Last fortnight, recently minted unicorn UpGrad announced its 5th acquisition of 2022 with Exampur, which came quickly after they acquired Harappa Education and Wolves India in the previous month.

A Statement Of Purpose

In 2015, India was witnessing a change in the startup environment. 

TVF’s famous web series Pitchers trailer showcased how a feeling of “Hiranandani mei Silicon Valley khadi ho Rahi hai” inspired many future entrepreneurs to take a plunge and start something of their own.

Mayank Kumar, an IIT Delhi grad, had also been thinking about it for some time. While working at a consulting firm, he gained exposure to the health and education sector. Mayank gathered some exciting insights to become the foundation for his next venture.

He could see that there were problems in the way higher education was provided. 

Education through the Brick & Mortar route reached less than 20-25% of the targeted audience, and the required skill set for a successful career was changing quickly.

This sparked a discussion between Mayank and two of his colleagues and IIT Delhi alums Ravijot Chugh & Phalgun Kompalli. The three of them started thinking about how resources for upskilling could be made available at scale.

Around the same time, serial entrepreneur Ronnie Screwala, well known for building UTV and many category-defining businesses, sold the controlling stake in UTV to Disney.

After 2012, with this inflow of funds and his zeal to build and back new businesses, Ronnie started actively investing in startups through an investment arm. 

He was not only intent on backing budding founders but also actively participated in the problem-solving processes that can hugely impact sectors like health and education.

Soon, Mayank and Ronnie were introduced by a mutual connection who noticed that they were looking to solve the same problems and would make a great team to build a technology-enabled solution.

After giving it a great amount of thought, Mayank and his colleagues, Ravijot and Phalgun, joined Ronnie to start an Edtech venture.

On 23rd March 2015, upGrad was born.

Out Of Syllabus

The upGrad team decided they would focus singularly on the higher education space.

They would not look at K-12 or the competitive exam prep space. They focussed on the Indian market and keenly studied the disconnect between traditional college curriculum and industry requirements.

upGrad's founders noticed that the future of work demands industry professionals to upskill continuously, not just for their organisation's benefit but also for their personal growth. 

Earlier, learning would halt as soon as professionals entered the workspace. upGrad brought along novel approaches toward imparting and receiving education by offering people a chance to upskill while working. 

For example, digital marketing was not even a course offered as part of the curriculum for MBA in 2005, but by 2020, a marketing degree would be incomplete without it. It has become such a specialised skill that to become job ready, one can pursue a course dedicated to digital marketing and find a job.

upGrad was solving this problem by offering digital marketing or data science courses. These were more relevant skills for learners and businesses with a massive demand for these skills. The supply-demand imbalance for these new-age skills ensured that folks who invested time and effort in upskilling could attract higher salaries.

Online courses also helped working professionals who aspired to upskill themselves. This upskilling would happen while continuing their full-time jobs.

Online education was still a very new concept in 2015, and people advised upGrad founders to offer the courses for free to increase adoption.

At the same time, universities were no longer geographically limited by the brick-and-mortar format. Still, they did feel that on-campus students, even part-timers such as night school attendees, were more committed to the learning process than those who opted in for Massive Open Online Courses (MOOCs).

Whether they were “diluting their brand” crossed their minds.

upGrad’s founders believed online education could be better than campus education as tools and accessibility made it a better format. They felt it should be charged at a premium if they have to make a tangible change in someone’s career.

They took a contrarian bet, which resonated well with universities as this ensured a hundred per cent commitment from the students once they signed up for a course.

Tie-ups with IITs and global universities like Deakin business school helped upGrad create courses focused on specific areas, designed for a similar duration as campus courses but customised for online attendees.

By 2016, upGrad was ready to take off. 

Focus On Your Subjects

Unlike other typical startups, Ronnie would be the largest founder-investor in the company.

They, therefore, didn’t have to go through the process of raising money. Instead, they had the business challenge straight ahead.

The founders had to find learners who would be ready to trust them with their time and money for an online course with no physical classroom. This one was yet to find acceptance in broader society.

Doing this was especially hard as the courses cost a significant amount.

For learners, the value that upGrad was offering was simple - access to a top university, the flexibility of the online courses, and an opportunity to get a significant salary hike.

For the first 100 learners, upGrad founders themselves hustled to interact with applicants, gauge their commitment and understand what made them hesitant about the process.

