The global Education Technology (EdTech) market is a diverse and rapidly growing industry, with startups across different stages and subcategories. It has been experiencing significant interest from both industry veterans and investors alike. EdTech startups, in general, are not meant to replace or substitute the current practices, but rather provide smarter options for a wider reach through online educational delivery. It’s an integration of innovative solutions to the existing education system by enhancing the pedagogy and learning process.
By looking at the industry, we have classified them under the following broad areas:
K-12
Higher Education
Language Learning
Corporate Training
The most dominant segment out of all is the K-12 software platform and tools market within the EdTech industry. It’s expected to grow from US$ 6.73 billion in 2018 to US$ 44.94 billion by the end of 2025. Pre-K, tutoring (live), language training, coding lessons, upskilling, and mentoring models are some of the segments which are gaining more traction as compared to the traditional, expensive and slower alternatives. In the Corporate Training category, we have also seen some of the top start-ups such as ‘Coursera’, ‘Udemy’ and ‘General Assembly’ emerge over the last 10 years to capture quite a large chunk of this segment.
Market Analysis
Market Size
According to HolonIQ, the Total Global Education Expenditure will be US $8 trillion by 2025. The Global Market size value for EdTech is expected to grow from US$89.07 billion in 2020 to US$285.23 billion in 2027, growing at a CAGR of 18.1%. Education focused AI expenditure itself is estimated to be a US $6 billion market by 2025.
The digitisation pace in education is predicted to overtake healthcare, primarily due to the advancement in this field over the last 10 years, and explosive growth in artificial intelligence especially in countries such as China, the US and India.
Worldwide Impact: Asia Leading
EdTech is now a global phenomenon: The US set the pace for the last five years and now EdTech is witnessing the world's fastest growth in investment in Asia, led by China and India. Europe saw some strong innovations, but still remains a fragmented and under-invested market. In the past decade (2010-2019), China accounted for 50% (US$16.6 billion) of all the EdTech investment, the US 33% (US$10.5 billion), followed by Europe (US$1.8 billion), India (US$1.7 billion) and Rest of the World (US$1.7 billion).
Source: HolonIQ, 2020
Southeast Asia has also been riding high since the past 5 years with US$480 million in EdTech investments. In Singapore too, EdTech has been evolving and the industry has seen sustained growth. Starting from online content access, EdTech now incorporates gamification, social learning, and learner data analysis to provide personalised learning experience to students.
Funding and Investors’ Sentiment
Growth Drivers
There has been some global macro trends driving EdTech growth which have been observed by investors and companies:
Increase in population especially in emerging economies will lead to more demand for online learning to make education accessible to the masses.
Growing need for educational technology, tools, and services due to the convenience and learning experience offered by these solutions.
Increasing digitization providing a wider outreach will ultimately make it easy for people to have access to quality and cheap education.
Rising issues such as student debt, flattening test scores, etc. can also boost EdTech since education from the best institutions can be provided online without the need to take massive loans and use of AI, ML in education helps to provide personalised learning experience to students.
Cultural impetus and the focus on education in the market has made people realise the importance and value of EdTech.
Venture Investment in EdTech
There has been a major push in EdTech funding on a global scale. The year 2017 saw 813 new EdTech companies getting funded, 2019 witnessed investment worth US$7 billion (HolonIQ report) in EdTech and growing at a predicted rate of 17%, the EdTech industry is expected to reach US$250 billions of market investments cumulatively by 2020. It’s interesting to note how the EdTech landscape has changed from US$0.5 billion of VC funding in 2010 to now. An estimated US$87 billion is expected to be invested in EdTech in the next decade, almost triple the investments made in the prior decade.
The Southeast Asia EdTech industry has seen nearly US$480 million of venture capital in the past 5 years in over 200 EdTech start-ups and it’s just getting started.
