Future of Edtech Firms
Investors are drawn to the entrepreneurial potential of a business that caters to individual students rather than a slow-moving, small-pocketed school.
When you add in a pandemic that compelled many people to accept remote learning overnight, it's no surprise that firms like Outschool and ClassDojo have made their first profits, while startups like Quizlet and ApplyBoard have been valued at $1 billion.
The industry received a flood of record-breaking venture financing last year. According to PitchBook statistics, edtech firms raised $10.76 billion last year, up from $4.7 billion in 2019. While delays in reporting might affect this figure, venture capital investments have more than doubled since the epidemic started. In the United States, edtech companies raised $1.78 billion in venture financing in 265 transactions in 2020, up from $1.32 billion the year before.
The emergence of double-bottom-line investments will undoubtedly shake up the EdTech industry. Many educational duties and classrooms are becoming virtual, and money is anticipated to follow. But how can we ensure that this new hybrid educational environment is stable, safe, and innovative? It's a problem that many entrepreneurs are now attempting to solve.
To be honest, many venture investors have a bad perception of EdTech investments, as if they are second-rate investments. Because many EdTech businesses are created by full-time educators, it's tempting to dismiss their founders as lacking in "appropriate" business abilities. That approach does not completely fit with an investor's ideas of what an entrepreneur should look like. Those entrepreneurs, on the other hand, have spent their lives as educators, saw a chance for disruption, and bravely stepped into an unknown future. That person is the epitome of a pioneer.
EdTech companies may be just as inventive and lucrative as any other company. The way education-based investments are framed—or pitched—to investors further muddies the picture. Re-frame your elevator pitch, refresh your deck, and realign your objectives if you're an EdTech startup. That's all there is to it!
Education technology solutions are expected to evolve in tandem with advances in cutting-edge technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), Augmented Reality (AR), and Virtual Reality (VR), and to contribute significantly to market growth by providing an interactive online learning experience. In a survey produced by HolonIQ, worldwide education venture capital financing was estimated to be worth USD 7 billion in 2019. They also expect a threefold increase in edtech investment over the next decade.
Looking at learning technology suppliers more generally, Metaari estimates that worldwide private investment in learning technology suppliers totaled USD 18.7 billion in 2019.
Furthermore, the government's intervention through NEP 2020 (National Education Policy) supported the edtech industry's exponential expansion, with expectations of even faster growth.
The edtech industry is expected to increase 8x to 10x in the next five years, from an estimated value of USD 700 million currently. The radical set of regulations is expected to enhance the industry, allowing students to become all-rounders and creating dynamic communities of academics and aristocrats.
Furthermore, new features and technologies continue to emerge to meet the increasing demand for online education, which is fueled by the epidemic and the limits it imposes.
Reasons for VCs' Increasing Interest in the EdTech Sector
1. Unrealized Potential
Even now, certain areas and communities lack access to educational resources. They are unable to get even the most fundamental learning experience. Similarly, there are a number of individuals who want to learn something new or improve their abilities but are unable to do so inside the conventional educational framework.
All of these examples demonstrate a plethora of untapped market prospects, giving edtech VCs confidence that investing in education startup financing ideas would pay off handsomely.
2. Increased acceptance
Edtech platforms connect individuals who want to learn and those who provide the same service by bringing them together digitally on the same platform. They provide them the ability to learn anything, at any time and in any location, at their own speed. Furthermore, these platforms make use of cutting-edge technology such as artificial intelligence and the Internet of Things.
Because of these two factors, edTech concepts are not only gaining popularity among consumers, but also drawing more investors.
3. The need for lifelong learning
With the pace at which information is expanding these days, and the time it takes to master a talent in order to apply for any job, another skill is quickly becoming the show-stopper. As a result, they must embrace the concept of lifelong learning. Finally, urge investors and developers to put their time and money into building mobile applications, which are projected to represent the educational industry's future.
4. There is Less Competition
Another reason why investors like the notion of developing educational mobile apps is that there are still subdomains where just one or two businesses are altering the tale. As a result, there is less rivalry and a larger market opportunity, resulting in a lucrative edtech venture.
5. A higher return on investment
As previously said, the EdTech industry is developing at an exponential rate, its solutions are generally recognised, competition is low, and so on. All of these variables imply that the return over investment, or ROI, in the online education arena is exponentially larger, and it would be a mistake for an investor to neglect this opportunity.
While this clarifies why educational investors and entrepreneurs are flocking to edTech, let's look at the second essential question: Should one invest in the notion of creating their own online education and edTech startup?
Education Technology Challenges Your Startup Might Face
1. The external ecosystem's vulnerability
While the educational ecosystem may seem to be the ideal setting for a "one-size-fits-all" strategy, it is not. That is not the case.
When you look further into the education and learning sector, you'll see that social and cultural elements have a significant impact on the presence and effectiveness of any learning solution.
As a result, the most difficult issue to overcome is comprehending the complexities of the educational system and developing your EdTech firm while taking into account all of the linguistic and cultural limitations.
2. Technological infrastructure is required.
Even today, many parts of the globe lack basic infrastructure and resources, such as power and Internet access. The network latency is far greater than intended, causing the app pages to take hours to load. In the case of video classes, the buffering might go for years.
This makes it practically difficult for students to benefit from the advantages of employing the best EdTech solutions and contribute to the marketplace's success. Which suggests that a lack of sufficient technical infrastructure is one of the difficulties that leads to the failure of EdTech firms.
3. The Targeted Audience's Attitude
EdTech solutions bring a feeling of ease to the environment by providing real-time and customised services. Some students, on the other hand, view this as an opportunity to get away from a structured learning environment. This makes dealing with uninspired pupils even more difficult for instructors and others.
Another problem you must address is striking a balance between convenience and customer involvement.
4. Decreased Monetization
Most online education entrepreneurs use the freemium model to grow their businesses since customers are more interested in free courses and study materials. No surprise, the brand's downloads have increased as a result of this monetization approach. However, it does not result in a greater retention rate.
One of the main reasons for this is that individuals are only willing to pay for goods that will benefit them in the long run. Or, to put it another way, items that help students learn and improve the abilities that are in great demand in the business sector.
Another reason why the EdTech sector isn't thriving is the lack of business models that profit from educating and preparing users for the best job prospects.
While these are the problems that must be overcome in order to ensure a win-win scenario in the education industry, it is not advisable to attempt to tackle them alone. For this, you should seek the assistance of the top education app development services companies. Someone like our EdTech software development team.