Most governments around the world have temporarily closed educational institutions in an attempt to contain the spread of the pandemic, leaving 1.5 billion students in 188 countries out of their classrooms. The world has not seen this level of disruption of education since World War II.
There are various edutech companies providing a wide range of learning tools for primary, secondary and pre-university students across the continent and everyone will agree that the time is ripe for these startups to grow whether it is in brand awareness or user base.
Never before have schools and colleges so urgently needed digital tools and services to facilitate remote learning —and been less able to afford them. After a financing lull in March, investors poured money into edutech, catapulting several startups past the US$1 billion valuation mark.
For instance, Udemy raised US$50 million in February pushing valuation to US$2 billion, ApplyBoard raised US$71 million in May, Quizlet closed a US$30 million round in May crossing US$1 billion valuation mark.
Also Read: How the Coronavirus is teaching edutech startups a much-needed lesson
Barclays estimates that spending on technology by educators will increase 12 per cent a year and is still just three per cent of a US$6 trillion global market. However, the large scale adoption of the edutech offerings still remains a challenge because of the following reasons:
- Only 59 per cent of the world has internet access
- Only 49 per cent of the household globally has access to the PCs
- Governments are prioritising health care sector over the education sector
- Schools struggle with capital technical resources in the absence of government support
- Lack of trained staff to conduct online classes
Hence, investors have deliberately focused on entities that market tools and services directly to consumers (DTC) and not to the institutions. Three DTC edutech sectors that gained most investments were online tutoring, digital aides and apps, and edutainment.
Online tutoring companies in the US, China, and India have attracted huge traction and interest from the investors. For example, Chegg outperformed forecasts by hitting US$132 million in revenue and 30 per cent rise in the stock price in Q1 2020. Byju, India’s second highest valued startup raised US$100 million Mary Meeker’s Bond Capital. Countries such as Australia, Korea, and Saudi Arabia have seen a surge in edutech startups supported by large rounds of funding in Q1 2020.
Interest and investment in tools and services designed for direct use of the students and parents are on the rise. Digital aides and apps such as Google Classroom, Seesaw, and Classdojo have seen a sharp rise since the remote learning started. Sites such as Khan Academy have seen 2.5 to three times increase in the traffic, with users spending twice the amount they did before the pandemic.
Users are turning to learn as a source of entertainment and a way to gain additional skill sets. Some of the popular edutainment business in this space has added several users and attracted millions in investment.
Also Read: These Indonesian edutech startups are helping students cope and thrive during the COVID-19 crisis
Example: MasterClass, which recruits celebrities to share expertise in non-credit-bearing online classes has registered 10 folds growth in revenue and raised US$100 million in funding. Similarly, Duolingo reported a 101 per cent increase in the user base since March.
The outlook in the DTC edutech space certainly looks promising. However, investors foraying in this space should also be mindful of the ongoing risks such as regulation, funding cycles, and competition. Ultimately, the best companies, investors, and impactors in this space will be those who put the users at the centre.
Finding ways to reduce costs, deliver quality pedagogy, and demonstrate impactful outcomes will determine the long-term winners as the edutech market grows and matures.
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