How Indian Tutors Make Millions From Anxiety

It’s one thing for sixteen-year-olds to go crazy over their favorite Bollywood actor, but for teenagers who get hysterical when they see a science tutor on stage? This is such a superstar Allah Pandey30 year old co-founder Physics Wallachoriginated in small towns and villages in India, starting eight years ago with nothing more than a whiteboard and a YouTube channel that has since been viewed 1.4 billion times.

With over 5 million downloads on the Google Play Store, Pandey’s low-cost learning app, now known as PW, became a $1.1 billion unicorn last month. It raised $100 million in its first institutional funding round from WestBridge Capital and GSV Ventures. Pandy needs this money to replicate his online success in a chaotic world Kotacenter of India’s unique test preparation market.

Kota is a city of 1.5 million people in the state of Rajasthan in northwest India, where high school students gather from all over the Hindi-speaking northern belt and spend two years of grueling 18-hour workdays with one goal: to pass the highly competitive entrance exams. to engineering and medical schools. . The spectacular emergence of PW, with its own campus with up to 20,000 children in two shifts, is forcing the industry to cut its high fees. When Pandey showed up in his brand new class, screaming teenagers surrounded the online celebrity – at least according to a YouTube promotional video that was viewed 3 million times in three weeks.

The Indian exam preparation market has always been about turning anxiety into money. Over 1.5 million applicants are vying for just over 100,000 medical and dental jobs nationwide. Meanwhile, the prestigious Indian Institutes of Technology competition, one of the most active pre-university competitions in the world, involves a brutal two-stage job: a “basic” test followed by an “advanced” exam. IIT’s 23 campuses open their doors to just 16,000 budding engineers a year.

Now, however, the industry built on monetization of teenage anxiety is itself in the grip of a frenzy. As the economy has fully recovered, investor enthusiasm for online problem solving in the era of the pandemic is giving way to a new preference for physical lectures. P.W.’s main rival Unacademy, backed in part by Singaporean state investor Temasek Holdings, has also abandoned mobile device restrictions and entered the Cat Factory. (There’s a Netflix Inc. series by that name—a coming-of-age story about fatty foods, a nascent romance, and frustration with inorganic chemistry—set against the backdrop of industrial-scale tutoring.)

The teacher’s salary is coming

. Allen Career Institute, which is expected to reach 125,000 students this year (70% of the market in Kota), is unhappy that Unacademy has poached about 40 of its faculty, according to a recent Livemint article. “We have heard that an annual salary of 20 crores plus is being offered,” Naveen Maheshwari, director of Allen, told the newspaper, using a local convention for 200 million rupees. That’s $2.5 million, a royal amount for a Tier 2 city.

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Not all tutors get paid that much, but the business case is definitely going offline. In pursuit of the profitability of its core online offering, Unacademy laid off about 1,000 employees in April; According to the Economic Times, the app is now cutting food and travel costs. With the Covid-19 lockdown no longer conducive to distance learning, expect this shift to pick up pace. PW, which offered online courses for as little as $45, could earn 9 to 17 times more in a real class, according to a profile of Pandey posted by Ken’s news site in May.

Traditional tutoring has a faster path to profit because its success is rooted in India’s demographics and post-socialist economic structure. The industry boomed in the early 1990s, just as India began to rid private businesses of licensed straitjackets and trade barriers. The burden of providing jobs has shifted from the public to the private sector. But there was a discrepancy. The more industrialized western and southern regions absorbed private investment. Outside the capital city of New Delhi and its outskirts, there are few good jobs in the Hindi-speaking north, where, thanks to a slower decline in the birth rate, the population is much younger than in the aging south.

This explains the incredible success of a place like Kota, which has nothing to offer but crowds of desperate youth. While some of them do want to become engineers, most simply want to stand aside – in the job market, social prestige and marriage – from the hordes of unemployed university graduates. In June, Vedantu, another online learning unicorn, opened its first offline test preparation center in the backwoods of Muzaffarpur, in the impoverished, overpopulated eastern state of Bihar, where birth rates will remain higher than population growth until 2039. When it comes to the constant influx of teenagers, Bihar has a 40-year “advantage” over southern Kerala.

These regional differences matter. While the nationwide college graduate unemployment rate is 18%, it is 54% in Rajasthan and 34% in Bihar, the Hindu Business Line reported last week, citing data from the Indian Economy Monitor. The worse the job situation, the greater the exam stress in middle-class families and the more opportunities for startups like Byju’s, Unacademy, PW and Vedantu to compete in the classroom. But then traditional institutions like Allen can also create apps and hire their more established teachers with stock options. In May, Allen sold a $600 million stake in a new investment vehicle founded by media mogul James Murdoch and Uday Shankar, the former head of India’s 21st Century Fox Inc. The competition for hybrid learning – a mixture of online and offline – will only intensify.

In the first episode of Cat Factory, the protagonist’s father is hesitant to take a 16-year-old from his family, school, and city and transplant him into an alien environment. The chances of success are low: although Kota graduates one in five IIT applicants, only one in the city’s 50 applicants manages to secure a place. “But your child – he only needs one place,” says the head of the coaching institute. The parent writes the check, and the global fitness industry is hoping that career-conscious Indians will take checks in the coming decades.