Much like any other university application, they asked applicants to submit a statement of purpose (SOP) and had a stringent shortlisting process to gauge interest and intent.

Once shortlisted, they understood that some of the resistance in their target customers came from upGrad and its courses being new. It was not easy to trust them without getting exposure to the content directly.

Applicants wanted to experience the offering before pledging their hard-earned money.

upGrad decided to offer its content free for two weeks. Once applicants felt comfortable about the value it provided, they could go ahead and sign up for the course.

Despite this, prospective students wondered whether online courses could offer them any natural edge over the offline method, an X-factor of sorts.

upGrad could sense that to become a successful professional, one needed to be equipped not only with the knowledge of a concept but also its application.

And this was something which a subject matter expert would best teach. Learning digital marketing was great, but understanding its application during Big Billion Days from the VP of marketing at Flipkart could make it more holistic.

These industry experts could not keep travelling across cities to share their expertise all that often (or at all) given their full-time job, but upGrad could bring these experts to share their knowledge OTT.

Teaming university professors with industry experts online was the secret sauce for upGrad.

By 2018, through a series of offline events, upGrad soon built a committed pool of learners and given their stringent acceptance process, universities could find the right type of students they were looking for.

As the company scaled brick by brick, it went from 100 to 10,000 by year 3. A small base, but 100x growth from their original start. 

upGrad was staring at a large higher education pie. 

A High Scoring Chapter

In 2018, India had over 1M registered schools and 18K higher education institutions. 

Yet 58% of children didn’t finish primary school while a whopping 90% didn’t finish secondary school. Only 10% of that number made it to college.

Financial and personal constraints were quoted as the primary reasons behind these numbers. 

Online education companies were offering a superior, easily accessible yet cost-effective method. 

India’s e-learning market in 2016 was $247M with approximately 1.6M users. They pegged the market to grow eight times to ~$2B by 2021, with users increasing to 10M. Higher education was forecasted to be a fifth of the share. 

The rising internet/smartphone penetration on the subcontinent, the high demand for accessible and on-demand learning among both students and job-seekers/working professionals, and the push from the government itself (‘Digital India’ and ‘Skill India’) rated highly among the factors behind this tremendous growth. 

India was expected to blow past China in the number of smartphone users, which was primed to double from 400M to 800M in the same period. 

By 2019, the global economy's slowdown and the onset of automation also threatened around 70% of the jobs, especially in the IT and manufacturing sectors. 

This made a case for most working professionals to ‘upskill’ and get to the up-and-coming technologies of machine learning and artificial intelligence. 

Where else but online education? 

Yet another factor was looming, one that would have the most significant impact on the e-learning market, one which no one saw coming. 

In 2020, the onset of the pandemic and the following national lockdown would transform online education. 

Online classrooms, the rise of zoom and video conferencing and many layoffs across industries were common themes during the pandemic. 

Ed-tech companies would witness a 50% growth in their user base within the first six months of the pandemic while also attracting $1B worth of investments in the same period. 

upGrad would explode, just like the others. It would raise a giant $130M round as its first round of capital from outside.

But how was it making any money?

A Solid Report Card

The pandemic was a huge boost to upGrad. 

upGrad saw an 86% increase in its operating revenue. From INR 160Cr in 2020, to INR 300Cr in 2021, a 2x jump.

Its revenue was built like a classic online university for higher education, a “university of universities”

upGrad works as the intermediary between various educational institutes and learning providers on one side of the platform and the learners on the other. They offer courses across arts, law, management and, of course, technology and data science.  

All the courses and offerings are accessible through a mobile application and website. 

The institutes set the eligibility criteria for their courses, and individuals meeting them can register. Once registered, candidates must pay the course fees upfront or through instalments, providing a cost-effective and affordable approach.

upGrad charges the universities a commission based on the fee they receive. 

This commission forms the most significant chunk of its revenue, accounting for just over 50% of its operating revenues, at INR 152Cr in 2021. upGrad pays a % of this to the universities and institutes to develop and promote educational programmes on its platform. 

Its courses, which directly collect an enrollment fee from the candidates, make up around 49% of the operating revenue - INR 148Cr in 2021, growing from INR 72Cr in 2020. 

At the same time, expenditures similarly saw a considerable increase, growing 113% from INR 241Cr in 2020 to INR 515Cr in 2021.

