Context & alphabets: Creative Galileo & the samosa act

Prerna Jhunjhunwala, Founder of Creative Galileo
 
Prerna Jhunjhunwala talks about the power of context, and picks up three settings. The first one is the dynamics of funding in the edtech market. The ‘Pre-K’ sub-category within edtech—prep, play school and nursery—never caught the fancy of venture capitalists (VCs), underlines the founder of Creative Galileo, a character-based early learning platform for kids between 3 and 10 years of age. Look at the numbers. In 2020, $2.1 billion venture money flowed into K12 (kindergarten to Class 12). The next year, which was the peak of funding ‘aberration’, the numbers leapfrogged to $2.9 billion. When seen in the right context—in 2019, K12 scooped just $454.9 million in funding—K12 saw more than a generous flow of money in 2020 and 2021.

Now, let’s see how many dollars poured into the Pre-K segment. The numbers are miniscule: $11.4 million and $31 million in 2020 and 2021, respectively. And the context? In 2019, it was $18.8 million. Still, the funding looks Lilliputian when compared with K12. Now let’s inject some meaning into the context, and the data. Many edtech founders raised fast, scaled fast, and failed fast. There were many who made most of the ‘bull run’ in the stock market across the world, and sprinted at a furious pace. There was a land grab, there was a scramble, and everybody wanted to cross the finish line as a winner.

Take, for instance, Teachmint. A classroom management platform started in May 2020, it reportedly raised over $110 million, was valued at $500 million (it was billed as a soonicorn—a venture with the potential to cross the $1 billion-mark in valuation), and closed FY22 with an operating revenue of Rs 77.45 lakh, and a loss of Rs 131.7 crore. This May, the edtech startup undertook its second round of job cuts in six months and reportedly laid off 70 employees. Clearly, ‘pace’ and ‘panic’ go hand in hand. Interestingly, both start with ‘P’.   

Meanwhile in Bengaluru, Jhunjhunwala tells us what the edtech world at large failed to realise, and factor in: Bull markets eventually end, and what replaces it is a bear market. “Bears maul,” she says, declining to comment on other edtech players. She, though, prefers to talk about the power of alphabets. If B stands for bull, then B also stands for bear. The context changes everything. Creative Galileo, she underlines, never became an obese child. In three years, the edtech startup raised just $10 million. “We were not fat. So we kept running,” she reckons.

Jhunjhunwala now talks about the second context. Alphabets in themselves don’t make sense. “One has to arrange them, use them, and then form a word and a sentence,” she says, underlining that she is planning to hit the funding street in the midst of a winter chill. “I am getting ready for the series B round of funding,” she says. “But why do founders talk about A, B, C and other rounds of funding,” I ask her. Jhunjhunwala answers the question by using another alphabet ‘R’. Risk and reward, she underlines, both start with R. Venture capital, she reckons, is the risk capital that will help her play a long business-to-consumer (B2C) game. She explains. The ‘Little Singham’ app had 1 million users in FY21. The numbers ballooned to 5 million over the next fiscal. “In FY23, we had 11.4 million users,” she claims. “It’s rewarding to have such a massive user base especially when one has to democratise online learning,” she adds.

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The flip side, though, is how do you monetise 11.4 million users? The answer again was hidden in the context: Funding winter. When Jhunjhunwala raised her seed round in September 2021, the founder had made an elaborate business plan which had outlined four stages. The first was the direct-to-consumer (D2C) online model, which was Little Singham and its free download. The idea was to focus on scale and get as many users on the platform as possible. Then comes the second stage of going to schools, providing interactive content for kids, and taking care of all their needs. The third stage was working on a freemium model, which meant using advertisements to make money, and for the ones who wanted an ad-free world, there was a subscription model. And the last stage was building a learning marketplace within the app.
 
Interestingly, a bitter funding winter rejigged the plan. Monetisation, which definitely was on the cards but not immediately on the radar for Jhunjhunwala, topped the priority chart. The entrepreneur fast-tracked her ‘second stage’ and tied up with over 2,000 schools across India over the last five months. The idea was simple. Jhunjhunwala, who opened her first preschool—Little Paddington—in Singapore in 2015, scaled it profitably to five centres quickly, and eventually sold it to private equity firm Affirma Capital for $35 million, knew that she can afford to shun the herd mentality of opening a brick-and-mortar school in India.



 A waning pandemic, indeed, made hybrid models of teaching the flavour of the season. Most of the online edtech players have gone offline over the last year or so.

Jhunjhunwala, though, took a contrarian bet. “The pressing need was not to open one more pre-school brand but to power the existing ones with technology and content,” she says. The business-to-business (B2B) model, she points out, would open a source of recurring and sustainable money to run the venture. There are thousands of organised and unorganised mom-and-pop pre-schools across India. “B2B gives us an opportunity to tap into this huge segment,” she says. Over the last four months, she adds, Creative Galileo also started monetising its direct user base, albeit at a slow pace. “You can’t rush into it,” she says, adding that adopting an aggressive sales and marketing-driven approach is counter-productive. “Pricing is the magic sauce or chutney,” she says.

Okay, Jhunjhunwala figured out the chutney. But where’s the context? “We also made samosa,” she smiles, explaining her samosa pricing. The edtech company is piloting a model that has an annual tag of Rs 999. If one breaks it into average cost per month, it is under Rs 100. “Affordability is the key. Everybody loves and buys samosa,” she smiles, adding that one needs to think of something which doesn’t burn holes in the pockets of parents. She repeatedly harps on context. Schools have reopened, kids are going back to classes, and parents need a sticky proposition to subscribe to an online plan. “Quality of content alone won’t work. It has to be quality and pricing, much like samosa and chutney,” she adds. The pilot, she claims, is working.

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The backers, for the time being, are enjoying the ‘snacky’ pace of growth. Jhunjhunwala, points out Nainesh Jaisingh, has had a successful stint in running a pre-school education venture. “She is now striking the right balance between growth and profitability,” reckons the founding partner and chief executive officer at Singapore-based Affirma Capital. Creative Galileo, he claims, is growing in a measured way with low cash-burn. “A sharp focus on monetisation is crucial for all businesses in any environment, and more so today,” he says.

Jhunjhunwala, for her part, points out how working closely with her co-founder and backers is helping navigate the edtech mayhem. The first big lesson was to shun lofty revenue targets. “Small and sustainable wins and goals always work,” she underlines. Second, edtech entrepreneurs must also don the hat of a teacher. “Babies don’t start running without crawling. They first crawl and strengthen their muscles,” she says. Businesses, Jhunjhunwala reckons, must try to aim for sustainability, and then start scaling. “B2B gives us that sustainability, and B2C gives us scale,” she says. “C stands for casual and C stands for causality,” she says. If one conserves cash, and crawls, then the journey becomes sustainable. “No kidding, we can learn from kids,” she signs off.