Is UpGrad spreading itself too thin too fast?

Is UpGrad spreading itself too thin too fast?
Mayank Kumar, co-founder & MD, upGrad
8 Dec, 2020

Late last month, UpGrad Education, the Mumbai headquartered edtech firm promoted by media industry veteran and entrepreneur Ronnie Screwvala, bought The Gate Academy (TGA) — its fourth acquisition in four years.

UpGrad started up in 2012 as an online platform with a focus on working professionals. Since then it has forged partnerships with around 10 universities in India and less than five higher education institutes from countries such as the United Kingdom and Australia and, claims to have impacted 9 lakh learners.

The Gate Academy, headquartered in Bengaluru, has enrolled 185,000 students and has 57 brick-and-mortar centres across India. It helps students prepare for one of the most competitive exams in the country—the Graduate Aptitude Test in Engineering (GATE). It targets a market of learners, long before they become working professionals.


How does TGA fit into UpGrad’s mission to advance a working professional’s journey through rigorous online programmes developed in collaboration with best-in-class faculty and industry professionals?

“A lot of our learners are college students who are also preparing for GATE and other exams,” Mayank Kumar, co-founder and CEO of UpGrad, told TechCircle, “while our degree-learners could also be looking for government jobs.”


UpGrad wants to bundle the product and offer students a test-prep solution. It plans to invest more than Rs 100 crore for the new arm, even as the company is looking to raise its first ever external equity round.

The test preparation market is an adjacency that can be integrated into UpGrad’s main business, with an eye to reduce its customer acquisition cost (CAC) by attracting GATE aspirants. Plus, TGA is profitable—it recorded net sales of Rs 20.7 crore in the 2019 fiscal with a profit of Rs 94 lakh.

But industry observers aren’t entirely convinced. “They are growing aggressively, doing many things,” says an edtech veteran on the condition of anonymity. “Sure some of it will succeed. But from an investor’s perspective, what is your real strategy?”


Post pandemic, UpGrad may have developed a completely new visage: to become a go-to online platform for any kind of learning across college and professional life, for anyone in the age group of 18 years to 60 years. 

While the lockdown induced by COVID-19 increased online interest in learning, the Draft National Education Policy—announced in July—has also been a catalyst for its changing face.

But is UpGrad spreading itself too thin?


Shopping Spree

UpGrad has tried to build its own curriculum, and a partnership model. But for a five-year-old venture, it has just one programme from a marquee institute like IIT Madras. It hasn’t managed to build a win-win revenue-sharing proposition for the premier educational institutes in India.

The company then built a training programme targeted at companies, made possible by its acquisition of Pyoopil Education Technologies in October 2016. Pyoopil had a mobile-based SaaS (software as a service) for corporates to deploy training programmes. 


In 2018, UpGrad bought out AcadView.com that provided skill-oriented training with blended online sessions from more than 700 industry experts. And less than a year later, it acquired CohortPlus, an online community for product managers founded by Srinivasan Narayan. CohortPlus also curated product manager jobs, with status and feedback for all applicants. Its member base had grown to 30,000 professionals. UpGrad had thus expanded its presence in the certification-training markets led by SimpliLearn and Edureka.

According to its last available financial results (sourced from RoC by VCCEdge), UpGrad’s net sales stood at Rs 85 crore for 2018-19, compared Rs 36 crore in FY18. Its losses had however grown 40% to Rs 43.3 crore in FY19 from Rs 31 crore in the previous year.

UpGrad has strong brand recall. But what is its raison d'être?


“If you have to look at anything that makes you better in your career, there is no single destination you can go to,” says Mayank Kumar. “You’ve got Naukri.com for jobs, LinkedIn to network. But there is no place where one can go to find everything that will help people improve their careers. We see that as a clear white space.”

That’s why UpGrad is building a single destination platform—a super-app sort of product—for careers.

“Like you go to Netflix for movies or Uber for transport, when you think of careers, you should come to our platform—that is the thought process we want to have as our positioning,” Kumar asserts. He cites a new feature for users to network, learn new things, get career mentoring and coaching, find a just-in-time interview prep, and get hired.

The new feature, expected to go live in 5-6 months, will be in the UpGrad app, like an app within an app. The firm has been in discussions with venture capital investors to raise about $100 million at a valuation of about $400 million. 

It has got at least two term sheets recently, according to a source familiar with the developments. One was way below UpGrad’s valuation expectation, while the other term sheet came with a 2x liquidation preference (liquidation preference represents an investor’s right to get paid first and how much he gets paid in case of a liquidation event such as the sale of the company). A 2x liquidity preference means that the investors would get paid out two times their original investment before common shareholders get paid.

“We do not comment on speculation,” says Kumar, in an email. “UpGrad has had zero asks or discussions with any of its investors on final round about Liquidity Preference. Also, as a policy, UpGrad would never agree to anything more than a 1x liq pref. We are in active discussions with our final round investors and there is nothing unacceptable in any of our discussions.”

Acquisitions will continue to be integral to UpGrad’s renewed mission of becoming a destination for lifelong learning. It has set aside $7 million for acquisitions.