We need to understand if the model makes sense by taking a view on unit economics. 

Digging deeper, we see that UpGrad doubled its user base in FY2021, growing from 1M to 2M. 

If we even assume that 50% of this was through marketing efforts - given an estimate of INR 205Cr for advertising and promotional efforts (the other 50% through referral and organic), UpGrad’s CAC would stand at ~ INR 2050. 

With revenue of INR 300Cr and content development expenses of INR 84Cr, UpGrad’s gross margin stands at ~70%. At a customer base of 2M, the AOV (annually) is INR 1500, and the margin is INR 1050. 

Breaking even on a customer would take UpGrad 2 years. With most of their campaigns primarily focused on lifetime learning, they seem to have things going their way.  

But it wasn’t like upGrad was alone, as the company faced well-funded challenges from all sides. 

Race For Valedictorian

UpGrad’s target segment remains people in the age group 18-50, 

These are employed or graduated. The segment is looking at upskilling themselves to make a career transition or to remain competent in their fields. 

Not every college has a campus placement, which is one of the problems upGrad is trying to solve by providing placement assistance along with their courses.

If one doesn’t want to invest a few months in learning a course and just needs help with career counselling, they can opt for mentorship. It includes guidance via video calls for resume writing, interview preparation, resume review, job search strategy and LinkedIn profile designing

One can say that Byju’s, Unacademy, Simplilearn, Eruditus, and Vedantu are Upgrad’s competitors since they’re all players in the edtech space. 

But by the target audience, Simplilearn and Eruditus can be labelled core competitors for upGrad.

Simplilearn is niche specific and focuses on skills needed in the digital economy. It has data science, AI & ML, project management, cyber security, cloud computing, DevOps, and digital marketing courses. 

Eruditus focuses on executive education programs for mid-career professionals. The program consists of online sessions, case studies, actual classroom interactions and application-based exercises. The program curriculum is not generic and is designed to consider working professionals' industry demands and requirements. 

upGrad, on the other hand, offers courses in various areas from marketing to HR management, law, supply chain management, software and tech, data science, management and analytics.

Simplilearn is niche skilled, Eruditus is for mid-career professionals, and upGrad is mass focused, neatly targeting different segments. 

Each of these three players has partnered with universities across the globe to provide these courses. 

upGrad stands out from its competitors in its marketing investment, making its courses more popular among the masses. That makes sense because of its target group. 

Among upGrad’s USPs is the practice of ‘student mentorship’, wherein each learner is guided through the program with the help of a mentor. This mentor helps the mentees with program-specific topics and provides support, guidance, and motivation. Learners are provided with personalised job recommendations based on their area of interest and experience. 

All these factors combined lead to a course completion rate of 80%, the highest in online education worldwide. 

upGrad started as a B2C company and eventually forayed into the B2B arena with upGrad for Business. By 2021, it was able to provide training to over a million employees of the companies that signed up on this platform. 

With a $185M funding round in August 2021, upGrad achieved unicorn status, reaching a valuation of $1.2 billion.

All this money needed to be deployed; buying new companies and starting new partnerships seemed like a natural progression. 

New Friends

UpGrad had begun to go all in to address the needs of the higher education sector much earlier. 

Their first step was the acquisition of Pyoopil in 2016, a mobile SaaS platform that targeted corporates aiming to conduct online training programmes on demand. Pyoopil’s offering in the form of B2B would complement UpGrad’s B2C model. 

Next was Acadview, which targeted fresh graduates aiming to upskill through online courses and industry projects for real-world experience. By 2018, Acadview had partnered with 80 private universities across North India and was growing swiftly. 

UpGrad did institutional tie-ups, as it partnered with Jamia Hamdard University and O.P. Jindal Global University to offer online undergraduate and postgraduate courses. 

UpGrad realised the need for better marketing to scale up its base, tying up with Star India to run its advertisements through Hotstar during the Indian Premier League in 2020. 

They felt it essential to connect with their target audience pan India as they aimed to broadcast the importance of outcome-oriented learning and growth through its ‘Sirf Naam ki nahin, Kaam ki degree’ campaign. 

What better way than IPL, averaging 31M impressions and reaching even the country's remotest corners?

upGrad acquired Impartus in May 2021, a video-enabled learning solutions provider and rebranded it to ‘upGrad Campus’. 2021 also saw the addition of TalentEdge and KnowledgeHut to its portfolio. 

