Edtech’s Make-or-Break Point: Understanding the Current Landscape and Future of Learning

Insights

3rd June 2020

The global spread of the current pandemic has caused drastic measures, including schools and universities around the world being closed. With 1.3 billion children in 186 countries facing closed school doors in the last weeks, the sudden transition to homeschooling and distance learning is certainly changing the idea of education and what learning looks like in the 21st century and beyond. The current pandemic is accelerating trends that were already shaping the future of a market, which is projected to reach $10 trillion by 2030, mainly fuelled by population growth in developing regions and technology advancements for re-skilling and up-skilling in developed economies.

After talking last month with Verena Pausder, one of THE advocates for digital education in Germany, on homeschooling (you can find the Interview here), I wanted to take a deeper look at relevant players in the market, lessons learned from Asian Edtech startups and the future of learning post-pandemic.

🗺 Edtech Market Map

Below you can find an overview of all companies focusing on education* founded between 2000 –2020, narrowed down by the Top 150 in terms of funding in Europe, Asia, and the US and mapped across 14 categories along the different life stages. You can access the full list including further details on the funding amount, business model, and description of the companies here.

*Disclaimers: 1) Excluding companies focusing on financing solutions 2) Many startups listed sit across multiple categories — I chose one for each for simplicity

1. Pre-K

👶🏻 Early Childhood: Companies in the Pre-K cluster offer organized learning for toddlers ranging from traditional to exploratory learning and immersive settings. Neobear utilizes AR technology to develop new knowledge-friendly toys for kids aged from 2–10, while Lingumi teaches English to toddlers via interactive courses.

2. K-12

🏫 School Administration: Companies like Arbor help manage the school’s daily admin, record important student information, and create reports. Others allow schools to connect to other ones at the district, state, and national levels.

📚 Course Material: Most startups in this category, like Bibliu, operate online marketplaces for textbooks and other course materials. Newsela converts news stories into digestible content for younger students and Chegg provides teachers with a “portfolio” of resources to include in their curriculum.

❓P2P Q&A: Similar to Quora, platforms such as Brainly support educational Q&A as a homework platform. structured by traditional content topics such as maths, science, and history (200% MoM activity growth; 200m users since Covid-19).

3. K-12 & Higher Education

👩🏻‍🏫 Classroom Tech: Startups such as ClassDojo let teachers, students, and families communicate with each other and share what’s being learned in the classroom. Echo360 combines video management with lecture capture and active learning to increase student success.

🤓 Next-Gen School: Alternate education providers such as Lambda School train people to be software engineers for free in exchange for a share of future income.

4. Vocational & Higher Education

🎓 Career Planning: Platforms such as Noodle or ApplyBoard (new Edtech Unicorn since May 2020) let you discover schools and universities and connect with education experts. WhiteHat matches non-graduate talent with apprenticeship opportunities and provides training with world-class content providers and 1:1 coaching.

5. Lifelong Learning

💻 Broad Online Learning: Providers such as Coursera, Masterclass or Skillshare host content covering subjects ranging from traditional maths and science topics to cooking and UX design.

🗣 Language Learning: Marketplaces like Dada and Vipkid connect students in China with English tutors, while Duolingo or Babbel offer multiple languages in their app.

6. Across All

🙇🏻‍♀️ Study Tools: Notable companies include BYJU’s and Knowbox which provide study tools that use technology to offer personalized learning programs.

🖥 Learning environment & LMS: Software platforms like Schoology and EVERFI enable schools and corporations to administer and share content, activities, and assessment related to learning.

🤖 Tech Learning: Online platforms such as Codeacademy and Udacity cater specifically to teaching programming and other engineering disciplines. Wonder Workshop and Tech Will Save Us belong to the new wave of STEM products such as robotics and science kits which integrate software and hardware in the maker-movement.

👩🏻‍💼 Tutoring: Marketplaces such as Zhangmen, Preply and Varsity Tutors let you find online or offline face-to-face tutors.

🔬 Simulation: Virtual and mixed reality simulations are now becoming mainstream and being used in education too. Labster for example gives students access to a realistic lab experience without entering an actual lab.

🦄 Edtech Unicorn Landscape

💡 Insights from the current landscape

As of May 2020, there are in total 18 Edtech Unicorns — Alone between January 2020 and May 2020, four new companies reached Unicorn status (Udemy, ApplyBoard, Course Hero and Quizlet). Edtech as a sector is currently seeing broader investor interest due to the momentum from COVID-19.
Education was so far a tough market to achieve standard VC multiples and hence funding was limited — Investments in education technology globally were just at $18.8bn in 2019. Even though investments in 2018 and 2019 outstrip combined investments in a 20-year period between 1997 and 2017, it is still only a fraction of other sectors. But this seems about to change. In the last 3 months only, MyBuddy.ai, Duolingo, Niche, Quizlet, Edsight, Masterclass, ApplyBoard,Course Hero, Udemy raised in total $307m, ranging from Series A to Series E rounds.
Software and content marketed to consumers outside the traditional school system seem to be more attractive business models — only 6 (Udemy, ApplyBoard, Guild, Age of Learning, Hukeidu Group and 17zuoye ) out of 18 Unicorns are also school/corporate-facing. Schools and government are seen as too slow to adapt and sales cycles are too long, sometimes taking up to 24 months. Freemium models that go direct-to-teachers have struggled to monetize.
Europe is lagging behind with zero Edtech Unicorns (so far)— there are 8 American, 1 Canadian, 8 Chinese and 1 Indian Unicorns. The European market is clearly more challenging, since each country’s education sector is small and works differently, ranging from public to private systems. With 20m students, teachers who spend 40% of their time on admin and an urgent need for a (tech) workforce to be able to compete against the US and Asian nations, it is clearly a market ripe for disruption.
Asia is leading in the Edtech segment — especially China and India while Southeast Asia is catching up. Education is in China the third biggest expense after housing and medical care. Currently, 150m users (mostly between 26–35 years) pay $40b for mobile-based learning programs. Apart from cultural and incentive-based reasons, technology is also more advanced in Asia. Mobile-centric learning platforms leveraging Machine Learning, the phone’s built-in microphones and App-based lessons are still rather untapped in the West.
The US has invested very broadly in various categories, while Asia has a clear focus on Tutoring marketplaces and Language Learning — Tutoring and Language Learning is so big in Asia since the population is spread out and there is a big scarcity of good quality teachers and lack of affordable good public education.

