We screen social impact start ups as a part of our initiatives at Malpani Ventures. We work closely with social impact edtech startups and initiatives like Beyond Exams, Learn with Comics, Learning to Earn, and have the opportunity to support Barefoot Edu, The Apprentice Project, Giv Funds among others.

We recently evaluated a social impact startup in the education space working to offer affordable learning experiences for students in non-urban India via the means of audio. The startup had 2 co-founders who had on-ground grassroot connect with the students whose problems they were trying to solve. It had 150+ teachers who championed specific subjects. And lastly it had a product that could be used to impart learning via audio akin to running a school class. Despite the promise and our inclination to be a patron of social impact initiatives, we did not participate in the opportunity. Why?

Disconnect in the product vs on ground reality

The startup was championing the product which works without internet or electricity. This is a boon for villages and hamlets in parts of India not otherwise accessible. The product could potentially work as a replacement teacher for classrooms in villages and tier 3 towns in India which are otherwise understaffed.

However, in the quest to become an edtech player, the company was also focusing on dishing out a freemium app. While aspirational, the app was a clear disconnect and diversion of focus when the key end user being student of classes 2-10 may not have smartphone access. Upon talking to schools and students, we found that most product users were unaware of the app, and vice versa.

Business model viability

Product was sold for a heavily discounted price, and there was no way of validating if the target users had the ability and/or willingness to pay off the shelf rates. The freemium app users were largely free users who did not have the means or the channels to pay online for the paid version of the app. This is considering other free mediums of the same content available within easy reach.

Founders wanted to flood the market with imports from China which were marginally cheaper to procure. However this meant inviting working capital risk in an un-validated market and risking bad inventory. To argue the case on founders' end, having control on pricing is good, but from a return on capital perspective it did not make sense.

GTM

We believed that the company had to develop into a sales-led organization with an on-ground activation team that provided demos and closed customers. This is owing to the nature of target users, and decision makers who were not digitally native nor had access. From our experience with other portfolio companies, we understand that on-ground sales is tricky when sub-scale and gestation periods were far higher than estimated originally. In the absence of an on-ground team, online channel not working due to the nature of end users, the company had very limited visibility of a validated GTM strategy.

Key takeways

a) The company needed product validation. Considering students had only used the product for less than 3 months, coupled with the lack of data on buying intent, there was no way of validating the product other than hard sales.

b) The company needed to reach a beta critical mass of 2000-3000 product sales before considering building an app after customer feedback. The company may have built an app and spent resources on the same before validating the need.

Concluding thoughts

Readers will appreciate that we evaluate companies as investors from the outside in, and decisions are based on the limited interactions, data points, and validations that we can arrive at in that short period. This is in no way a judgement on the entrepreneurs' ability to build their businesses. We believed in the entrepreneurs' vision to provide affordable and accessible learning experience to students, but we could not validate the strategy or the tactics for us to develop our conviction.