Screwvala speaks to Outlook Business about valuation and funding in the ed-tech sector, the PM Internship Scheme, and the IPO plans of the company
Ed-tech platform upGrad has been on the news for its recent fundraise, where it is mentioned that the start-up received $60 million from sovereign wealth fund Temasek, as per media reports. However, upGrad co-founder and chairperson Ronnie Screwvala says that it is speculative and he will comment on it only when it is finalised.
With regards to the funding aspect in the ed-tech sector, Screwvala says that he doesn’t believe that raising money is the sole criterion for building a successful company. Screwvala speaks to Outlook Business about valuation and funding in the ed-tech sector, the PM Internship Scheme, and the IPO plans of the company. Edited Excerpts.
With regards to the recent funding by PhysicsWallah and Eruditus there's a growing sentiment that investor confidence in ed-tech is returning. What are your views on the same?
I don't have strong views on the topic, to be honest, because I don’t believe that raising money is the sole criterion for building a successful company. For instance, a company might raise $5 billion but still have a valuation of zero. Ultimately, the real measure of success lies in what you build rather than how much you raise.
I understand your question regarding funding, and while investors may have been bullish and invested $5 billion at one point, their enthusiasm can quickly fade. This is a cyclical pattern in the investment landscape. However, I don’t think entrepreneurs, CEOs, and leaders focused on building long-term companies need to be overly concerned about investment cycles.
The education sector doesn't require the kind of capital that has been invested in K-12 sectors. Therefore, I am specific when discussing fundraising. The notion that you need $5 billion to create something in the learning space is misleading.
In the case of fundraising, the valuation often reflects a private arrangement among a few investors. Unlike a public company, where stock is actively traded and a market value is established daily, a private company’s valuation is determined by a small group of investors, making it more subjective. Thus, I believe the discussion around over-funding is more relevant than simply focusing on the amounts raised.
With your co-founder stepping down, should we anticipate any changes in your role?
To clarify, my co-founder (Mayank Kumar) has not resigned; he continues to hold his role as co-founder and director. Unlike other start-ups where founders may leave, he is still very much with us.
We’ve switched roles to enhance innovation: he is now focusing on strategic initiatives, building relationships, and understanding the forward market, while I am taking a more hands-on approach.
The term "left" is misleading. Our roles have changed, but he has not exited the company. Terms like "resigned" imply a complete departure, which is inaccurate. The truth is, he remains part of the company.
Read: Founders vs Investors: What Byju's, BharatPe Cases Reveal about the Great Indian Start-Up Feud
upGrad recently committed Rs 200 crore for PM's internship scheme. On that note, what roles can start-ups play in this initiative?
In this context, if 100 to 200 million jobs are expected to be created in India over the next 10 to 15 years, not all of them will come from the corporate sector. The IT sector is already saturated, and while BFSI is growing, it is not expanding at that scale. The automobile industry is emerging as a new sector, and the hospitality sector is also evolving, requiring a different approach.
The hospitality sector, including hotels, motels, and highway infrastructure, will play a significant role, especially as road infrastructure develops. Every five kilometers, hospitality services will be needed, creating a vast number of jobs. These are two or three major sectors entering the market, outside of the usual focus on AI and tech.
From a start-up perspective, it's not solely about tech-driven sectors. I believe that 30-40 per cent of the new jobs will be created by companies outside the traditional corporate landscape, particularly in start-ups and new industries. Therefore, while this may not be a part of the conventional narrative, the start-up ecosystem needs to be robust for significant job opportunities to emerge, and new sectors need to open up.
What are your IPO Plans?
This question is somewhat premature. As an organisation, we believe that we should aim to become a publicly listed company within the next two to three years. This is primarily due to the credibility that public listing brings to the skilling sector, which is vital for the company's long-term success.
The reasons for listing the company should not be driven by market conditions; that would be the worst rationale for pursuing an IPO, as market dynamics can change at any time. My concern is that around 40-50 per cent of the companies that may list today could be below their listing price within two years. While the media may focus on the downturn, they often overlook the potential for growth from that point onward.
From our perspective, it is appropriate to consider listing when we are ready. We need to reach a critical mass; we don’t want to be classified as a small-cap or mid-cap company. Instead, we aspire to be a large-cap company, which will take time to achieve. We aim for a minimum compounded growth rate of 40 per cent over the next five to ten years, and we need clear predictability regarding our growth trajectory. Those are the criteria we should consider for listing the company, not the current market sentiment or the opinions of investment bankers.