Investing in ed-tech Startups may bring both profit and purpose together
The education industry, one of the largest and most significant sectors of the global economy, is undergoing a digital transformation. As more efficient and engaging kinds of educational delivery channels develop, artificial intelligence, automation, and digitalization are changing norms in education. With education being one of the most conventional industries internationally, where the “service” has been given in nearly the same way for centuries, there has been very little innovation. In reality, previous to COVID-19, digital technology adoption was minimal, at only 2-3%, well below most other areas of the contemporary economy. COVID-19, on the other hand, has catapulted educational technology, or ed-tech, into the mainstream, removing the primary bottlenecks, notably instructors’ aversion to using new digital technology tools and students’ and parents’ beliefs that education cannot be provided online. Adoption and usage have increased dramatically, and demand for ed-tech solutions has skyrocketed, accelerating the digitization of education by five to 10 years.
Before the pandemic and the overnight shift to working from home, online learning was a sliver of what was available offline. In most situations, it supplemented traditional learning methods or replaced live tutoring when there was no other option. There were no other options during the crisis, so going online became the standard. Ed-tech has the potential to change education as we know it, thanks to more resources and a large population of instructors and students who are now much more open to online learning.
Ed-tech, in particular, has the potential to make the educational process more interesting and, as a result, more efficient and successful. We think it’s a promising sector at this point of its development. Credit Suisse focuses on new, creative businesses that challenge the status quo in education, skills, and corporate learning. They are mostly small- to mid-cap companies that are seeing excellent top-and bottom-line growth. Their products and services appeal to tech-savvy millennials while also catering to the silver economy, which is growing as people live longer and want to learn and experience more.
Ed-tech is no longer a rising star in India, but rather a mature business with more than US$5 billion in private equity investments in the previous five years. In this sector, two unicorns have already emerged, with Byju’s being the most valued unicorn out of India at US$16.5 billion and Unacademy just joining the rare billion-dollar club. According to a recent analysis by RBSA Advisors, there are presently over 4,500 ed-tech companies working in India with educational technology, a sector that is expected to expand to US$30 billion in the next ten years from its current market size of approximately US$800 million.
With schools going online and work from home culture primed to become an accepted way of life, the pandemic-driven lockdown has provided a tremendous boost to the already booming sector. According to a recent article by The Ken, Byju’s has gained 20 million new students to its platform since the pandemic began, bringing the total number of enrolled students to over 64 million.
Ed-tech has the potential to transform India by laying the groundwork for a level-playing field in education across the country, with online platforms delivering the same content to urban and rural populations, the rich and poor, people of all castes and creeds, and bridging the divide more effectively than ever before. The Indian government has recognized the value of educational technology with artificial intelligence and has established several initiatives, including Skill India, SWAYAM, SANKALP, STRIVE, DIKSHA, and the National Digital Library.
In India, K-12 education is the most popular, followed by online exam preparation and online certification. Corporate training, teacher training, performance monitoring, artificial intelligence or machine learning-based personalization tools, gamification of pedagogy, upskilling on hobbies and interests, as well as vernacular-medium semi-urban and rural population-focused products or services, among other things, could provide a wealth of investment opportunities in the future.