4 edtech CEOs peer into the industry’s future


Image Credits: Bryce Durbin / TechCrunch

When Zach Sims first started pitching his coding startup, Codecademy, he framed it to investors as a corporate tutoring company. That was intentional, despite the fact that edtech is a $5 trillion business.

“It was much easier for investors to understand instead of an education company,” he said, noting that the industry has long been defined by tight budgets and slow sales cycles.

But, as millions adopt remote learning overnight, edtech’s reputation is changing — and investors are scrambling accordingly. The revitalization means that a new wave of edtech startups is upon us. We asked four entrepreneurs who have been working in this space to share what they think the next billion-dollar business will look like. While we’ve covered the investor side of edtech quite a bit, it was refreshing to hear from founders and executives who are on the ground making decisions:

How to sell: Classroom and outside the box

According to Matthew Glotzbach, CEO of Quizlet, “any edtech solution tailored toward schools and classrooms may find a significant headwind,” such as games or VR/AR headsets that need to be used within classroom settings. “Not because physical spaces are going away, but in this limited time, limited budget environment, teachers and administrators are going to spend their money on solutions that are more tailored toward distance.”

Startups should plan to be useful in both a pre-coronavirus and post-coronavirus world, likely hybridizing tech solutions that are useful for day-to-day classroom operations as well as remote learning.

How to reach scale: B2C or B2B?

A majority of U.S.-based, billion-dollar edtech companies (Duolingo, Udemy, Udacity and Course Hero) focus on selling to consumers instead of other businesses like schools and universities. Internationally, the appetite for extra schooling and tutoring is an explosive market: English learning and test-prep unicorns include China-based VIPKid, a $3 billion business, and New Oriental, a $20 billion business, as well as BYJU’S, an $8 billion business from India.

Glotzbach said edtech’s consumer side has more potential because it is easier to sell to single-decision makers like parents, as opposed to highly fragmented school systems. The dividing line between B2B and B2C, he said, will increase over time as more parents learn how to work with tutoring services at home. “And, as we all know, it’s not like schools have a lot of extra money sitting around.”

As with any trend, however, there are outliers. DreamBox Learning, an online math platform, pivoted in 2010 from B2C to B2B so it could reach more students.

“We wanted all kids to have access to effective learning tools, not just those who could afford it,” said CEO and president Jessie Woolley-Wilson. The move helped grow DreamBox to serve five million students and 200,000 educators across all 50 states, Canada and Mexico. The company has raised $210 million in known venture capital to date.

Counterintuitively, recent news shows that B2B startups are benefiting from students being at home, too. ApplyBoard, which sells its software to colleges that want to market to international students, just raised $75 million and is now valued at $1.4 billion. Niche raised $35 million for its college search platform, and its main source of revenue comes from subscription fees it charges universities. Along with new cash, both companies have seen customer growth increase since COVID-19 began.

The data points show that there is promise in selling to large businesses in a world where physical college tours are no longer a reality. Colleges are looking for alternative marketing channels to cope with travel bans and social distancing. At least currently, that means tech is showing up to help with the digitization. May the digging for dollar signs continue.

Understanding the fragmented market to your advantage

When shelter in place began across the world, Glotzbach said the online notecard company saw Singapore’s active user base double overnight. Why? Education policy, he noted.

Singapore’s education system is centrally controlled, Glotzbach explained, with a single Ministry of Education offering policy for the whole country. It’s good news for startups that want to grow across an entire country, but it’s a completely different story domestically.

“The United States has a highly distributed model,” he said. “The education systems are not federally mandated beyond the local district level, so there is not a discrete pattern for us to track.”

It’s worth noting that this all might soon change, due to the massive experimentation happening within the United States. Schools are turning to startups to virtualize tours, teachers are using virtual lab companies to mimic biology class and videoconferencing is a necessity, not a tool.

Historically, however, the United States has been slower to adopt edtech than other countries. Udemy, a San Francisco-based learning market place last valued at $2 billion, recently released a report to give a little insight into how people around the world are learning; the company had 130% growth in enrollments in the U.S., 200% in India, 320% in Italy and 280% in Spain.

Darren Shimkus, a general manager of Udemy for Business, said that to be successful, “companies can and should have global aspirations.” But, you can’t force global expansion, he said.

“If you have a product where you’re not already being pulled in Nigeria, or Brazil, or Bangladesh, it’s really hard to force that,” Shimkus said. “The nuts and bolts of making it happen are really, really hard.” The San Francisco company last raised $50 million at a $2 billion valuation in February from Japanese publisher Benesse. Shimkus said the raise was opportunistic — versus necessary — and will be earmarked for global expansion.

The rapid implementation of technology during COVID-19 is giving edtech founders many opportunities to fill in the cracks. While we can’t predict which startup will be the next billion-dollar business, we can turn to the past to see what worked and the present to see what might happen next.

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