The Edtech opportunity
As millions of classrooms moved online, Edtech moved into the spotlight in 2020. Prepared for LocalGlobe and Latitude’s December Future of Education event, we took a look at the Edtech opportunities currently gathering momentum.
An essential opportunity
Education is the third biggest spending item per capita in the UK, among essential national spending. Like healthcare, the industry has not fully entered the digital age, making it a big prize for tech companies to crack. If the most recent generation of global decacorns have been built by targeting discretional spending, it reasons that the next generation of startups could be significantly bigger. However, Edtech accounted for just 1.5% of global VC investment between 2014 and 2020.
The funding landscape
In 2020 VC investment in Edtech reached $13B, a 94% increase vs 2019, with growth mainly driven by Asia. Since 2017, Asia has accounted for 71% of total Edtech investment globally. Europe lags North America and Asia for investment and for creating billion-dollar Edtech companies. However, Europe has a rich pipeline of early-stage rising stars, companies valued between $100M and $250M with high growth potential.
The UK leads within Europe, raising $1.2B since 2014 – more than the next 3 European countries combined (France, Germany, Ireland) – and London accounted for 70% of all UK Edtech investment (more on London EdTech in our report “Best in Class: Global trends in EdTech from a London perspective“).
Pandemic acceleration of trends
The pandemic is accelerating trends transforming education across every stage, through forced exploration and adoption of digital educational tools and services. As well as helping children and schools adapt to remote learning, the potential role of Edtech in adult learning and reskilling has been climbing national agendas, in the light of post-pandemic unemployment, and an automated future. Below is a snapshot of key players that digitize different stages of education.
Explore interactive landscape
B2B Edtech is still up for grabs
Tutoring startups and other consumer-focused unicorns have driven the bulk of Edtech value creation. Whereas the real value creation in the B2B space, dependent on corporate and school budgets, is yet to come.
Higher Education has been largely undisrupted for a millennium. Universities, particularly in the US, increasingly look like a bad return of investment, as fees increase faster than wages. University value-add could historically be divided into 4 main bundles, and there are now companies targeting 1 or more of them.
Although this year undergraduate enrolment in the US has fallen 4.4%, enrolment in schools that offer income sharing agreement (ISAs) has increased. Some traditional universities such as Purdue University, University of Utah, and Clarkson University are also embracing this new model.
Education is no longer delivered by educational institutions alone. All sorts of companies offer learning through real-life encounters. You don’t have to take a formal course on how to start and scale an e-commerce business, just go to Shopify Compass and learn by guided-doing.
The internet was originally hailed as the great equalizer, democratising access to information and learning. But Covid-19 has shown there is still a lot of work to be done. Edtech tools allowed millions of children to continue learning while staying at home, to a level unimaginable just a few years ago without innovative Edtech startups in the market. But low-income families have been hit hardest, both in terms of remote schooling and work.
Tech-enabled solutions can help students figure out what they want to do, and educate them along the way. They can fill essential skills gaps, and future-proof economies. But public funding in education has not been growing in line with GDP in the US and many European countries.
With digitally inclusive policy, progressive procurement and shortened sales cycles, governments can reduce friction for Edtech startups entering the market, and in turn attract more private capital to the sector. And unlike school curricula, startups don’t respect international borders. The winners will go global.