EdTech funding is hitting record levels, never seen before. A recent report by Ambient Research put edtech funding for H1’15 at $2.5b (in contrast to $2.4b funding for the whole of 2014).
In India we haven’t seen the kind of frenzy around edtech funding we have seen in China. 8 Chinese companies saw funding of $50m+ in the first half of 2015. These 8 companies raised more money than all Indian cos put together ($137m) with the single largest Indian deal being possibly a ~$30m investment in Simplilearn (in two phases by Helion, Mayfield, Kalaari) and a $20m investment in PagalGuy (not clear by whom). Other notables include UEducation’s $16m investment from Ronnie Screwvala, Toppr’s $10m from Fidelity Global and VedantU’s $5m from Tiger. (See TOI’s story on India’s fledgling edtech sector). Still, it is only likely to get bigger going forward.
How should one make sense of these different investments? Is there a framework to understand VC investments in the edtech sector? I have covered aspects of these in several of my blogposts before such as A Framework for Startups to Explore Higher Ed Opportunities and Technology is Eating the University, but i don’t think i have looked at something that encompasses the entire education sector. Here goes.
There are possibly 3 broad investment themes at play. Are these 3 MECE (mutually exclusive and collectively exhaustive)? Perhaps the first, but I am not entirely sure of the latter. As time goes by, more themes will get discovered and played, but still, this is a good place to begin. The 3 are
- Lifelong learning or as GSV, a leading U.S. PE firm refers to this, KaizenEdu. As opposed to traditional learning which is restricted to ages 5 to 25, lifelong learning is predicated on the assumption that the digital-age economy mandates continuous investments in skilling, as new jobs arise and new skillsets are called for. This throws up opportunities for two kinds of companies
- one around skill acquisition to enhance job / career prospects such as lynda, skillshare, simplilearn,
- the other around fun / edutainment such as curious, rouxbe, gardentribe etc
- Unbundling of college (the bundles that a college sells are signalling (selectivity of intake, credentialization), skilling, socialization (access to peer networks, campus life), transformation (complete 4-yr experience making a man out of a boy), access to opportunities (corporate interaction / internships, access to placement office). These are getting unbundled out of the college, or getting rebundled into new bundles etc. Mettl, Enstitute, Coursera, CampusJob, CoCubes etc are all examples of startups that are targeting one specific bundle well. Over time, supported by the rise competency-led models, dynamic transcripts that communicate the complete portfolio of learner skills, and corporate acceptance of non-traditional pathways (such as a profile of a student who hasn’t been to college, but has skilled herself through internships, gigs, short-term courses etc), startups who attack these individual bundles can threaten the entire university edifice
- Enhancement of traditional education business models or processes thanks to the rise of tech and mobile – from digital textbooks (Khan Academy) to on-demand tutoring (CourseHero, Vedanta) to gamification of content (DuoLingo). Each of the traditional education processes can be rethought afresh through the lens of tech and mobile. Some more examples
- enhance communication processes between students, parents and teachers – ClassDojo, EdModo
- help universities connect to students (and improve their marketing ROI) – RaiseMe
- testing students for mastery – Educational Initiatives’ ASSET exam
Startups attacking edtech space can use the above framework to systematically identify opportunities and attack them. In a future post, I will explore theme #3 in terms of its sub-components. I have looked at #2 in terms of its sub-components here.