The tech industry was growing leaps and bounds, expected to cross $350Bn by 2026, increasing the demand for skilled talent. 

Things were getting busier as 2022 kicked off

Letters Of Recommendation

upGrad began to build out their ‘Study Abroad’ programme

Replicating their strategy of partnering with universities, they initially partnered with Clark’s University and then Golden Gate University in the United States.

They also acquired  Global Study Partners (GSP), an Australian two-sided marketplace for recruiting international students to capture a student base outside India

They also promoted scholarships with $100M for students to go abroad to pursue their bachelor's, master's and doctorate programs. 

To become the major player in this segment, they continued to build over 18 international partnerships across the US, the UK, Australia, Canada, and Germany. 

These partnerships would not only unlock UpGrad’s accessibility into foreign markets but would enable its international portfolio for learners across diverse geographies. 

The subsidiaries upGrad Campus, upGrad Jeet and upGrad KnowledgeHut were consolidated to create one parent company in India as the edtech sector faced a decline in its growth rate. upGrad Jeet was the rebranded version for The Gate Academy, which was the test preparation business.

upGrad announced that it has crossed the milestone of USD 14 Million a month and achieved an Annual Revenue Run rate (ARR) of USD 165 Million. It aimed to reach USD 2 billion in revenue by 2026.

2022 was even bigger as Upgrade added 5 companies to beef up its offerings in the sector. Work Better Training, INSOFE, Harappa Education and Exampur were all added to the portfolio. 

Harappa had an active base of 100 mid to large-sized organisations, which aimed to address the need for a more capable workforce and lifelong learning. Exampur delivered content through YouTube, focusing on prep courses and exams for government jobs. It had a subscriber base of ~12M, with a massive chunk of these viewers from Tier 3 and Tier 4 cities. WOLVES India, a recruitment platform targeting tech startups in the country, was added to UpGrad Rekrut. 

Their strategy for achieving the same is to focus on international expansion, acquisitions, integrated offerings across segments, newer products within each piece and through tie-ups with more universities as also ownership of universities around the world. 

upGrad was now dreaming bigger dreams. 

Graduation Ceremony

As the global markets began to slow, upGrad planned to go public by 2023.

By listing upGrad on the stock markets, the founders plan to dilute their stake to 51%. upGrad is looking to scale up to 10 million users by FY23, quite a significant number, targeted to ensure that the company doesn’t get listed as a small-cap or mid-cap stock. 

Most of the company's stake is with the co-founders so they can stick to their conviction and strategy instead of getting distracted by what other investors will ask them to do.

upGrad wants to emphasise becoming a lifelong learning partner for everyone. Identifying upskilling to be the need of the hour in our ever-changing world, upGrad is slowly finding its place as a one-stop shop for all things upskilling. 

Amitabh Bachchan was looped in as upGrad’s brand ambassador in February 2022.

upGrad raised new funds of $210 million in August 2022 from marquee investors and family offices, taking its valuation to $2.25 billion. When EdTech was getting hammered, upGrad was able to raise and double its valuation.

The founders also invested $12.5 million in this round to retain majority stake. This money will be used to fund acquisitions the company has been involved in over the last few months. 

From being “yet another” EdTech, it was now in a very strong position.

upGrad is looking at geographical expansion and opportunities in US and Southeast Asia, as it believes that in the future 30-40% revenue will start coming from the international markets. It has even appointed Myleeta AgaWilliams as International CEO, to spearhead growth across the APAC, EMEA and US regions. 

This addition in leadership comes as the company is at a high point in its journey of international expansion and wants someone who has seen these markets evolve to make sound business decisions. 

As major edtech players nurse wounds or face the heat, upGrad’s higher education ambitions have put it in good shape. Sitting on a run-rate revenue of 1,000 Cr, it has a large enough base to catapult to the big leagues. 

To put the scale into perspective, oft meme-d Lovely Professional University has revenue of ~1,500 Cr. upGrad got there in half the time with an almost entirely online model. As a university of universities, upGrad’s success will be driven by the quality of curriculum it picks. 

With money in its bank and wind in its sails, upGrad looks set to upgrade Indian higher education.

Writing: Abhinay, Bhoomika, Raghav, Ritika and Aviral Design: Chandan and Subidit