Examples of Major EdTech Start-ups
Out of the 19 global unicorns (startups worth more than US$1 billion), we have picked a few of them to highlight:
BYJU’S: Founded in 2011, and having raised US$1.6 billion in capital till Aug’2020, BYJU’s is the world's most valuable ed-tech company based out of India. It offers highly adaptive, engaging and effective learning programs for K-12 and competitive exams like JEE, NEET and IAS. With over 64 million registered students and 4.2 million annual paid subscriptions, BYJU’s is currently valued at US$10.5 billion
Coursera: Founded in 2012, and having raised US$443.1 million till July’2020, Coursera is one of the biggest EdTech companies based in the US that collaborates with top universities and guarantees a certificate of course completion. With 190 of the world's top universities and industry educator partners, 43 million learners, 2,000 companies using the enterprise platform, Coursera is currently valued at US$2.5 billion.
Udemy: Founded in 2010, it is an online learning marketplace based in the US with over 50 million students and 150,000 courses ranging from programming, marketing, finance, analytics and various other courses. Udemy has raised US$223 million till Feb’2020 and is currently seeking fundraise at a valuation of US$3 billion.
Impact of COVID-19
EdTech started the new decade with US$3 billion of venture capital investment in Q1 2020 and has reached US$4.1 billion till July’20 as Coronavirus accelerated the adoption of EdTech. That’s US$1.5 billion more than was raised during the same period in 2019, although the number of deals have reduced to 279. The pandemic has acted like a catalyst in the acceptance of online learning and accelerated this change, by doing what otherwise would have taken a decade or more, in a matter of a year or two. The schools and students saw themselves shifting to digital learning and even, governments are being forced to promote online learning. Whether it is virtual tutoring, video conferencing tools, language apps, or learning management software, there has been a significant surge in usage since COVID-19. Many schools struggled to make this transition due to the less tech-savvy teachers. Due to poor internet connectivity or availability of computers (only 34% of students have computers to do homework in Indonesia), students in certain countries struggled in digital learning.
We see an explosive demand for EdTech from existing and new customers. All the affected stakeholders from K-12 districts, universities, and workplaces, are implementing some sort of remote learning technology. A major emerging trend has been the growing partnerships between traditional education players and EdTech companies. Some of the EdTech start-ups even offered their services for free to the schools during their darkest hour. BYJU’S, an Indian EdTech unicorn founded in 2011, which is now the world’s most highly valued EdTech company with a valuation of US$10.5 billion, announced free live classes on its Think and Learn app, and has since experienced a 200% increase in the number of new students using its product. In March’20 alone, BYJU’s had six million new students accessing the freemium model, while Unacademy recorded 1.4 billion watch minutes.
Further, EdTech start-ups globally successfully raised funds during the pandemic, including some of Plug and Play’s portfolio companies such as:
Snapask, an on-demand tutoring app, which raised US$35 million in February’20 in its Series B round for further expansion in the Southeast Asia region; and
Course Hero, an online learning platform to get study materials, share class notes and ask tutors questions, which raised US$70 million last week in its Series B extension round, justifying its unicorn valuation of US$1.1 billion given in February’2020.
Conclusion
Education is still at a nascent stage in terms of technology adoption. This should be seen as a huge opportunity to implement technologies such as AI, voice interfaces, machine learning and many others. This will also help address the issues of cost, access and institutional efficiency to the world’s growing population. Due to the rapid pace of advancement in technology, radically different jobs will emerge in certain industries in a few years from now that require totally different skill sets from today. This generates a need for continuously upskilling the workforce in order to tackle the skill gaps and EdTech possess the potential to address this issue.
EdTech is a big and diverse industry with a plethora of opportunities across the business lifecycle. There will not be a single winner as it is not a winner-takes-all-market. There is space and need for several players to exist simultaneously and ultimately, the best companies, investors, and impactors in this space will be those who put the needs of students at the centre rather than just focussing on implementing high-tech solutions. It will be interesting to see how EdTech start-ups find innovative solutions to reduce costs, deliver quality pedagogy, and demonstrate impactful outcomes in the long-term.
ARTICLE WRITTEN BY: KARTIK JAIN
Kartik Jain is currently a Ventures Analyst at Plug and Play APAC.
He has developed a good understanding of start-up sourcing, portfolio management, deal flow and due diligence. A Venture Capital enthusiast, he wishes to draw upon his multi-disciplinary experience and contribute to the growth of the start-up ecosystem.
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