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Edtech market landscape and growth in the short run of pandemic
Edtech abbreviation for Education Technology is the combination of IT tools and educational practices aimed at facilitating and enhancing learning. Edtech encompasses not only the hardware and software program but also the learning theories and the most effective ways to teach people. Edtech solutions are being increasingly adopted as it offers numerous advantages. A majority of educators believe that each student learns at their own pace, a few major benefits that Edtech offers students are the accessibility of resources to learn from and flexibility to train at their individual pace. Another advantage is the comparatively lower cost which makes it more affordable for anyone to expand their knowledge.
Globally the market opportunities amount to $227 Bn and likely to reach $404 Bn by 2025 growing at a CAGR of 16.3%. The global Edtech venture capital funding in 2019 was around $7 Bn, in 2020 this amount increased more than doubled and reached $16.1 Bn! The booming sectors of Edtech are
· K-12 education
· Post-secondary education
· Corporate training
K-12 is the largest segment of the market; however, the highest funding received was by skill development startups. This signifies that the rise of Edtech startups has created awareness for skill development and not just graduation for a successful career.
· Key Players: Byju’s, Yuanfudao, Zuoyebang, VIPKId, Articulate, Udemy. etc.
· Market Size: $227 Bn
· CAGR: 16.3%
· Average Valuation of top 10: $6.49 Bn
Edtech market size ($ Bn)
Source: Holon IQ
The rapid change in industry dynamics post-covid
The pandemic resulted in shutdowns of physical classrooms, globally, over 1.2 billion children are out of the classroom. To tackle this education changed drastically with the rise of e-learning and remote teaching. Prior to the pandemic, the EdTech sector was growing but at a relatively slower rate as online education was still met with some resistance. The lockdown and fear of COVID-19 spread have taken schools, colleges, and educational institutes online, thus leading to the emergence of many EdTech products and services and a rise in adoption. Though in its nascent stage, there has been a significant transformation in curriculum development and pedagogy where we have moved from thinking digital to being digital.
Drivers of growth
- Penetration of technology:
The increasing penetration of mobile devices, easy accessibility to fast internet, and the impact of the pandemic and growing online teaching-learning models to keep running the education system are majorly driving the growth. The presence of interactive and immersive learning can impact several as it increases the level of interaction. Educators are also increasingly adopting newer technologies like AI, virtual reality, and gamification.
- Integrating traditional teaching method
Edtech development over the past made the educators doubtful about the impact of technology on improving the outcomes of students. It also created suspicion about overreliance on smart devices. However, the situation is now changing with schools investing more in the attempt to integrate new technology into traditionally delicate educational structures. Employers are also investing in such skills with a focus on leadership and management and creative problem-solving.
- APAC region largest opportunity in Edtech
China and India are the biggest markets for education in the world. The Asian region has always shown lower-income elasticity for education relative to other sectors. Moreover rising access to digital tools and increasing government initiatives in India and China has further emphasized the importance of education.
VC Deal Size
Segment-wise market mapping and major players
The ed-tech industry, generally segmented into the Pre-School, K-12, and Higher Education sectors have continued to evolve over the years.
- Pre-school and Early Education:
With digital learning, the preschool segment is expected to witness the fastest CAGR from 2021–2028. The global early education market is expected to reach $480 Bn by 2026. Implementation of technology in this segment will enable educators to use applications to maintain records of the students in a much more efficient way, as well as help curate interactive games, storybooks, and other content for early childhood learning. Companies like Makeblock, Tinker Garten, Flintobox, etc., provide interactive activity-based learning for young minds.
- K-12 Segment:
The major share is captured by the K-12 sector, with a share of about 41% as of 2020. There are great developments in the education system across the globe that supports experiential learning which is enabled with the help of gamification and AI-based technology. While the use of technology such as interactive whiteboards, learning management systems had already started to gain acceptance before the Covid-19 pandemic era, more focus is shifted towards software that provide O2O tutoring, virtual field trips, interactive lab experiments, etc. Key players in the K-12 segment are BYJU’S, K12 Inc., Kahoot, Khan Academy, Chegg, Quizlet among others.
- Higher Education and Professional Training:
The global higher education market is expected to grow at a CAGR of 10.2% from 2019–2027. With university and college fees soaring, people are relying more on edtech platforms for e-learning, college or career preparations, and even financial assistance. Professionals in the modern world are constantly required to constantly upskill themselves to match with the evolving job opportunities. Thanks to MOOC platforms, one can now have access to the world’s top university courses, sitting at home. Major edtechs like Coursera, upGrad Education, Udemy, Skillsoft, DataCamp, etc. make learning an easy and affordable process for young aspirants and professionals.
Innovations and new technologies leading to a colossal $404 billion market in the future
Implementation of the latest technology contributes significantly to the growth of the edtech industry.
- Adaptive learning with AI: AI is considered to be a blessing as it evolves the learning content according to the needs of the user, making it more adaptive. With the increasing use of AI for interactive and experiential learning, global expenditure in AI for education is expected to increase to $6 Bn by the year 2025. Apart from the learning experience, it makes it easier for educators to keep a record of their students.
- Robotics reduces human intervention: Apart from being more adaptive, the use of Robotics makes the learning process more interactive and enjoyable, for young minds. With a high student-teacher ratio in countries like India, robotics make way for one-on-one interaction with the learner. Robotics, specifically in the education market, is expected to reach $3.1 Bn by 2025.
- More immersive learning with VR: Augmented and virtual reality technologies facilitate immersing learning as it replicates physical experiences virtually, making the learning process more fun, engaging, and coherent. Conditions like the Covid-19 pandemic, have created a realization of the growing need for AR and VR in education.
- Boosting creative mindset with 3D Printing: 3D printing helps create objects that are helpful in enhancing the spatial knowledge of the learners. Raising awareness among learners and educators about the new 3D printing technology will facilitate the use of custom-made, affordable, user-friendly products. Leading universities like MIT, Virginia Tech, and University of Texas have already started creating awareness about this technology through its courses.
Valuation multiples for the global edtech space
Global peer comparision and their EV/Revenue Multiple
Edtech sector provides a lucrative investment opportunity with high growth prospects, but as evident by the peer comparison as the company grows the market saturates as most of the available opportunities have already been captured. We are cautiously optimistic about entering into the market as later into the life cycle of the business chances of above-par returns will be sleek.
The edtech conundrum: necessity or costly?
Online courses and programs offer cheaper options for learning than traditional education options. According to reports, a degree course in a traditional university or college costs a total average of $85,000. On the flip side, an online degree costs $30,000. This means enrolling for a course online offers students the opportunity to save more tuition fees and boot camps while enjoying greater flexibility. However, that doesn’t mean that the traditional method is not all bad; they offer tangible learning and study experience and access to university resources.
In our opinion both methods have several offerings and calling on better than the other won’t be right as both have their pros and cons. This brings us to the inevitable, that integration of both the methods is the way going forward.
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