good teachers -- will adopt to these methods fast because they will use this for learning at home. For the next one third, we are creating the product in multiple languages which will have a subsidised model. We have just launched our app in almost all languages, a few are remaining which will go live in the next two-three weeks. If you see the app now, you have an option of English as well as Indian languages, this will help the next one third while accessing the product. You need to understand that India is very aspirational. I have gone to Malayalam medium schools, but even then I was figuring out my own ways of learning. The average English which I am speaking here, I have learnt by listening to cricket commentary on radio. So students are very aspirational, you give them some kind of access and they will know how to make the best use of it.

The bottom one third is the biggest challenge. This is where we need policymakers and NGOs to come forward as all our investors will want us to have a perfectly “balanced for profit model” and not “for profit model” for the bottom one third. However, the challenge is how do you actually reach out to them? This cannot be achieved in the short term and obviously not during this crisis. What I expect is over the next three-four years, with the kind of digital adoption which is happening, with Jio and more smartphone and internet penetration, it will get resolved. Then you have a very good chance of making sure that we solve the problem of access.

On top of that, it is not that we are just solving access issues, we are look at making it more efficient. I always felt that in a digital format you have a “chocolate covered broccoli” -- so you can actually present the content in a format which gets students’ attention before we take them through the rigour, which is required in learning as it is not like in entertainment. There you only need to get engaged with good students, but when it comes to education you need to show its effectiveness. Unless and until parents see benefits and students see the benefits, they will not continue with you.

Q: I want to pick up on the point that Sandeep is making and get you to share your learnings with us as that is important for a lot of people who are trying to make this digital pivot at this point in time and monetise it. BYJU's has turned profitable in FY18-19, revenue of about Rs 2,800 crore in FY19-20, so what are the challenges as you went about monetising content and what would your playbook be to those who are looking at monetising this digital pivot?

Raveendran: The monetisation, like almost from the beginning as I never started this as a business. It is a clear example of your passion intersecting with a clear need and figuring out ways to improve, how to make it bigger and better and that we are continuously striving to do that. Now monetisation was important for us from the beginning as I did not start this with VC money. When you met me in 2011, we were just making that shift from test script to school learning and we were still doing it offline. So it is important to figure out the right balance between creating free users and monetising some of them by showing them a freemium model.

Even in the offline world, we actually had a freemium model. Now the advantages of any freemium model is if you have a strong product and obviously you also need to make sure that there is a clear product market fit. Then monetisation has never been a challenge for us to be very frank. So in the offline world, our freemium model’s first session was free or the second session will be free so that more students will talk about it. What started off in the classroom when I met you in the auditorium and then, it went on to become even bigger where I did speak offline. In those sessions, there used to be 25,000 students attending those math workshops and math sessions simultaneously. Then we made sure that the impact is like we are able to reach out to from thousands to millions that is when the ecosystem- the digital infrastructure was just getting shaped up.

We moved from 100 percent offline services model to a 100 percent online product based approach. Still even in that product based approach, our sales model was offline for the first four years. Now after the crisis, we were forced to move our offline sales to online sales. So we have learned how you can make it even more efficient so on the other side of the crisis, we will have even more productive workforce as we are going to use the best of both what can be done offline and what can be done online.

So monetisation in any segment and this is the segment where parents if they see benefit and they are used to spending on education. Obviously in India, education is still the only way to make it big. If parents see clear value in it, that is why we are having a freemium model and that is what we have always followed. We give parents and students an opportunity to explore, use the application for a few days, few weeks and few months and then, we convert them into a premium model.

The best part of all - like you mentioned - a lot of boring business numbers. But what we are very happy about is the fact that we were able to get the kind of engagement. Our biggest real long term validation of the product is the fact that 85 percent of the students continued from last year to this year. For parents, they need to see clear benefits to spend again. Otherwise, if it’s not resulting in improvement of learning, parents will easily drop out.

Q: Given the uncertain period, what portfolio companies should keep in mind? As runways for everybody might be different depending on how much they have been able to raise, what is the playbook?

Naik: Let me just also go back to the question you asked Byju. You never start thinking about a business model by saying how I am going to monetize this and what profitability would look like. I have maintained this for quite some time that if you address the real need of Bharat, if you go after what the consumer needs to improve either their life or move out of the social strata that they have, the consumers will pay for it.

Byju and I have this conversation all the time, we sit and we talk about what more you can give to the same consumer at the same price point. The chat is never around how you can monetize the consumer more or what kind of profit pool can we go after. That is the big message if entrepreneurs focus on the real needs of the big belly of the consumers’ base of India.

This crisis is going to separate the strong entrepreneurs like Byju's of the world from the ones that probably would have never build a sustainable business and all we need to do as investors are identify people like Byju who have a very strong passion, who are doing something that is building the belly of the market, that is really building the next generation of Bharat and then back them with capital and be there at times to give them the right advice so that they singularly focus on the goal they started with. As long as they do that our startup ecosystem, our consumer tech ecosystem is going to flourish which is why I am a big bull right now.

Q: Given the fact that you are a big bull on consumer tech at this point, are you going to be putting down money even during this phase? What is the plan looking like as far as investments are concerned?

Naik: This is the time you step up because I have always believed that you don't react to a crisis because that leads to panic, you respond to a crisis because that is when you make thoughtful deliberate decisions. This is the time when true value-added long-term investors like us need to step up and back the best entrepreneurs in the segments to help them with their passion of scaling very large tens of billions of dollars of consumer technology companies. I have no doubt in my mind -- and this is based on almost two decades of investing -- that the time has come. This is consumer technology 2.0 and we are going to see global companies coming out of India which will be addressing specific needs of emerging markets.

Q: What is your war chest looking like to back these consumer technology companies that you believe could be global players in the time to come?

Naik: Globally, we have about $10 billion of dry powder right now. We think that the next 2 years will be the best vintage to make these investments as this is the time that you can go in and invest behind entrepreneurs and help them scale their companies. So in terms of deployment in India, I am very bullish that we will be deploying at least $1-1.5 billion in the next year or two. This will be our largest deployment here over the next two years specifically backing innovative digital disruptors that will build the Bharat of tomorrow.

Q: Are you going to be out there looking for funding? Any need for it at this point in time and what is the war time CEO like you focusing on today?

Raveendran: You always need war time CEOs not just during a crisis because pandemic or no pandemic, startups are always about doing things on first principles, having an annual plan is important, but having a weekly plan and sometimes even daily plan is the order of the day.

I strongly feel it is not just the big startups but this is an opportunity for a lot of new entrepreneurs to come and solve multitude of challenges or problems which are thrown by this crisis because startups launched during a crisis or during a downturn tend to be far more resilient than those started in a better regular stage. Since every crisis create multiple challenges there enough problems to be solved and so that means there are enough opportunities for new ideas. After the last financial crisis in the immediate years there were more than 50 unicorns crated globally.

It is important to keep in mind that you are actually solving something which is close to you, you need to find a problem which you care about, so you don't stop when you hit the first roadblock. As Sandeep mentioned, you need players who can score hundreds on the last day on an uneven track and not just those who can score hundred on the first day on a flat wicket. If it is about football, you need teams who can go and win in any ground under a hostile crowd.

First Published:May 8, 2020 11:51 PM IST