Edtech Overview
By Ben Grosse
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Edtech Overview
Overviewing Edtech
Education technology consists of the building blocks upon which the future of learning, development, and growth in the world will be built in the 21st century. By intertwining technological innovation and education, edtech furthers the effectiveness of existing learning methods across all ages and sectors. Used by primary and secondary schools, corporations, governments and NGOs, and individual consumers of all ages and backgrounds, edtech is swiftly becoming one of the cornerstones of economic and societal development across the globe. Yet the question remains, why and how will technology be the premier vehicle for crafting and delivering improved learning in the future?
Education is omnipresent in our lives. From the time we enter preschool to the day we retire, we are all constantly consuming both formal and informal educational content, even if we do it unknowingly. Even before the onset of the COVID-19 pandemic, there were clear indicators that the archaic education systems that exist predominantly in the US were experiencing a bottom-up transformation driven by technology. Former educators, enlightened students, and a variety of other stakeholders are increasingly finding new ways to utilize modern technology to bring forth modern education. Edtech spending has skyrocketed, reaching $183 billion in 2019, and is expected to reach $404 billion globally by 2025. This drastic uptick in spending is warranted, as revolutionary tech-enabled and tech-centric platforms, such as Udacity, Duolingo, Coursera, and The Lambda School, are giving the education stack new meanings and capabilities.
As both a driver and measurement of economic development, primary and secondary education is increasingly becoming a competitive field in which governments, organizations, and individuals are trying to gain the upper hand; technology and digitalization are that upper hand. From facilitating hybrid learning models through intuitive and engaging digital platforms to allowing top-tier educators to monetize content through elective education platforms, the education of the digitally native youth has proven to be increasingly efficient and effective with the heavy use of technology. While the largely bureaucratic and monolithic early education system slows the implementation of technology into formal learning settings, the key transition of edtech in regards to primary and secondary education comes in the form of elective learning. Startups such as Coursera, Course Hero, and Quizlet are allowing younger generations to voluntarily consume additional educational content through digital marketplaces and platforms. Yet, this is also a two-lane road, as educators are now able to be fairly compensated on the open market through content creation marketplaces such as Teachable and Podia. This nuance is key, as providing value to all stakeholders (students, educators, administrators, parents, etc.) is a key differentiator across the top primary and secondary focused edtech startups.
Edtech has had an astounding impact on the postsecondary education environment, as consumer-facing solutions are facilitating continual adoptions and improvements of key skills that are suited to help them find greater success in the modern economy. As job demand shifts to accommodate the innovation economy of the 21st century, a massive gap needs to be filled when it comes to skilled, technical, and digitally fluent employees. Those with a lack of tech-based skills are seeing a growing need to re-skill and re-school in more modern professional skills. On the same note, companies are learning the importance of keeping their aging workforce up to date in the latest technological developments, systems, and tools to push the boundaries of efficiency. This broad, open, white space is being filled by the likes of Udemy and Lambda School, which are empowering non-digitally native citizens to re-skill and upskill their quiver of professional capabilities. Edtech also expands to more recreational aspects of people’s lives. Platforms such as Masterclass allow everyday citizens to lean into their passions through learning from the best in a given category, such as learning to become a better shooter from Steph Curry or learning to be a better comedian from Steve Martin. Edtech within the post-secondary education space is still evolving. As the value chain within the sub-sector continues to become more concrete and visible, its innovation will present a wide opportunity for those looking to better themselves through education.
Why Edtech?
Our team at Hillside Ventures is composed of students. The vast majority of all our lives have been dominated by education. We have seen—and are currently living through—a black swan event that has altered the modern education system like nothing before. This core experience, along with the years of experience beforehand, has given our team a unique insight into the shortcomings of the education system. Furthermore, our digitally native upbringing has granted us a lane of visibility into how education can be further improved through technology. While by no means are we experts on education or technology, our position as both longtime and current stakeholders will give the Hillside Team an essential tool in evaluating the problems, solutions, and future unicorns in edtech.
