Starting up in the Education Sector - For Profit or Non-Profit?

 

Free Education - an ambitious problem that many startups worldwide have wished to solve and are doing too - Coursera, edX etc. But then Coursera and edX are for-profit ventures.

They generate their revenue from strategic partnerships with universities to offer certificates issued to end users on successful completion of the course. One needs to pay to get certified and this is one of the revenue streams for these MOOC providers.

Revenue Streams the for-profit EdTech startups

  • Partnerships with universities and corporations
  • Ads
  • Certification
  • Subscriptions (Pay-for-content i.e. Premium Model)
  • Pivoting to a skills training portal for individuals or corporates
  • Sharing end user’s course performance statistics with recruiters

Essentially, the content is free; the service and additional features are not. These are true for the startups in the for-profit space.

I met the co-founders of an Indian startup based out of Bangalore. He described their venture as something that “aims to be the Khan Academy of Indian Education.”

Their primary revenue stream is from user contributions at the moment. Since their content is mainly hosted on their own portal, revenue from ads also could be significant in the near future. But the important difference is that Khan Academy is a non-profit. Their model is very different from just being a portal providing free education. Khan Academy focuses on technology . One look at their careers section and you know what they are aiming at. If someone in hiring Data Scientists and Machine Learning Experts, this is a clear indication of their vision to build a world-class machine teacher.

YouTube to TVF Play

Consider The Viral Fever (TVF) - They started by uploading content on YouTube, then after gaining traction, they have now slowly started moving its traffic to their own portal by releasing new content on YouTube only after two weeks after the first release on the portal.

Publishing content on your own portal gives you more control over the targeting of ads and pulling in partnerships relevant to your content. This could be the path that the ad-supported model users could use - at least to start with. After all, in every sector, the focus shifts based on the market’s response and the strategy pivots to something better.

Non-profits in the Education Sector

Two of the best examples of successful ventures in this space are Khan Academy and Wikipedia. Both run on a grant-as-investment model. Being non-profits, these organisations have to declare their financials publicly (Khan Academy’s Financials, Wikimedia Foundation’s Financials)

Summary

If startups in the EdTech sector want to survive for a long time and also meet their goal of imparting free education, going non-profit could be a great business move.

This way, they can seek donations from key influencers (especially if any of the co-founders are key influencers in the sector)

If the start-up is from India, or any other country that forces companies to spend on CSR, startups can tap into the CSR budgets of these corporations using their foothold in the industry.

Of course, the biggest and the only downside here is for the co-founders themselves - the inability to mint big money. But then, this is a small sacrifice if your vision is to provide free education to everyone.