The fact of the matter is, despite something of an early mover advantage and a well-heeled backer, upGrad really hasn’t made much of a dent in the market. A big reason for this could be down to upGrad’s price point.
The company’s approach has been guided by Screwvala’s experiences in the media business. Coming from a media background, Screwvala understood the importance of high ARPUs (Average Revenue Per User).
Positioned at the top
As such, upGrad positioned itself in the higher price bracket, with courses ranging in cost from Rs 75,000-2.85 lakh ($1,000-4,000). At Rs 2 lakh ($2,800), upGrad’s ARPU is probably among the highest in the industry, next only to Eruditus, which offers executive education programs (online and offline) from Ivy League universities. High ARPUs, of course, mean that upGrad is largely forgoing the mass market.
Not that they haven’t flirted with lowering the entry barrier. The company briefly tested the market by offering a free module for a certificate course in entrepreneurship, when they started in November 2015. While almost 50,000 people signed up for that course—validation that demand existed—the company realized that free or even short-term courses priced at Rs 15,000-20,000 ($210-280) were not going to cut it.
“We were very clear that we wanted to keep the ARPU high. We wanted to be in sectors where people feel there is a specialization and you need to pay for it,” says Screwvala. He believes that 100,000 students paying an average of Rs 2 lakh is a much bigger story than 3 million people paying Rs 20,000-30,000 ($280-420) for a course. Also, he says, once a student gets into short-term courses, it is difficult to get them to pay for specialized courses at higher costs.
All fair points. But nailing the high ARPU game in India isn’t easy, and the proof is in upGrad’s low volumes. 10,000 students in four years do not make for a great story or valuation. The rule of thumb for internet businesses is that profitability and volume go hand in hand. This realization has dawned upon upGrad. From purely chasing value, it now wants to add volume, while still largely maintaining its ARPU. This won’t be easy, but when was a $400 million valuation ever easy?
Tipping the scales
Since upGrad’s early offerings weren’t able to drive volume, the company decided it needed to do more. So, in October 2018, it acquired fellow edtech startup Acadview for an undisclosed amount. Acadview upskills graduates with in-demand technologies through live online courses and industry projects, enabling better employment opportunities. There are digital marketing courses, for example, for students who are already pursuing an MBA program or about to finish one.
The acquisition of Acadview was aimed at helping upGrad cater to college learners rather than just working professionals. Importantly, some of these courses cost as little as Rs 25,000 ($350). This, upGrad hopes will bring scale.
Making life easy
Essentially, upGrad’s latest ambition is to become an integrated edtech company that gets into one’s life as soon as you finish your higher secondary education and then keeps on upskilling/reskilling you through your career.
The University Grants Commission, India’s college education regulator, also gave upGrad a shot in the arm last year, when it announced that universities would be allowed to offer degree programs online. Bringing undergraduate students into a market that previously only saw post-graduate and executive students is a huge opportunity for scale. Degree courses in the US, for example, make up 50% of the overall edtech market.
“The government is committed to increasing the gross enrolment ratio (GER) in higher education, which currently stands at an abysmally low 25%. The distance education model has not worked, so online education is this great hope which can mend GER, getting more people to college education, while at the same time upskilling those who are already in a job,” says upGrad’s Kumar.