The Post-Pandemic Outlook for Edtech
The pandemic came early to Seattle. By mid-March, schools closed, sending students home to figure out how to keep learning from their kitchen tables.
The sudden shift gave leaders at DreamBox Learning, a math education company headquartered nearby, an early glimpse at the upheaval to come and an inkling that digital teaching tools would soon be in high demand around the country.
But how to make the most of the moment? Soon, schools would be inundated with sales pitches from edtech companies, and it didn’t take long before they started pushing back against those that seemed predatory.
Rather than chase new business, DreamBox prioritized existing clients. The company invited its school district partners to make the online platform—which combines kid-friendly graphics and game elements with problem sets and lessons—available to more students, at no extra cost. Four thousand schools accepted the offer. In a matter of weeks, DreamBox went from 3 million to 5 million student users.
That strained the company, but it also notched DreamBox record levels of renewals. Districts expressed interest in additional DreamBox products that address other pandemic-related problems, like its new predictive analytics tool, designed to assess student progress and learning loss in lieu of now-canceled standardized tests.
And customers seem grateful.
“If we deliver some value to them in this crisis, we hope we become an essential part of their mathematics strategy and practice,” says DreamBox CEO Jessie Woolley-Wilson. “And when it comes to renewal opportunities, district leaders will consider DreamBox more seriously and with more intentionality than they might otherwise have.”
For the edtech industry, the pandemic poses a paradox. Never before have schools and colleges so urgently needed digital tools and services to facilitate remote learning—and been less able to afford them. The federal government promised more than $30 billion in relief support for education, but school and college leaders say that won’t be enough to make up for decreased funding from local and state governments and lost tuition revenue. Big budget cuts are coming, or have already arrived.
It’s going to be a hard few months, or even years, for edtech companies to build new relationships and sign deals with new clients, experts predict. Companies like DreamBox that already have customers, and that provide them with top-notch support, will have an advantage.
Yet this reality seems not to have dampened investor enthusiasm for private edtech companies. After a financing lull in March, they’ve poured money into companies, catapulting several past the $1 billion valuation mark.
“I can’t believe the number of unicorns we’ve seen,” says Patrick Brothers, co-founder and co-CEO at HolonIQ, which tracks education investment internationally.
Many of the investors are new to the industry, Brothers notes.
“For general investors, edtech wasn’t sexy and it wasn’t mainstream. Coronavirus really changed that. Everyone’s had their kids at home studying,” he explains. “There’s a lot of private capital around the world that has a new appreciation for this industry.”
This bullish behavior makes more sense upon examining the kinds of companies that have attracted bling this spring. They largely market edtech tools and services, like online tutoring and digital courses, directly to consumers, not to institutions.
They might be onto something: Recent market movement suggests there is indeed hunger for direct-to-consumer edtech. Every kid struggling with remote learning right now needs quick and easy assistance, and they’ve sent web traffic to online education platforms soaring. Meanwhile, every bored adult stuck at home could be spending his or her time learning something new on an app or in an online class. Case in point: Online course provider Coursera reported more than 13 million new registered users since mid-March, a 535 percent increase from the same period last year.
“Everyone that has a direct-to-student outreach is reporting a huge growth,” says Paul Freedman, CEO and co-founder of Entangled Group, an education consulting firm that was recently acquired by another edtech unicorn, Guild Education.
Consumer edtech, then, may be where the market is hottest moving forward. And experts say a new key audience has emerged in the sector: parents. Many have been thrust—begrudgingly—into the role of homeschool teacher, and they’re looking for ways to keep kids on track academically that don’t require them to spend hours brushing up on fractions.
Even post-pandemic, family-friendly tools will have an advantage in the market, says Frank Catalano, an edtech industry consultant and analyst. Companies should no longer assume a trained teacher is available to offer assistance.
“The new audience for edtech companies, whether they sell directly to consumers or not, is the parent. That’s a major and permanent change,” he explains. “Whether it’s needed all the time or not, it needs to be built in.”
Leaders at DreamBox anticipated this shift. The company has always sold consumer subscriptions that allow families to use the platform at home, and it offered to let parents sign up for the platform for free through the end of the school year. Not only was there a surge in free subscriptions—there was a jump in paid ones, too.
“We reassured moms that they didn’t need to be math experts to support a child,” Woolley-Wilson says.
She thinks there’s more opportunity now to convert people into paying customers than there’s ever been before.
“Solutions like DreamBox can be a convening resource that will allow for structured planning and instructional delivery to be shared more effectively between home and school,” she says. “Maybe that’s a trend that will stick over time.”
Here’s a look at other trends experts foresee for the edtech industry as the pandemic continues to shake up education.
What Schools Need Now
With the economy crashing in on retail and hospitality, investors are keen on education right now, says Freedman: “Other industries have been constrained far more. Education has become relatively more attractive.”
That may make it easier to raise capital for new edtech projects—but not necessarily to market them to institutions. Even as school districts await federal aid, they are bracing for budget cuts of 5, 10, even 20 percent, and colleges are wondering whether enough students will show up in the fall to stay afloat.