🔮 So what’s next post-pandemic?

First predictions were made already in this excellent post by Mercedes Bent and some renowned Edtech VCs on Techcrunch. This is an extended take.

Right now, the pandemic shoved the sector almost overnight into the spotlight and is fuelling current and future demand of Edtech solutions, created by two global trends:

Accelerated innovation cycle for educational institutions and
Increase in future demand for education offerings that offer viable routes to employment

Let’s have a look at education before Corona (B.C.) and potential scenarios after Corona (A.C.)

K-12 B.C.

The current education system is largely run on a 19th-century “factory model”, which means all students are forced to learn at the same speed, in the same way, at the same place and at the same time. Students are passed to the next grade irrespective if they absorbed everything which was taught. Overall, K-12 has lagged the broader market’s adoption of technology. At the same time, the next decade will see an additional 350 million post-secondary graduates and nearly 800 million more K12 graduates than today. Personalized learning on a scalable level by leveraging AI becomes inevitable. And that can be only accomplished by the digitization of K-12.

K-12 A.C.

Covid-19 forces schools, teachers, and parents now out of their old behavior out of necessity. New habits might be created, and even though tech will increase in classrooms, it will only be a supplement, but no replacement of teachers. Hybrid solutions that can blend in online and offline learning formats and let teachers increase classroom engagement or sick students catching up on missed classes, by leveraging instructor front-facing video technology, will probably win long-term. After the homeschooling period, a majority of parents will remain more involved probably, calling for more communication platforms such as ClassDojo in the US or Sdui in Germany. AI will spur personalized education, enabling students to learn at their own speed by tailoring content to their strengths and weaknesses.

Higher Education B.C.

In recent years, there has been a sharp surge in the popularity of alternative education options. Searches for “Masterclass” even surpassed “business school” in the United States lately. Compared to K-12, Higher Education already used online teaching tools and has a more sophisticated infrastructure to allow remote teaching.

Higher Education A.C.

Tech may increase even more in universities to stay competitive and offer more flexibility to students, thus moving to a hybrid online/offline campus model. The largest tech companies could partner with elite universities around the world (think MIT@Google. iStanford. HarvardxFacebook) driving tuition fees down and new tech talent up. The US and UK will see probably cutbacks, mergers and closures of universities since they depend so highly on tuition fees and international students. This could also lead to growth of career planning platforms since universities need new marketing channels, or virtual lab companies such as virtual science lab company Labster.

Lifelong Learning B.C.

Western education models did not do encourage too much lifelong learning so far, while in Asia adults prioritize and are willing to pay for it. This led to sophisticated mobile-centric, AI-enhanced learning platforms and apps in Asia vs. learning platforms in the West overly focused on video content solely.

Lifelong Learning A.C.

Before Corona, it was already clear that the current education model must change to keep up with the dynamic job market that demands lifelong learning. Since more people will become unemployed due to the recession, Edtech’s role to help aquire skills to access employment opportunities has never been more important. This may lead to short-term demand in broad online learning (Duolingo has had user growth of 100%), and a mid-and long-term surge in re-and upskilling platforms and educational programs with clear ROI, thus advancement in tech by leveraging more Machine Learning and AI.

I think it’s important to keep in mind that there is a huge difference between remote teaching and online learning and that the move to Edtech solutions happened almost overnight due to an emergency shift and not a deliberate shift. What also became very clear during this crisis is that tech can be only a supplement and never a full replacement for teachers. If you’re building a company in the outlined areas or would like to share your (different) perspective, feel free to contact me at jp@btov.vc.

This blogpost was originally published on Medium on June 3rd, 2020.

1. Jennifer joined btov in March 2019 as an Associate. She previously worked as a Venture Architect at Deloitte Digital Ventures, where she advised some of the most renowned CEOs and CDOs on their digital transformation strategies and helped them on disrupting themselves before getting disrupted by new ventures and technologies. She took her first steps into Venture Capital at Global Founders Capital in Singapore, where she looked at early stage companies from various sectors in Asia Pacific. She also gained operational experience at Rocket Internet as a Global Venture Developer. She holds a Bachelor of Science in Business from the University of Mannheim and Master in Management, with focus on Entrepreneurship, from ESCP Europe Business School. She has vast cross-continental and cultural expertise having lived, worked and studied in France, Singapore, UK, Spain, Mexico, Vietnam and Germany.

In her freetime, she is a volunteer teacher at ReDI School of Digital Integration, a non-profit digital school teaching coding skills to create job opportunities for refugees in Germany.

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