Schools are notoriously tough to scale up and the government isn’t letting profit-motivated models to take off. But a new breed of entrepreneurs is experimenting with some solutions
Krishnan Ganesh, chairman and founder of TutorVista.com, an online tutoring company, is a serial entrepreneur with a nose that can sniff out new opportunities very early. In 2002, he and his wife Meena sold their call centre business, Customer Asset, to ICICI for $20 million. His investment in the next business, Marketics (a data-analysis start-up) fetched him a good return too (he sold it to Business Process Outsourcing firm, WNS, for $65 million).
And now the duo has spotted their next big thing: Schools. Last year, Ganesh and Meena joined hands with the Manipal Education and Management Group, one of India’s oldest names in private education, to get into the business of running K-12 (short for Kindergarten through Standard XII) schools.
The opportunity for the business of education in India is huge. India has the world’s largest population of school going children (over 200 million). Indians also spend a lot of money on education. “School education forms the second most important spend item on an Indian family’s list, just after food and grocery. In US it is seventh,” says Ganesh. But it won’t be easy for him.
Education is a difficult business to build scale; there are hardly any businesses of scale in this sector, in India or elsewhere. There are only 75,000 private schools in India, and only a handful — like Delhi Public School (DPS) — have managed to cross 100 locations.
A key reason for that is schools are a not-for-profit pursuit by law. And with reason — education needs to be inclusive. Human Resource Development Minister Kapil Sibal has minced no words in letting the whole world know that as long as he stays minister, those seeking to make profits out of schools can take a hike.
So, schools in India are required to be set up by charitable public trusts which cannot take out surplus money out of the institution. As a result, there is hardly any venture capital investment that has gone to setting up schools in India. According to a research report published in January 2009 by IDFC SSKI, only $180 million of private equity investment has taken place in the formal education sector. This includes the entire gamut — from playschools, to coaching classes, online tutoring and digital content for schools.