This doesn’t mean it will be impossible to market new products and make inroads with new school clients this year. But experts say edtech companies will need to be strategic about what they offer. And entrepreneurs should be prepared to make their pitches to school leaders higher up the food chain than whom they would normally talk to.
“To take advantage of the stimulus money would be to offer really attractive multi-year deals,” says John Krull, an IT consultant who previously worked as chief information officer for Seattle Public Schools and chief technology officer for the Oakland Unified School District. “At the same time, do district-wide licensing; make it really easy on the district.”
Schools may be most interested in:
Tools that Connect Schools With Students and Families
It’s always hard for schools to communicate with students and families, and the pandemic has compounded that problem. Systems that help educators, learners and parents stay in touch are needed. To that end, a chatbot company that enables college leaders to text with students just raised $1.6 million in seed funding, while a family outreach and attendance tracking tool recently attracted $3.5 million.
Bonus points for tools that facilitate communication in multiple tongues, says Aaron Walker, founder and CEO of Camelback Ventures: “If we are going to integrate parents and families into the learning experience, it’s going to force us to embrace the true diversity of this country, and that includes the languages people speak at home.” In this vein, parent-teacher communication platform ClassTag, which supports more than 60 languages, just raised $5 million in seed funding.
Several tech giants have “large, entrenched footprints” when it comes to the administrative software that schools and colleges use, but only a minority of those institutions have switched to cloud-based systems, says Troy Williams, managing director of University Ventures. The recent shift to remote work and instruction has left many administrators wishing they could access their tools from anywhere.
Accessibility and Equity
The pandemic has revealed that many students don’t have internet access or the tech tools they need to learn remotely. Schools may be looking to invest in affordable and creative solutions, such as low-cost mobile hotspots or hardware that runs on cell signals.
Even students with access to technology may struggle with remote learning that does not accommodate their special education needs. Not all established edtech products are compliant with policies that protect students with disabilities, which is causing schools extra grief during the pandemic, Krull says: “For newer edtech companies trying to get into districts, that would be a good thing to have high on their list. They could actually beat out an incumbent.”
Privacy and Security Compliance
Plenty of schools and colleges scrambled to set up unvetted distance learning tools, only to be embarrassed when naked strangers Zoombombed classes. Experts say successful tools and services will be those that comply with privacy and security regulations and integrate easily into systems that institutions already use.
What Consumers Want Now
Meanwhile, with campuses closed across the U.S., preschoolers and PhD candidates alike are cooped up at home, trying to keep learning in the midst of the crisis. Most students are new to or relatively inexperienced with remote education. Before the pandemic, according to the latest available data, only 15 percent of U.S. college students enrolled exclusively in online courses and fewer than 1 percent of K-12 students enrolled full-time in online schools. But suddenly, almost all students are taking classes entirely online.
College students are turning to digital tutoring platforms like Chegg and online course providers like Coursera, both of which have performed well over the last few months. Younger students are seeking assistance online from Khan Academy videos and digital resources like the books available through Epic Kids, which hit No. 1 on the kids’ free apps chart in the Apple app store during the first week of April.
Teachers may be pointing children and teens to these systems, but experts say parents are also responsible. Many guardians were caught off guard by the “much more robust home learning” they’ve been expected to supervise—or improvise—since the pandemic started, says Wayee Chu, general partner at Reach Capital. “There’s a shift toward an increased engagement at home that will accelerate new opportunities with parents and students.”
Consumers may be most interested in:
Online Tutoring Services
It’s been a hot few years for companies that connect students with tutors who teach online. Between 2016 and 2019, online tutoring services raised more than $1.2 billion in venture capital.
The pandemic seems to have turned the heat up even higher. For example, Chegg outperformed forecasts by hitting $132 million in revenue in the first quarter of 2020, a 35 percent increase from the same period last year. The positive report sent stock values soaring more than 30 percent.
U.S. students are a big market, but so are students in China and India, thanks to those countries’ growing middle classes, which see education as a way to move up the ladder. Online tutoring companies based in those two regions, and in countries including Australia, Korea, and Saudi Arabia, have seen big fundraises lately. Companies that offer English-language tutoring may see increased demand as pandemic-era travel restrictions and health concerns prevent students from studying internationally over the next few years.
Digital Aides and Apps
Interest and investment in tools and services designed for students and parents to use directly has been high. Downloads for education apps like Google Classroom, Seesaw and Classdojo shot up when remote learning started. Visits to popular tutoring site Khan Academy, a nonprofit, are up “two-and-half to three times the normal,” founder and CEO Sal Khan told EdSurge, and users are spending twice as long on the site as they typically did before the pandemic these days.
Some people are turning to learning as a source of entertainment because they’re bored, or as a way to gain some new skills while out of work. MasterClass, which recruits celebrities to share expertise in non-credit-bearing online classes, raised $100 million in May, and the CEO says revenue has increased 10 times in the past couple months over the same period last year. Language-learning app Duolingo, which became a unicorn in late 2019, reported 101 percent more new users during the month of March, which a spokesperson says adds up to millions of people.
“As people shelter in place,” says Freedman of Entangled Group, “learning something is probably a really good and productive use of their time.”