How Spark Studio is weathering the edtech meltdown

From left Anushree Goenka, Namita Goel, Kaustubh Khade and (sitting) Jyothika Sahajanandan, Cofounders, Spark Studio Image: Selvaprakash Lakshmanan for Forbes India
 
2014, Stanford. Paul Graham was outlining one of the characteristic mistakes of young founders. One of them, the co-founder of startup accelerator Y Combinator underlined in his guest lecture in Sam Altman's startup class at Stanford, is to go through the motions of starting a startup. “They make up some plausible-sounding idea, raise money at a good valuation, rent a cool office, hire a bunch of people,” reckoned the venture capitalist. From the outside, he explained, that seems like what startups do. Soon, they realise how messed up they are. While imitating all the outward forms of a startup, Graham said, they have neglected the one thing that's actually essential: Making something people want.
 

Seven years later, in Bengaluru, Anushree Goenka was one of the young founders who mustered the courage to take a plunge into the world of entrepreneurship just ahead of the onset of the second wave of the pandemic. It was not one of the typical mistakes that Graham talked about. But there was some sort of connection between Graham, Goenka and Y Combinator.  
 
A year ago, in July 2020, Goenka quit Swiggy. The trigger to press the exit button was the same impulse which made her disillusioned with all her previous jobs. The computer science engineer and IIM-Ahmedabad grad started her innings with Monitor Group in 2011, worked as a consultant for over five years, then joined Scroll Media, and after thirty months, hopped on to Swiggy.
 
There was one common thread in all her stints. “It became clear to me that I was not making an impact, and feeling happy about my role,” she recalls. Take, for instance, consulting. The young professional would make best of the plans, offer suggestions and list out recommendations, but still didn’t have any control over the result. Similarly, in Swiggy, inspite of being in the leadership team, she was just a cog in the wheel—one of the 70 members in the leadership team. There was nothing challenging. “Is the impact of my job to make more people eat food from restaurants?” she wondered most of the time. Goenka wanted to build something which served a twin purpose: To have an impact, and make her happy. So after a decade in the corporate world, she turned founder in February 2021. And if you think this was the ‘mistake’ that Graham was alluding to, then you are wrong.  


 
In fact, to be fair to Goenka, she didn’t make any of the mistakes that Graham outlined. She didn’t come up with a plausible-sounding idea. Spark Studio was a compelling idea. The extracurricular learning and communications’ platform for kids was a much-needed service and product. The second common error—raising money at a good valuation—was again something that Goenka didn’t do. In fact, she didn’t have much choice even if she wanted to chase valuation.
 
The reason was the bogey of Byju’s. Most of the well-wishers she discussed her idea with, almost all VCs she pitched to, and every industry analyst and consultant she reached out to for insight harped about one thing. “Why can’t Byju’s kill you,” was the recurring question. Goenka tried her best to allay concerns. None worked, but nothing deterred her.

Also read: Decoding ConveGenius's 'common sense' edtech playbook
 
Was this one of the mistakes that Graham pointed out? Again, the answer is a resounding no. Most of the startups are counter-intuitive. Goenka knew there was a need. “India lacked high-quality arts and liberal education,” she recalls. A painter who learnt the craft for years, Goenka curated the best of the talent—national award-winning painters, musicians and other artists—and brought them online to teach the kids. With all green flags in place, Spark Studio started on a high note.


 
There was, though, a red flag raised during the early months. The extracurricular market was getting hyper-cluttered and competitive. “We're hearing 16 pitches every week on extracurricular,” cautioned VCs. “You are late. Already there are a bunch of guys who have raised big money,” alerted another set of funders. Meanwhile, Goenka was perplexed. “I have just started. How can I be late?” she reasoned. She roped in two of her friends from Byju’s—Kaustubh Khade and Jyothika Sahajanandan—and Namita Goel, a teacher, and started on her mission to make an impact. “Education was one of the sectors where one can do both: Make money and impact,” she underlines. With a lean core team, Goenka again didn’t do what Graham talked about—hiring a bunch of people. In fact, she didn’t even rent a cool office.
 
