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3 bearish takes on the current edtech boom

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Edtech is booming, but a short while ago, many companies in the category were struggling to break through as mainstream offerings. Now, it seems like everyone is clamoring to get into the next seed-stage startup that has the phrase “remote learning” on its About page.

And so begins the normal cycle that occurs when a sector gets overheated — boom, bust and a reckoning. While we’re still in the early days of edtech’s revitalization, it isn’t a gold mine all around the world. Today, in the spirit of balance and history, I’ll present three bearish takes I’ve heard on edtech’s future.

Quizlet’s CEO Matthew Glotzbach says that when students go back to school, the technology that “sticks” during this time of massive experimentation might not be bountiful.

“I think the dividing line there will be there are companies that have been around, that are a little more entrenched, and have good financial runway and can probably survive this cycle,” he said. “They have credibility and will probably get picked [by schools].” The newer companies, he said, might get stuck with adoption because they are at a high degree of risk, and might be giving out free licenses beyond their financial runway right now.

“They’re spending all their resources and money meeting near-term demand and it’s not clear in the short-term what will translate into revenue dollars.”

Jan Lynn-Matern, founder and partner at Emerge Education, a European firm, recognizes edtech’s waves of popularity. Years ago, Lynn-Matern said the sector heated up because of the MOOCs (massive open online courses) like Coursera, but then lost popularity soon after.

It has not forced the education-focused investor to change much.

“To be honest, we’re not like over-reacting in either direction,” he said. “We are going with exactly the pace we were going at pre-crisis, and we are being very considerate about where we put money.”

“We are not funding tutoring companies or homeschooling companies just because they have become more popular over the last four weeks,” he said. “We have core theses on what we think is fundamentally going to happen over the next 10 years.”

This comment stuck out for me because it sounded almost like a subtweet: Homeschooling startup Primer recently raised money. Flashcard companies like Quizlet have raised, and tutoring businesses like Juni Learning have also been seeing unprecedented inbound from investors.

These existing, yet nascent categories that Lynn-Matern is hinting at include challenger online universities, vocational schools and up-skilling opportunities.

Now that we know that the next wave of edtech companies might struggle, and high-competition sectors are risky bets, there’s one more trend I want to call out: the cliché that it is hard to sell B2B in edtech.

Monetization in edtech has always been a challenge, particularly when companies are selling to businesses instead of directly to consumers. This is largely because schools don’t have a lot of extra money sitting around and budgets are tight. Throw in a once-in-a-lifetime pandemic and reduced spending at the state and local level, and school districts may not be ordering thousands of VR goggles for their students when doors reopen.

What happens to edtech when kids go back to school?

However, as lockdowns extend, schools — particularly higher-ed — need new ways to get on the radar of incoming students. If you look at some recent customer-growth metrics of B2B companies, proof is there that budgets are changing.

Toronto-based ApplyBoard, which connects international students to opportunities abroad, raised $75 million earlier this month at a $1.5 billion post-money valuation. The company had a 200% month-over-month surge of new schools signing up for its service. On the complete other end of the spectrum, EdSights raised $1.6 million in new funding after doubling the customers it had taken a year to secure in just one month. The company sells a chatbot that checks in on students and connects them to resources at universities, and charges per student.

While edtech has stepped up in the past few months to connect millions to studies, it doesn’t mean a spray-and-pray approach is what the entire category needs from a startup generation to investment perspective. The boom will only last for so long, but when students return to campuses, only the strong will avoid the bust.

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