It is evaluating startups across domains such as small-ticket certifications, hiring, college SaaS, counselling, and study abroad segments. It is in advance stages of discussions with five companies, three of which are expected to be announced this financial year. “Each area is a niche and relevant area, so acquisitions allow us to enter that area much faster, scale up much faster,” Kumar says.

The wide promise

In 2019-20, UpGrad got up to 90% of its revenue from working professionals. Mayank Kumar says it generated Rs 230 crore of revenue in fiscal 2020, of which working professionals contributed around 90% while B2B and academies accounted for the remaining 10%.

It also operates an academy business where it partners with enterprises such as HDFC Life, PNB Metlife, or Tech Mahindra to offer job-linked industry-relevant programmes to first-time job seekers in tier II, III markets. With UpGrad’s enterprise business, it offers training courses for corporate employees.

The upskilling and reskilling segment for working-professionals may have less volumes, compared with K-12, but it has a large ticket size. UpGrad claims ARPU (average revenue per user) to be between Rs 2 lakh and Rs 3 lakh. It even has courses priced over Rs 5 lakh.

According to the industry observer cited earlier, the firm has accelerated its revenue run rate—Rs 120 crore in the latest quarter. While this translates to an annual run rate of Rs 480 crore, it is a far cry from its financial projections of Rs 1,200 crore in 2020-21 (which it stated in an October press announcement).

Kumar expects to finish the quarter ending December 2020 with Rs 200 crore in revenue. 

“For the fourth quarter, we have targeted a growth of 30 new courses, each with start dates each month. So, we are on track for a Rs 300 crore quarter, and Rs 1200 crore ARR,” he explains.

The annual growth will be high because of a large number of new courses, monthly start dates of cohorts, and sales force and marketing ramp-up, he adds.

Even so, UpGrad is now targeting users for lifelong learning. Prospects include aspirants of undergrad degrees, test prep programmes, after which they can pursue postgrad, choose to study abroad or take up its academy programmes or recruitment services for job placement. Users can also take up diploma courses or other certification courses such as data science or digital marketing. For later career stages, it offers executive programs for leadership roles and PhD degrees.

Its focus has been on personalisation of curriculum, content and coaching to provide unique learning outcomes for every learner. Says Kumar, “We have 300-400 curriculum choices or specialisations for students, contextualised materials for each stream, industry-relevant mentors, and a network of large tech firms for.”

The personalised and human approach has helped it to achieve 80-85% course-completion. The aggressive focus on personalisation and specialisations has led to an increase in its lead-to-payment ratio, which currently stands at about 2.5%. Four out of five students who finish a six-month course have found an outcome, Kumar adds. “It could be getting hired, promoted, or achieved a favourable transition in career roles.” 

With the National Education Policy (NEP) 2020, the government has recommended that the top 100 universities (as per the National Institution Ranking Framework) offer online courses for higher education. The policy has an ambitious goal of increasing the higher education Gross Enrolment Ratio (GER) from 26.3% to 50% by 2035!

According to the Ministry for Education, this entails an addition of 35 million seats for higher education.  

Eyeing the opportunity, UpGrad is venturing into undergraduate and postgraduate courses in commerce, science, business administration, and computer application. This will open up a younger audience (in the age group of 18-24).

The NEP 2020 has also introduced a credit bank system where students can take a break from the undergraduate course and return within a specified period without missing the credits earned during the previous session. The company aims to create a product around this to target the gig economy workforce at ecommerce and food-delivery firms, which many youngsters join after dropping out of colleges.

Also on the cards is a product for colleges transitioning from offline to online, counselling services for learners who want to go abroad to study, and international markets. According to Kumar, more than 100 universities and colleges are using its proprietary tech/SaaS platform ‘UpGrad Live,’ which he says has brought 1 lakhs students on to the platform. It wants to take this number to a million.

The firm is also looking to set up a university outside India, and in the process of getting an approval for a global credential license. Currently, it offers programmes from a handful of foreign universities including Duke Corporate Education (in the United States of America), Deakin University (Australia), and the Liverpool John Moores University and Liverpool Business School (the UK). Almost 10% of its India revenue comes from partnerships with international institutes.

But as it expands into new areas, its headcount too has crossed 2,200. Half of these are in sales and marketing, and the remaining spread across product, content, technology and support. “In the last four months, our sales force has gone from 300 to 1000,” Kumar says. With its three acquisitions, UpGrad claims it added only 10 persons. The Gate Academy buyout has brought 300 people on board.

One reality however is true of ed-tech: the cost of customer acquisition. The likes of EdX, Coursera and Eruditus strike a premium because of the nature of its partnerships with the likes of Massachusetts Institute of Technology, and Indian Institutes of Technology. 

As UpGrad grows its brand and breadth of courses, it will be doing a lot more of the heavy-weight lifting to convert prospects into paying learners. The advantage of working with a renowned university is that it is easier to convert prospects, while gross margin is lower because the platform has to share revenue with the university.

In India, learners care about education pedigree and price. UpGrad is taking a large risk by diversifying on its own brand strength.

Edited by Kunal Talgeri