Though she didn’t make any of the common mistakes listed by Graham, she did something that the YC cofounder mentioned. Goenka, who made it to Y Combinator in June 2021, explains. “I am a painter and passionate about arts,” she says, adding that a high-quality arts curriculum and education was something amiss even in her top-flight school. At Spark Studio, she built an exhaustive arts curriculum. “It was great and I was confident that people would make their kids learn arts, animation, music, photography,” she says.


 
The reality, though, was shocking. The uptick was excruciatingly slow. “People wanted it, but there was no willingness to pay,” she rues. “That’s the truth of the market,” she says, adding that during her YC stint, she learnt a couple of priceless lessons. First, there is no replacement for obsession with customers. “Talk to your customers and build something that people want. Everything else is fluff,” she says.
 
Back in February 2021, Goenka and her team started with an esoteric educator mindset. “We used to talk about Leonardo da Vinci,” she recalls. The idea was to make parents understand that da Vinci was not only an artist, but was a scientist, sculptor, engineer, and a mathematician. “He was multifaceted, and all of us too should be,” she tried to reason with parents. If kids learn arts and music, she pointed out, it will help in building linguistic and memory skills.
 
Nothing worked, though. “We realised the language we are talking was too complicated,” Goenka recalls. Once back from YC and a year into her stint as an entrepreneur, Goenka scaled back her focus on arts. “Now it’s a very small category for us,” she points out.   

Also read: Context & alphabets: Creative Galileo & the samosa act
 
The second learning came handy during the mad funding frenzy of 2021. “The message in the YC was: When there’s too much on the buffet, don't overeat,” says Goenka. In over two years, Spark Studio managed to raise just $1.9 million. “We didn’t have much, we didn’t lose much focus, and we didn’t burn much,” she says. While Goenka remained lean and survived the edtech meltdown, many perished. Matrix Partners-backed Crejo.Fun shut down. The extracurricular activity edtech startup reportedly ran out of funds, couldn’t raise money, and shuttered. Bengaluru-based SuperLearn, which had the mission of making high-quality after-school learning affordable to Tier II and III cities and towns, too, shut down. Last October, Qin1, which offered live online classes on coding and English language, also shut operations.
 
With such a high death rate, how is Spark Studio managing to take the heat? Goenka shares her survival story. A year into her journey, Goenka found the missing spark. “We realised that the demand for public speaking courses and English communication had dwarfed everything,” she recalls. The pain point was spotted, and English turned out to be the painkiller. Percentage of revenue coming from communications started to become the dominant stream, and Spark Studio found its mojo.
 
There was another thing that worked. And it was counterintuitive. Once the pandemic started to ebb, interest in all kinds of online courses also waned, and offline centres became the norm. Goenka stayed online. YC learning of ‘building for the future, and not building for today’ helped. “Online education is the future,” she says, adding that offline centres are too operationally heavy and can’t be scaled with less capital. “Our current business doesn't work very well for Tier III price points,” she says, underlining that Spark Studio still gets most of its revenues from top cities. The startup, she claims, is piloting an AI-powered product in a handful of nations. “The power of AI will break all the constraints of language, region, time-zone and scale,” she adds.


 
The backers are delighted with the sweet spot that the startup has found in English and language communications. The team, reckons Vaibhav Domkundwar, founder of Better Capital, spent time to solve the English problem via live learning, which helped them understand the nuances of what makes English learning work, and what makes it fun. “The AI-first English learning product is differentiated and engages learners and leverages the latest in AI,” he adds.
 
Goenka, for her part, is satisfied her fledgling startup is taking baby steps and growing slowly. “I don't know which business hits a hockey stick in weeks or months,” she says. But this is exactly what happened in the edtech world over the last 18 months. Scale fast and fail fast became the norm, excessive hiring was the rule, and obsession with fundraising put customer needs on the backburner. “We didn’t do all these,” she says. Edtech, Goenka underlines, is a trust-driven business. “You can’t buy trust. You need to earn it.”