TestBook is a name that resonates with every graduate who aspires to crack a government job. The roots of TestBook go back to January 2012-13 when Ashutosh Kumar and Narendra Agrawal, two roommates from IIT-Bombay, made it their mission to build an online one-stop-solution for government and public sector exam prep in India.
Small town boys – Ashutosh is from Madhubani in Bihar and Narendra from Ajmer in Rajasthan – they both made it to IIT-Bombay via the mother of all test prep cities, Kota. At that point, Ashutosh was actually teaching at various coaching institutes too! They were both familiar with the gaps in offline preparation and “tinkerers” and started building a next generation solution for government job aspirants that was tech first!
TestBook raised its first round of capital from LetsVenture and ah!Ventures back in October 2014 and earlier this month closed their Series B funding of $8.3 million from Iron Pillar. TestBook has raised about $12.6 million so far and its cap table has on it S Chand Publications, Matrix Partners India, AngelList and Better Capital and Reliance Jio President Vikas Choudhury.
At present, TestBook offers over 100 preparatory courses targeted to a base of over one crore students across IndiaIn a market that’s pretty competitive (literally and metaphorically) both offline and online, we ask Ashutosh what has been TestBook’s biggest differentiator and how they have gone about building a product that is ‘Bharat’ first.
From the INR 1.5 cr you raised from LetsVenture back in 2014 to your Series B of $8.3 million from Iron Pillar this year, can you tell us about your experience as a founder and what the fundraising experience has taught you so far?
Over the years, I’ve seen investors get more selective. They look at the whole P&L, gross margins and contribution margins, LTVs (loan-to-value ratios), customer acquisition strategies and so on. From day one, TestBook has been capital efficient. If you look at our funnel from top to bottom, we have acquired 60-70% of our users organically. From an economic standpoint we are very stable too. For instance, around six months ago, we came up with a learning product which was initially priced at INR 600 a year, we now charge between INR 4000-5000 a year. That’s why I can say that we have been able to build a good base of free users, sign-up users, online course users, and test-only users. Therefore I can say that it was not much trouble attracting investors.
The market in which you operate is unorganised but perhaps very efficient offline! Tell us about the fundamental changes in consumer behaviour between 2014 to 2019 that make you optimistic about the growth ahead.
The largest applications for government jobs still come from small-town-India because there are no private job opportunities in these places. Towns like Allahabad and Meerut in UP, Patna and Gaya in Bihar, Bikaner in Rajasthan, have become hubs for government job preparations because the best teachers move to these locations where they can earn better than in smaller towns. In turn students flock to these places and entire city economies become dependent on test prep.
Now, if we talk about evolution in the last 5 years, the biggest impetus to go online actually came from the government itself. Government exams started getting conducted online in 2012. And, we started seeing some demand for online test prep material from a user perspective. Then in 2016 when major exams such as Railways moved online, the demand for online courses skyrocketed.
What we have been able to do online is create access for students from the smallest town to the best teachers, we actually pay our teachers 5-7x what they would have earned. For students, they find all the material well organised and in one place instead of going to various coaching centres for different subjects. The other big advantage students have vis-a-vis live coaching centres is repeatability, they can keep going back to the recorded content. We also offer live and recorded lectures from popular teachers.
From a macro-perspective, with digitization, smartphone penetration and Jio, students are now being able to access online courses easily. Also, the market has transformed from being entirely test-based to learning-cum-assessment based.
How did you scale the transition to being a learning-cum-assessment based platform? With the new funding, are you planning to offer more personalized assessment?
We’ve realised that complete learning can’t happen by just watching videos on YouTube. A properly designed curriculum that includes lectures, assignments, tests, tutorials and practice questions is the key to comprehensive learning taking place. In 2014, we had just the assessment layer where we would run tests and guide students on their weak areas. Then 2016 we started building full course material and 2018 we included videos on various subjects. Also, in the last couple of years, our ability to build relevant recommendations has really improved. We have thus moved to becoming a complete learning platform not just an assessment platform.
We will now be investing a lot more in the product, using data sciences and machine learning to make the learning cycle for users more adaptive. This will help us increase the stickiness of the product.
In your business, would it be fair to say that the only success metric to track is the number of aspirants who crack the exam and thus a government job? Can you give us a comparison between the good offline coaching institutes and TestBook in terms of the success rate of students?
In terms of selection, around 1% of all people who appear for these exams crack it. Around 2% of students from good offline coaching institutes crack the exams. In our case, that number is better. We have had more than 35,000+ selections in the last 3 years, i.e. 7% of our paid users. So, I would say that we are 4-5x better than offline coaching institutes.
How aggressively are your products priced versus your competitors, both online and offline?
The pricing model depends on the quantum of content you provide on a course. We have courses that sell for INR 7000 – 8000; these courses include 200 to 500 hours of video lectures, practice questions and assignments. We also have crash courses which have half the content, and the pricing is also adjusted likewise.
When we compare our pricing model with that of offline institutes, I would say we are around 30-40% cheaper. The sweet spot for our consumers in this ‘Bharat’ market is about INR 5000 for our type of content. While we charge around INR 7000 for complete courses, offline institutes charge around INR 17,000 for the same.
How do you reach out to users that belong to ‘Bharat’, tell us about your marketing strategy?
Our basic aim is to push students up the funnel, get them started on the free product and then keep showing them the value. Now that we have a full learning platform in place we are actually targeting government job aspirants in college itself so that they can start preparing on the foundation and basics in a strong manner. We would like to train them from scratch and ensure that they leverage our platform for learning courses before jumping onto assessments.
We have two customer acquisition strategies: online and offline. Online, we do content marketing to notify users about new exams. When it comes to offline marketing, we have quite a unique strategy. This is because the biggest problem even today is the ‘digital payment transaction’. So we have come up with “offline vouchers” that are available in more than 500 retail stores; think of this like Airtel and Vodafone recharge cards that used to be very rampant a few years ago. These ‘recharge cards’ are available at cafes, bookstores and even coaching institutes that we have partnerships with. But I will reiterate that our very strong offline presence is only focused on onboarding customers from that particular area. In big hubs like Delhi and Patna we have a 25 member team building channel partners and BTL (below the line) marketing activities.
Also, we have around 70 learning centres (on a franchisee model) which are basically computer labs. Students come to these labs to access the tests as well as use the infrastructure. These centres are mostly in North India but we will build out the network in Central and South India too.
Can you take us through the future roadmap for TestBook? Are there any new curricula and languages that you are looking to add to the platform?
We have curriculum for around 100 exams on our platform presently and most of them are national level government exams. Moving forward, we want to offer a curriculum for 400 exams in 2 years which will cover various state level exams too. Presently, we support two languages on our platform (Hindi and English) and for some specific exams we have material in five languages; but as we add more state-level exams we will add languages too. We also see a revenue growth of 3-4 times year on year.