Why we passed an opportunity to invest in the mock interview prep space
At Malpani Ventures, HR Tech and Ed Tech are key areas of interest, and at the intersection of both lies the college-to-jobs space of Mock Interview Prep.
COMPANY
We recently evaluated a company in the mock-interview space. The company offers affordable & customizable mock-interviews for final year students preparing for job interviews/placements. The USP being feedback from mock interviews to help them prepare better.
The first part of the interview assessment have been automated today, while the second part relies on an industry evaluator who provides feedback few hours after the interview.
GTM
Strategy is to approach colleges to acquire students. This is done because:
a) Colleges want better placement rates
b) Corporates want better quality and trained freshers
c) Students want to be trained to get better salaries
The company is aiming for mass market, and affordable (Rs 1000/ticket) while many companies are aiming to go towards Rs 3000+/ticket size. While this company may have a wider market at low ticket sizes, other companies may have a narrow market with high ticket size thereby making the size of the opportunity somewhat similar.
Most companies follow the GTM of being the preferred interviewing platform for corporates -> Reach scale -> Open platform as a mock tool for candidates by claiming they were able to place 100s of candidates at Aspirational companies -> command a premium.
MARKET SIZING
Considering the company is targeting final year engineering students, we arrive at the following:
| Engineering branches | Number of students in lacs |
| Computer Science Engineering | 9.4 |
| Mechanical Engineering | 6.8 |
| Electronics Engineering | 6.1 |
| Civil Engineering | 4.8 |
| Electrical Engineering | 3.7 |
| TOTAL | 30.9 |
| Final year students (assumption) | 7.7 |
| Source: Statista |
Considering the above, we assume the following cases:
a) Bear case: Every student avails 1 mock interview
b) Base case: Every student avails 3 mock interviews to interview at Engineering, IT, BFSI jobs
c) Bull case: Every student avails 5 mock interviews to interview at different streams, and different companies, and company enjoys better pricing
| Market sizing | Bear case | Base case | Bull case |
| No of tickets purchased by a student | 1 | 3 | 5 |
| Ticket size (Rs) | 1000 | 1000 | 1250 |
| Market size (Rs cr) | 77 | 232 | 483 |
To simplify, if all goes well for the industry, the total business generated in the industry can be between 100-500 cr per year under different scenarios.
However, we understand that not every engineering graduate takes up a job immediately. Many go for MS or MBA abroad, or do MBA in India, or study for civil services exams. This means the market size will be on the lower side.
If we believe the company can take 10% of the market, then the annual revenues for the company can be between 10-50 cr which is not a very attractive number for growth investments.
This changes if the company repositions itself as a tool for companies to evaluate candidates which can widen its market multi-fold. But as we see this is not the focus area for the company.
HYPOTHESIS
Here is our 3-point hypothesis on this industry
a) Job seeker adoption
A business model in this space needs demand validation. Demand can be validated if more and more students use these tools for mock interviews. If there are 67 lac freshers (from all streams, source) looking for jobs in India every year -> we should see a higher % of students using tools like these to prepare for interviews.
b) Recruiter adoption
There is no need for a mock interview without a corresponding real-life interview. If there is demand, students are using these tools to conduct mock interviews and acing them, then we should see curiosity and need from recruiters to use these tools as an interviewing platform to acquire talent. We should see any one of the top 5 IT/BFSI companies (tend to hire the most talent, has most attrition) in India integrating these tools in their fresher talent recruitment tech stack in the next 12 months and exclusively hire freshers via these tool-led interviews. This will validate the need.
c) Automation of the entire product
Validating demand and need may bring in revenues. But many companies are gross margin negative due to the manual aspect of technical evaluation, which means we may not see value creation at scale. We will need to see automation, using ML to build AI to provide detailed feedback to users so the product is scalable and profitable.
COMPETITION
There are a bunch of startups operating in the space like:
- PrePlaced
- Pramp
- InterviewBuddy
- Interviewing.io
- Exponent
- Monjin
- GeeksForGeeks
- InterviewBit and more
There is a lot of money flowing into the space where the market today can be accessed by probably the top 10% of job seekers. There is no validation of the hypothesis that candidates will keep using the same platform as they climb up the corporate ladder as different career roles and positions require different levels of assessment, tools, and interviews as these products are early in their life cycle. We do not see the same job platforms being used by candidates at different points in their career [eg Naukri (entry level) vs LinkedIn (mass market white collar) vs eFinancialCareers/iimjobs (CXO, Buy side, hedge funds)], and we see something similar in this space as well.
VIEWS
- Need: We believe the need for mock interview tools exists. It not only makes for better prepared candidates, but also reduces the time & effort required by corporates in the hiring process leading to win-win outcomes
- Market size: We do not believe it is a large market. With potentially ~8 lac engg graduates a year, the market for fresher-oriented interview-prep market is between 100-500 cr
- Competition: With multiple startups in the space, we believe the industry will soon be in land grab mode and winner will be the one that outspends others
- Model: We are unsure if a completely automated evaluation platform will excite students because they want feedback from real-life industry persons
- GTM: We believe that startups that cater to corporates will have an edge vs ones that cater to students because the interview process, needs, and outcomes are determined by the corporates. The ones entrenched inside the recruitment tech stack of a corporate will have a natural demand from students who want to conduct mock interviews on the preferred platform of the corporate they want to work with
WHERE WE CAN GO TERRIBLY WRONG
- Market size: We can go wildly wrong on market sizing if we only focus on engineering freshers. If we expand it to all freshers in India, the market grows by almost 10x. Numbers become crazy when we add lateral job changes. But the positioning of a fresher vs experienced job portals are different [eg Naukri (entry level) vs LinkedIn (mass market white collar) vs eFinancialCareers/iimjobs (CXO, Buy side, hedge funds)]
| All grad branches | Grads/year in cr | ||
| Male grads | 0.31 | ||
| Female grads | 0.355 | ||
| TOTAL in cr | 0.67 | ||
| Source: Statista | |||
| Market sizing | Bear case | Base case | Bull case |
| No of tickets purchased by a student | 1 | 3 | 5 |
| Ticket size (Rs) | 1000 | 1000 | 1250 |
| Market size (Rs cr) | 665 | 1,995 | 4,156 |
- Changing model: If the model changes from interview prep to providing a steady flow of ready candidates to corporates, acting as a transacting recruitment agency. Having said that, every company in this space has the end goal of becoming a vetted jobs marketplace which brings us to the outspend to land grab argument
FINAL VIEWS
There is a need for such products, but we believe that the market is small, and value creation seems limited for a player. We will continue to monitor our thesis in the space.