I am Aarihant Aaryan! Welcome to the Iron Sharpen Iron newsletter,
I share my weekly homework from my startup journey, learning about human behaviour, and sometimes decoding industries and business models for fun.
I can’t control my curiosity :) )
"Happy New Year! After a two-week break, I am happy to be back. This year, I am keen to share a lot of learnings and insights around niche markets and businesses. Also, there have been a lot of changes in my personal life, and I can't wait to share them in the upcoming weeks.
When I joined PW in July, I was eager to learn about the behaviour, aspirations, patterns, and lifestyle of exam aspirants. So, the first thing I did was get all the details of our power and churned users, and I started having conversations with them every day from 7 pm to 9 pm for the first two months.
This exposed me to a bundle of insights, corrected many misconceptions that I had, and learned that there is a lot to be fixed in education, especially in the exam market.
I love to say this - India's favourite sport is writing exams, and there are close to 60 million test takers every year who write one or more exams.
These test takers cumulatively spend $100 million on registration fees. There are 70+ government/entrance exam categories, and as far as I can remember, at PW, we are solving for 20+ exam categories.
There are a few mega exams in India where the maximum test takers show up, which are JEE/NEET, UPSC, and CA exams."
This entire exam market feels like a tournament business, the aspirant is preparing for a tournament - since it’s a zero-sum game, the biggest beneficiaries of this entire play are people who arrange the tournament and people who coach the aspirant, if you don’t know the top 1% teachers who teach in JEE / NEET category are today paid north of $1Million in salary every year.
That’s more than what good actors are paid in the film industry.
There is a significant number of individuals who take part in state-wide group examinations, such as the Telangana State Public Service Exam, which is a typical exam to secure a government job.
In Group 3, for instance, 5,36,477 candidates applied for only 1,375 vacancies. Railways exams also draw a large number of applicants, with nearly 1.15 crore people appearing for these exams.
For this particular demographic, these exams are seen as hope, as these jobs provide them with stability, access to a better lifestyle, and better mating opportunities.
This demographic is known as the proper Bharat, and they come from humble backgrounds. Often, only one parent works in their households, and they hold modest jobs such as security guards, plumbers, vegetable vendors, technicians, or watchmen. For them, an income of 5000 to 10,000 INR ($60 to $130) per month is a significant deal.
At PW, there was a NEET aspirant who purchased our course worth 4000 INR by selling their only goat.
I once had a conversation with a JEE/NEET aspirant because I learned from some data that they had spent more than 700 hours on our platform in just 3 to 4 months. This amount of time spent here is around 3 to 4 times more than what Netflix power users usually spend on Netflix
Most exam takers hail from the Northern part of India ( Up, Haryana, Delhi, Uttarakhand) ideally states that have per capita income below $2000
I have an interesting theory that states that have higher per capita income have fewer students participating in entrance or public exams, there’s actual data to back this up.
In states like AP, Telangana, Karnataka and Kerala - there has been a steep decline in entrance exam participation, it’s an 8 to 10% decline year on year
At a personal level, I believe it is a great market to be in, tho from a tech and product first lense it is a low retention and low LTV business, your customer churns out in one year or more
But this a high ticket size business and many traditional players took advantage of the business and charged as high as 3L to 4L for coaching services, even today legacy players like Allen charge around 2L for coaching.
Last year, I had the privilege of visiting a town in Andhra Pradesh where I discovered the biggest educational institution that serves around 60,000 students in 7 districts around them. This institution provides junior colleges and entrance exam coaching and generates a yearly revenue of over 300 crores.
Narayana educational institution, which is mainly based in AP & Telangana, generates more than 1000 crores in revenue.
This made me wonder why we are doing so well at PW and what our right to win is. I realized that our price point is not just pocket-friendly but also solves the switching friction problem.
For instance, if someone is part of Allen, they may want to switch to Bansal classes, which would be a huge added expense. However, with PW, that's not the case. If they want to switch, it's not a financial burden by any means. That's why today, most aspirants, irrespective of the coaching centre they go to, have the PW app on their mobile and have subscribed to some courses.
As I mentioned earlier, when someone is preparing for a tournament like JEE or NEET, they not only spend on registration and coaching,
but also on other resources such as textbooks, test papers, test series, regional test books, stationary, uniforms, relocation expenses, and hostel rent. One of the leading publications in this category, Aarihant Publication, generates more than 500 crores in revenue.
In the future, as per capita income in states increases, participation in such exams may decrease as consumers may shift to other levels of exams.
However, India's favourite pastime will always be exams. It's just that the type of exam they take may change.
The company that solves engagement at the highest level will likely become the largest revenue earner in the exam category ten years from now.
After that, I will say everyone has pivoted from the tournament business to the entertainment business.
If you have any thoughts or questions share them in the comments :)
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