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Market Research on the EdTech Industry The global Education Technology (EdTech) market is a diverse and rapidlygrowing industry, with startups across different stages and subcategories. Ithas been experiencing significant interest from both industry veterans andinvestors alike. EdTech startups, in general, are not meant to replace orsubstitute the current practices, but rather provide smarter options for awider reach through online educational delivery. It’s an integration ofinnovative solutions to the existing education system by enhancing thepedagogy and learning process. By looking at the industry, we have classified them under the following broadareas: * K-12 * Higher Education * Language Learning * Corporate TrainingThe most dominant segment out of all is the K-12 software platform and toolsmarket within the EdTech industry. It’s expected to grow from US$ 6.73 billionin 2018 to US$ 44.94 billion by the end of 2025. Pre-K, tutoring (live),language training, coding lessons, upskilling, and mentoring models are someof the segments which are gaining more traction as compared to thetraditional, expensive and slower alternatives. In the Corporate Trainingcategory, 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 quitea large chunk of this segment. Market SizeAccording to HolonIQ, the Total Global Education Expenditure will be US $8trillion by 2025. The Global Market size value for EdTech is expected to growfrom US$89.07 billion in 2020 to US$285.23 billion in 2027, growing at a CAGRof 18.1%. Education focused AI expenditure itself is estimated to be a US $6billion 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, andexplosive growth in artificial intelligence especially in countries such asChina, the US and India. Worldwide Impact: Asia LeadingEdTech is now a global phenomenon: The US set the pace for the last five yearsand 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 remainsa fragmented and under-invested market. In the past decade (2010-2019), Chinaaccounted 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$480million in EdTech investments. In Singapore too, EdTech has been evolving andthe industry has seen sustained growth. Starting from online content access,EdTech now incorporates gamification, social learning, and learner dataanalysis to provide personalised learning experience to students. Growth DriversThere has been some global macro trends driving EdTech growth which have beenobserved 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 EdTechThere has been a major push in EdTech funding on a global scale. The year 2017saw 813 new EdTech companies getting funded, 2019 witnessed investment worthUS$7 billion (HolonIQ report) in EdTech and growing at a predicted rate of17%, the EdTech industry is expected to reach US$250 billions of marketinvestments cumulatively by 2020. It’s interesting to note how the EdTechlandscape has changed from US$0.5 billion of VC funding in 2010 to now. Anestimated US$87 billion is expected to be invested in EdTech in the nextdecade, almost triple the investments made in the prior decade.The Southeast Asia EdTech industry has seen nearly US$480 million of venturecapital in the past 5 years in over 200 EdTech start-ups and it’s just gettingstarted. Out of the 19 global unicorns (startups worth more than US$1 billion), we havepicked a few of them to highlight:BYJU’S: Founded in 2011, and having raised US$1.6 billion in capital tillAug’2020, BYJU’s is the world’s most valuable ed-tech company based out ofIndia. It offers highly adaptive, engaging and effective learning programs forK-12 and competitive exams like JEE, NEET and IAS. With over 64 millionregistered students and 4.2 million annual paid subscriptions, BYJU’s iscurrently 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 thatcollaborates with top universities and guarantees a certificate of coursecompletion. With 190 of the world’s top universities and industry educatorpartners, 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 USwith over 50 million students and 150,000 courses ranging from programming,marketing, finance, analytics and various other courses. Udemy has raisedUS$223 million till Feb’2020 and is currently seeking fundraise at a valuationof US$3 billion. EdTech started the new decade with US$3 billion of venture capital investmentin Q1 2020 and has reached US$4.1 billion till July’20 as Coronavirusaccelerated the adoption of EdTech. That’s US$1.5 billion more than was raisedduring the same period in 2019, although the number of deals have reduced to279. The pandemic has acted like a catalyst in the acceptance of onlinelearning and accelerated this change, by doing what otherwise would have takena decade or more, in a matter of a year or two. The schools and students sawthemselves shifting to digital learning and even, governments are being forcedto promote online learning. Whether it is virtual tutoring, video conferencingtools, language apps, or learning management software, there has been asignificant surge in usage since COVID-19. Many schools struggled to make thistransition due to the less tech-savvy teachers. Due to poor internetconnectivity or availability of computers (only 34% of students have computersto do homework in Indonesia), students in certain countries struggled indigital learning.We see an explosive demand for EdTech from existing and new customers. All theaffected stakeholders from K-12 districts, universities, and workplaces, areimplementing some sort of remote learning technology. A major emerging trendhas been the growing partnerships between traditional education players andEdTech companies. Some of the EdTech start-ups even offered their services forfree to the schools during their darkest hour. BYJU’S, an Indian EdTechunicorn founded in 2011, which is now the world’s most highly valued EdTechcompany with a valuation of US$10.5 billion, announced free live classes onits Think and Learn app, and has since experienced a 200% increase in thenumber of new students using its product. In March’20 alone, BYJU’s had sixmillion new students accessing the freemium model, while Unacademy recorded1.4 billion watch minutes.Further, EdTech start-ups globally successfully raised funds during thepandemic, 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. Education is still at a nascent stage in terms of technology adoption. Thisshould be seen as a huge opportunity to implement technologies such as AI,voice interfaces, machine learning and many others. This will also helpaddress the issues of cost, access and institutional efficiency to the world’sgrowing population. Due to the rapid pace of advancement in technology,radically different jobs will emerge in certain industries in a few years fromnow that require totally different skill sets from today. This generates aneed for continuously upskilling the workforce in order to tackle the skillgaps and EdTech possess the potential to address this issue. EdTech is a big and diverse industry with a plethora of opportunities acrossthe business lifecycle. There will not be a single winner as it is not awinner-takes-all-market. There is space and need for several players to existsimultaneously and ultimately, the best companies, investors, and impactors inthis space will be those who put the needs of students at the centre ratherthan just focussing on implementing high-tech solutions. It will beinteresting to see how EdTech start-ups find innovative solutions to reducecosts, deliver quality pedagogy, and demonstrate impactful outcomes in thelong-term.ARTICLE WRITTEN BY: KARTIK JAINKartik Jain is currently a Ventures Analyst at Plug and Play APAC.He has developed a good understanding of start-up sourcing, portfoliomanagement, deal flow and due diligence. A Venture Capital enthusiast, hewishes to draw upon his multi-disciplinary experience and contribute to thegrowth of the start-up ecosystem. References: