In 2014, education expenditures reached $5Tn worldwide representing a market 8 times bigger than the software market. About 9% of the apps downloaded on Apple’s App Store have an educational purpose. From learning by gaming to MOOC and online certification providers, the EdTech market has grown in multiple directions addressing specific challenges where “traditional” education sometimes faces its limits.
The global EdTech market is expected to grow by 17% on an annual basis over the next years to reach USD 252bn by 2020. This expansion is nonetheless unequally shared between developed and emerging countries.
EdTech startups, like any other startup, require a favourable environment to build up, including pre-existing infrastructure, demographics, supportive public and private investments and potential synergies with corporate partners. It is needless to say that the impact of those factors may vary heavily amongst low-income countries and mature economies.
Mature economies have turned EdTech into a big thing
EdTech markets have skyrocketed in developed countries during the 2000s. Reliable ICT networks enabled startups to provide scalable learning and teaching solutions to connect students among themselves, with teachers or to online courses. For instance, Coursera a US-based company, has reached over USD 30m in revenues providing MOOCs at a massive scale.
Setting the growth of the global industry over the past years, there are plenty of signals that highlight that the US EdTech market is reaching maturity in term of growth. American private investors such as Venture Capital funds, foundations or major universities have been tremendously financing startups in various fields like broad online learning (EverFi - USD 252m), learning management systems (Knewton – USD 157m), career development (General Assembly – USD 119m) and even early childhood learning (Dreambox Learning – USD 47m).
In 2015, 60% of the money invested in EdTech has been invested within the United States (only 8% in Europe). Meanwhile the school fees have been constantly increasing, EdTech startups have benefited from the induced deflection effect education costs had to provide a cheaper and skill-based education to learners across the country.
Nevertheless, demographics are not very encouraging for their growth outlooks within their country of origin (neither North America, nor Europe). Companies’ valuations have in this way already reached very high levels and they are now looking overseas to maintain a solid growth.
Asian countries are rapidly taking over the former leadership
By 2035, there will be 2.7bn students worldwide. 90% of the world population under 30 already lives in emerging countries. Given the rising pressure on the labour markets in Sub-Saharan Africa, East and South Asia, and Latin America, the need for a cost effective and skill-based education will continue to grow at a very rapid pace.
Asia has become the fastest-growing e-learning market in the world and will account for 23% of the USD 53bn e-learning market by 2020 sustained in a major part by mobile. Games-based learning is also already one of the major growing trends. To fuel this outstanding growth, Asian conglomerates and other private investors are leading massive capital injections and are clearly catching up with mature economies, iTutorGroup (USD 315m), Yuanfudao (USD 244m) and Vipkid (USD 125m) being only a few deals amongst many others.
Alongside numerous Asian thriving EdTech companies, US-based language learning startups such as Open English or Duolingo are also yearning to access the Asian market. Moreover, Knewton, an adaptive learning innovator has partnered with the Korean Chungdahm Learning to enlarge its reach potential. In other words the Asian EdTech market displays dramatic outlooks and is already concentrating around several corporate investors like Alibaba, Wipro or Tencent and a galaxy of rocketing start-ups.
Other regions follow this same development
If Asia is outplaying any other region, other EdTech markets have also experienced a serious growth. Taking a deeper look at Latin America clearly shows us that its ecosystem benefits from its proximity to the US to accelerate the development of cross-border learning solutions. Leveraging new educational policies encouraging digitalisation inside and outside classrooms and a surge in private investment, the e-learning market has been able to grow by 14,6% yearly since 2013, reaching about USD 2.2bn in 2016.
These catalysts have made Latin America a very attractive place to invest for foreign investors. IFC, the private investment arm of the World Bank led over USD 450m investments to online providers and distance learning institutions in Brazil, Chile, Colombia, Mexico, and Peru. Descomplica, the Brazilian “true-online” classroom for instance has received large funding of USD 14m from US based VC funds such as Valar Ventures and Social Capital. Brazil is obviously the biggest market gathering over 200 million people around the same language. Other very dynamic countries like Honduras or Colombia also pull the overall Spanish speaking market with 2-digit growth rates.
