2020 was a breakout year for EdTech.
Global EdTech venture capital firms raised a staggering $16.1 billion in 2020 as students of all age groups and nationalities continued their education remotely. At the beginning of the pandemic, almost 1.4 billion students, who make up approximately 80% of learners worldwide, were impacted by school closures. Online teaching came into the spotlight last year, but it appears to have captured the attention of many, even as educational institutions reopened. This created unprecedented opportunities for EdTechs. At present, there are nearly two dozen EdTech unicorns, many of which are in the United States or China. However, Chinese EdTechs hit a major roadblock in July of this year.
A major regulatory setback for Chinese EdTech
Chinese education companies have been a driving force for EdTech, but they’ve encountered a major setback. China recently introduced new regulations which ban companies that teach school curriculum subjects from making profits, raising capital, or listing on stock exchanges. As a result, these companies can no longer receive foreign investment. This is a major blow for Chinese EdTechs such as Yuanfudao, 17zuoye and VIPKid, all of which have multi-billion dollar valuations.
With Chinese EdTechs banned from making profits, there is little doubt that investment will now shift towards the European Union and North America, where the sector is booming.
Consumers are seeking more educational opportunities
However, interest in online education stretches beyond schools, colleges and universities. Individuals of all ages are actively seeking more educational opportunities at all levels of study.
We found that demand for online learning peaked in April and May of 2020 as schools were forced to close. However, once schools opened and demand declined, it settled at almost double pre-pandemic levels. Between June 2020 and June 2021, search demand increased by 72%, and between June 2020 and June 2021, by 16%. The pandemic appears to have reignited interest in online learning opportunities, and, naturally, investors are interested in this trend.
The trajectory of EdTech has changed significantly since the sector entered its growth phase. Earlier last decade, several up and coming EdTech companies had hoped to be acquired by education industry giants such as Wiley and Pearson or McGraw-Hill. However, these legacy education companies did not scoop them up as expected. EdTech interest has grown since then and these companies may now be unable to afford to acquire them. Instead, disruptive EdTechs are coming into their own with the help of bullish investors looking for lucrative returns.
EdTech Funding Activity
2021 is shaping up to be a good year for EdTech funding, and several lucrative funding rounds have occurred. The global tutoring platform GoStudent grabbed headlines when it raised $244 million in a Series C round that valued the company at $1.7 billion. GoStudent is experiencing consistent growth; the Vienna-based startup operates in 18 countries and runs 400,000 sessions per month with 700% year-on-year growth. Additionally, OpenClassrooms, a France-based online educational platform, recently raised an $80 million funding round led by Lumos Capital Group. However, tutoring platforms and online classrooms are not the only online education sub-sector investors are looking at; eLearning courses are catching their eye.
Online learning platforms such as Udemy, Skillshare, EdX, Coursera and the Open University have experienced success over the past 18 months. We compared H1 2020 to H1 2019 and found that all saw significant growth in demand: Udemy by 87%, Coursera by 166%, EdX by 71%, Skillshare by 103%, and Open University by 46%.
Understandably, a comparison of H1 2020 and H1 2021 revealed a decrease in demand, evidencing a slowdown in interest. However, by comparing H1 2019 and H1 2021 data, we are able to demonstrate that overall demand for online learning has grown. All five platforms saw a percentage demand boost of at least 12%, but Coursera came out on top with 99% growth. While platforms such as Skillshare and Coursera saw the fastest growth, Udemy still holds the largest share of the market.
Educational Institutions see online course demand skyrocket
Online courses operated by schools such as Harvard, MIT, Stanford, Yale and Oxford all experienced a more significant jump in demand than online platforms such as Udemy and Coursera. However, it is important to note that they are a fraction of the size. For example, Harvard online users have only 3.1% of the users that Udemy has.
The demand for online courses operated by these institutions grew significantly when compared to H1 2019. For example, Yale saw a demand increase of 1.3k% between H1 2019 and H1 2021. Similarly, Harvard courses saw a demand increase of 874% in the same period.
However, they also saw a more pronounced decline post-pandemic as interest died down. Like online courses by platforms such as Udemy and Coursera, school-backed online courses saw a boost in demand overall. Out of the five schools, Harvard and Yale saw the most significant increase in demand, 211% and 217%, respectively.
Which online learning courses are the most popular?
At the beginning of lockdown, we found that there was a massive surge of interest in online classes in creative fields and languages. However, as lockdowns persisted, courses such as coding became increasingly popular as concerns about long-term job security grew.
More workers are looking to improve their job prospects through upskilling. The pandemic saw millions of jobs lost and a boom in new technology with the potential to make specific roles obsolete. Online learning platforms see an opportunity to upskill individuals who are concerned about their future careers. Anant Agarwal, founder and CEO of the online learning platform EdX, said that “when the pandemic hit suddenly people who were in jobs began to realise ‘Oh my goodness, I need to be prepared for if I lose my job.’” He told CNBC that the company saw a 15-fold increase in the number of new learners registering on EdX in April 2020. Clearly, people are actively seeking educational opportunities to improve their skills and, by extension, their employability.
EdTech is powering private tutoring
It isn’t only online courses that are benefitting from the EdTech boom. Online tutoring is also catching the eye of investors as parents look for ways to help their children catch up on their learning post-pandemic.
One of the most recent EdTech players to step into the spotlight is BYJU’S, India’s first EdTech unicorn with an estimated valuation of $16.5 billion. The company has acquired several companies in the United States and India and has also raised $350 million from UBS Group, Blackstone, Zoom founder Eric Yuan, among others. Their plans for global expansion have made them an attractive option for investors.
Similarly, in the United States, Nerdy, the parent company of Varsity Tutors, will be acquired by TPG Pace Tech Opportunities, a special purpose acquisition company (SPAC). The company is one of the biggest EdTech players in the online tutoring space. Since its inception, the company has received investment from several venture capital firms, including the Chan Zuckerberg Initiative, Learn Capital and Technology Crossover Ventures.
It has always been easier for EdTech startups to sell directly to consumers rather than schools, but this may change. Several startups believe that offering their services to schools will have the biggest impact on students looking to supplement their learning. For example, Paper, an educational software provider which offers tutoring services in schools, just announced that it has raised $100 million in a Series C funding round.
Some of the fastest growing players in the market are focused on supporting those who have missed out on their regular education. As a result, the market is likely to receive government-backed contracts which will rapidly increase the value of the market and the total addressable market share.
What does the future look like for EdTech?
The level of funding given out to EdTech companies in 2020 and 2021 bodes well for the future outside of China. Online learning will continue to permeate K-12 education, colleges and universities, and online courses. The virtual courses, designed to upskill workers, will continue to see record numbers of new users as companies diversify their offerings thanks to new funding. Additionally, online tutoring platforms are likely to receive government-backed funding to supplement the education of children affected by the pandemic. The sector is ripe for investment, and many believe that the only way is up.
This article features multi-source, triangulated data insights generated by onefourzero’s expert consultants. To learn more about how we can assist your business by providing data with commercial value, please click here.