Ed-tech or gaming could produce the next Indian unicorn

India's consumer technology industry has truly come of age with investors pouring millions into new startups. While hot money chases e-commerce ventures, the education space is largely explored. Falling technology costs and the unexplored potential of the Indian market are propelling investors to look at ed-tech and gaming as the next big investment bastions.

The role of mobile phones in ed-tech

Personal computers have not penetrated the Indian market as compared to some other countries. However, the mobile revolution has taken over the country in a big way. Since smartphones and tablets are becoming increasingly cost effective, a right ecosystem is now in place to build a digital platform for delivering education.

Skill development or online education?

In a market like India, if you can create a high-quality product at cheaper price points, especially in the education space, the demand will be massive. Cost and accessibility have been the traditional bottlenecks for delivering effective services in this country.

Technology is the only way in which some education solutions can be delivered to the masses. So, entrepreneurs in this space should look for businesses that can scale up very rapidly, serve the masses and generate profits.

Statistics in India suggest that over one million people cross the age of 18 every month. They don't necessarily have the skills required to contribute to the knowledge economy. Another big challenge is that about 90 per cent of graduates from tier II and tier III colleges don't have the skill sets for entry level jobs.

So ed-tech entrepreneurs should explore ideas that can bring job-ready capabilities to students.

Moreover, many school classrooms don't have basic infrastructure. In several cases, they are constrained for budgets. That's another opportunity for an entrepreneur. Can I bring low cost but high quality education material into some of these schools by using technology?

Exits

In India, exits are a big challenge across sectors. However, there are positive signs as the pace of M&A activity has improved. Interestingly, we are witnessing a spate in the number of startups buying startups, VC backed companies buying other VC backed companies and the trend of more international investors coming in at a later stage.

There isn't much domestic M&A activity. However, secondary sales are happening and I suspect most exits in this space will be via that medium. So, a later stage investor can not only put in money but also buy out an existing investors. This could become some sort of a trend in the next few years.

A billion dollar business?

Historically, there haven't been many billion dollar businesses. However, this could change. You can get a smartphone in India for Rs 2,500 and its getting cheaper every week. This is a platform that even kids in rural areas are comfortable with. Even those who do not own smartphones today will own one in future years as prices will fall further. All this augurs well for two major industries- gaming and ed-tech. I suspect India could see the creation of billion dollar businesses in gaming and edtech.

(Dave Richards is managing partner of Unitus Seed Fund. Unitus Seed Fund is part of the Unitus Group, a financial services group operating in India and other emerging markets since 2000. It has offices in Bangalore and Seattle (the US). Till date, the company has made 16 investments in India across sectors such as healthcare, education, mobile, e-commerce, retail and agriculture through its $23 million seed fund.)

As told to our Senior Correspondent Ishaan Gera.