The Challenge of Finding Entrepreneurs

Aug 16, 2010

Contributor Name:

Sarayu Natarajan

Gray Matters Capital

It should be blindingly obvious – a market with millions of children, thousands of schools and the possibility of having tremendous impact. You’ve read elsewhere about how incredibly important external support beyond the school’s teachers and leader is for quality education! One of the ways of garnering support for quality education in schools is through opting for market solutions in the education space.  However, the Affordable Private School (APS) sector does not have adequate entrepreneurs (excluding the school owners) involved in the space; hence, bringing in new entrepreneurs is sometimes a challenge. What’s the problem?  In this blog, I will highlight the challenges that entrepreneurs face when they contemplate entry into the APS sector. In subsequent blogs, I will elaborate on ways to overcome the challenges, through case studies and examples. There are four major challenges – not hard to overcome, but nevertheless, real.

1) Disaggregated market: The APS market has a LARGE number of players; however, they all work in silos. There is limited communication and consequently, a scanty shared information base. While industry associations exist, they offer limited leverage to someone seeking to reach the market since they confine themselves to dealing with common issues and challenges. The result - high marketing costs, arising from the need for individual marketing to schools.

2) Attractive alternatives: Both larger private schools charging high fees and government schools, offer attractive opportunities for players. Government contracts, once won, offer opportunities for players to reach hundreds of schools and there are no marketing costs involved beyond the initial costs of winning the contract. Large private schools offer high revenues and higher margins from increased fees per child and lower marketing costs.

3) Lack of opportunities to pilot: Being a disaggregated market, pilot costs are high which acts as a deterrent. Pilots involve not only tweaking products to be relevant and affordable for the segment, but also marketing, that involves identifying the schools and the subsequent relationship management process.

4) Mindset: At times, APS leadership is resistant to change and new ideas. Though hesitancy to adopt new products is not unnatural, this leads to a slack in motivation for service providers resulting in a barrier to entry.

Hence, though the APS sector offers a lot of promise and has a clear need for support on the quality dimension, there is the challenge of inadequate service providers for it. This calls for concerted efforts by all APS stakeholders to drive change for these schools and take responsibility to address this challenge.

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Submitted by Sarayu Natarajan on September 9, 2010 - 1:18am.

Thank you Himanshu. Yes, regulation is indeed a big challenge. Part of the challenge around regulation is around the fear about it. It is a big deterrent for investors and entrepreneurs. However, there have been examples of investments in school chains through a management service company model, which have been quite effective. (SONG Advisors and Sequoia recently invested in K-12 Techno Services, a company that runs nearly 60 schools) I agree though - it is a huge deterrent, and there are no incentives to invest like in the IT, health, etc. However, with the low-cost private school market in particular, there is a challenge in finding entrepreneurs to work because of peculiar reasons beyond regulation. There are specific market conditions which make it a challenge. I'd love your thoughts and ideas on how to bring in entrepreneurs who are willing to undertake the regulatory challenge.

Submitted by himanshuraisharma on September 8, 2010 - 1:05am.

entrepreneurs are there but government rules are to be blamed , fund raising is a problem as investors cannot be made partners and no returns can be given to them , treat it as an industry and regulate it through a regulator but let it exist

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