Latin America has become the fourth largest EdTech market in the world, after North America, Western Europe, and Asia in terms of revenues, being nowadays one of the most innovative ecosystems.
But some developing economies have to cope with structural challenges
But when it comes to Africa the picture is unfortunately very different. Amongst nearly 128 million school-aged children, 17 million will never attend school. Another 37 million children won’t be able to receive regularly at least a basic education because of child labour, insecurity or lacking education policies. Moreover only 29% of the continent can rely on a permanent access to the Internet.
Though, within the next 4 years 80% of the world population will be able to access mobile broadband, allowing innovative educational solutions to spread even across remote lands. Given the fact that Africa is one of the fastest growing market for mobile phones, mobile EdTech or m-learning is becoming a major gateway to provide educational content inside and outside of schools. Cape Town based Rethink Education serves as a good example to point it out. Its mobile platform pushes content to instant messaging platforms, while the web platform is used in schools, improving dramatically the engagement of learners. Similarly, Ubongo in Uganda simplifies the teaching of mathematics with fun video stories and SMS. Africa is becoming one of the most dynamic e-learning markets, with revenues reaching USD 355m in 2013 and will more than double to USD 758m by 2018, led by Senegal, Zambia and Kenya.
However it would be wrong to expect technological progress to solve by itself all the structural and cultural challenges that are preventing a locality to harvest the best of its people.
When infrastructure and investments are lacking, only coherent initiatives led in partnership with local governments, industries and populations can set good roots for further innovations. Let us take an example: the Jacobs Foundation, the Bernard van Leer Foundation and UBS Optimus Foundation joined forces with the four largest nine leading cocoa and chocolate companies under the roof of the TRECC program to achieve real impact in education and community development in Ivory Coast (the largest cocoa producer in the world).
Together, TRECC and the companies will invest CHF 8.5M to improve quality of education in rural areas in Ivory Coast. Reaching about 80,000 people in an estimated 150 communities, this program will test different education models that have been proven around the world. TRECC works in close relationship with the Ivorian government, who help implement some of the models and scale up successful ones. The program intends to ensure healthy development during early childhood, improve students’ outcomes at the primary school level and boost technical, entrepreneurial and life skills for youth starting their professional lives.
Regarding the way Ed Tech startups are able to address specific issues, and improve existing learning methods, it is very interesting to witness how they leverage their own environment to shape relevant solutions to empower learners. By alleviating some obstacles that the population could be coming across to access education, EdTech startups already offer a wide range of features in emerging and low-income countries as well. When we think about it, we usually forget that innovation can also be a pain reliever for learners, teachers, families and authorities when a country faces major under-development. In this way, African EdTech market is booming thanks to strong entrepreneurial minds, and a necessary resilience.
Preparing and empowering the future labour force, this is a common challenge for EdTech startups in developed and emerging economies. Providing adaptive and specialised learning solution, the skill-based education has become the most rational solution to address today's and tomorrow's labour needs of corporates.
In the meantime providing fundamental education to regions in which school has not been priority can only be achieved by undertaking coherent actions with local players to trigger deep changes in the way communities live. Complemented by EdTech solutions, education is about to change the destiny of millions of learners and nourish the growth potential of local enterprises.
Seedstars partnered with TRECC & HEG Fribourg to find and support the best education startups from around the world. Seedstars World teams were scouting for the best startups in 80+ locations worldwide, and the best EdTech startup will win an access to the Seedstars Growth Program and will be awarded USD 50k by TRECC & HEG, to be announced at the Global Summit.
Thanks to Christian Rollmann, Finance & Entrepreneurship graduate and Tech enthusiast, for providing these insights about the EdTech industry.
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