Senior to learning, experiencing, and representing our school comes executing on the main focus of the fund, which is to provide outsized returns. While those more junior focuses will be key in facilitating strong returns, there must also be a distinct focus on verticals and opportunities that can return the fund. Edtech is one of those verticals, as the market is growing by approximately 16% YoY and is expected to reach a $404 billion market size by 2025. Looking beyond the sheer market opportunity, the vertical is littered with white spaces that can be best capitalized upon by startups. White spaces such as hybrid learning enabling platforms, content creation marketplaces, and community-centric learning models are from reaching their final evolution and have yet to reach meaningful market saturation. The availability of white spaces paired with the often bottom-up innovation and adoption of edtech solutions makes for the perfect market opportunity—one that Hillside plans to fully capitalize upon.
Having a strong conviction on the outlook of a specific vertical is only one part of the puzzle when it comes to venture investing. In the hyper-competitive and often stratified early-stage investment ecosystem, VCs must be able to develop an edge in sourcing deals, providing explanations as to why they belong in the deal, and executing on proposed value-add strategies. As first-time investors writing relatively small checks, this set of problems is particularly challenging for our team. While we are certain we can successfully execute all of those tasks regardless of the deal, it is important to understand in what markets our team may be best positioned to execute on those action items. Our situation as students allows us to effectively identify existing and emerging problems, source innovative solutions from associated universities, student founders, or student investors and provide strong value-add capabilities that can be executed post-deal. While on paper our team may not have the operating knowledge or deep industry experience like other investors, the education space is one in which Hillside’s team has the connections and know-how to help our portfolio companies execute go-to-market and scaleup plans.
What Hillside is Excited About
Hillside is committed to investing across the edtech vertical, but that doesn’t mean we don’t have some firmwide favorites. Here are three trends and spaces our team is extremely excited about:
The unbundling of the value chain at each stage of education
Digital/hybrid models and corresponding opportunities
Alternative forms of education
At its core, education can be broken up into four main components: instruction, coaching, feedback, and community. Traditionally, the primary and secondary education systems packaged all four components and accommodated only a low threshold for individualization or customization. Edtech platforms are now empowering students to emphasize one or a smaller combination of those components, which can potentially lower the cost of education, make the process more efficient, and increase the relevancy of the learning that occurs. This rearrangement and segmentation of the value chain is being made possible by startups like Teachable, Vedantu, and Age of Learning. Through facilitating the specialization of each stage of the value chain, startups with unicorn potential, like the aforementioned ventures, will continue to emerge at an increasing rate.
COVID-19 brought upon a rapid adoption of virtual learning that was primarily accommodative to the needs of both teachers and students (trust me, I experienced it first hand). As 2020 continued, most primary and secondary institutions transitioned to a hybrid model of in-person and online classes. Through integration technologies, like Slack and Zoom, along with improved digital teaching strategies, the educational experience for most students has improved throughout 2020 and into 2021. Yet, there is still a gaping hole in the hybrid learning landscape. Class administration platforms such as Canvas, Blackboard, Google Classroom, and Zoom have proven to be rather undesirable or ineffective platforms for hybrid or fully online learning. This problem presents a substantial opportunity for the improvement of hybrid class administration, which, for all intents and purposes, can only be accomplished through the implementation of platforms specifically designed to accommodate hybrid or fully online classes that promote community engagement, interaction, and continued development.
Public and private primary and secondary institutions alike were dealt a huge blow in the wake of COVID-19. Budget constraints, safety concerns, and declining enrollments affected all manner of schools in the months following the initial lockdown, and many institutions are feeling the need for more cost-effective solutions that will add substantial value beyond what they currently provide. On top of that, the recent emergence of alternative schooling in the form of micro-schools (replacing traditional primary schools), elite coding and software engineer-focused boot camps (replacing universities), and re-skilling programs targeting those in the workforce have materially changed the existing educational ecosystem. We view this trend as more of a slow burn, as the full replacement of existing school systems will likely never fully occur, and the adoption of new alternatives will take several years. However, as these alternatives become more mainstream and operationally efficient, Hillside is excited to witness and capitalize upon the wide opportunity set that will arise correspondingly.
Final Words
Edtech is about growth and optimizing educational systems to influence our lives in a variety of ways that we hadn’t previously seen as feasible. As technology evolves, it is clear that education will progress in lockstep, and Hillside is here to progress that movement forward. If you are an edtech founder looking to raise, a student interested in venture capital, an investor looking to learn more about Hillside, or have any questions about what Hillside Ventures is all about, feel free to shoot me an email at benjamin.grosse@uconn.edu.
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Ben Grosse of Hillside Ventures