EdTech- What to expect in 2021 & coming years? 🤔
2020 was a surprise year for founders building EdTech companies & provided for opportunities as well as problems. Let's try to understand the challenges and what it means for the future of EdTech.🔮
We saw a huge bump in investments in EdTech across the world, with ~$11B invested in 2020 alone (~4X of 2019). 🤯
K12 became mainstream as a sub-sector and live classes became a popular format. It’s interesting to see how Zoom became virtual classroom for several teachers and students had no choice but get used to it. The shopify models of EdTech further streamlined the experience for teachers and students.
Flow of mainstream capital has also led to some pertinent issues for younger EdTech players:
Low Barrier to Entry 🚧
With help of technology, it has become easy for teachers to start their own online learning service, be it 1:1 or 1:many. With help of platforms like Class In, Class Plus, Winuall, etc., even brick and mortar institutes are able to digitize and go live within click of few buttons.
Rising CACs/ Unsustainable Unit Economics 💰
#1 brings us naturally to rising cost of acquisition. With so much capital being pumped into EdTech, it’s becoming expensive to acquire a user, since most companies are buying the same ad inventories across channels.
Given the size of the market, it’s easier to build a proof of sustainable unit economics with a few thousand users, but as it comes to scale up, it’s becoming unsustainable.
In terms of unit economics of live models, EdTech companies are able to control the teacher cost but cost of acquisition is tougher to control. So they estimate a high life time value, hoping students will stick around for long. This might not be true given the options students/ parents have at their disposal.
It has been seen in China already, where several live tutoring companies have gone out of business, example: here
Supply Side Acquisition 🧑🏫
One of the most difficult problems (which is still not solved for yet) that haunts EdTech is wide scale teacher supply. At scale, all the live tutoring models would need several thousand teachers to deliver education in a standardized format, which in itself is a very massive opportunity. This problem exists at school level, with India having one of the lowest pupil ratio of 24:1 (students:teacher). Read more here.
In my opinion, one of the key reasons BYJU’s acquired White Hat Junior and Aakash Education is due to the extensive teacher network.
In 2021 and years to come, I am particularly excited about how innovators will solve for these problems and dodge existential risks. Here are some thoughts:
Product/ Tech First Approach & Unfair Distribution 💡
As of now, EdTech has become a lead-gen business, mastered by the likes of BYJUs and Vedantu/ Yuanfudao and Zuoyebang. For the younger players and new innovators, it’s time to rethink their strategy and develop a product first approach and build product led funnels/ growth.
To mitigate the rising CACs, this can help build flywheel distribution model which can attract large amount of students/ parents being served through technology.
Case Study: Timing 360
Started in 2017, Timing 360 is a Chinese company which started as a live tutoring platform and transitioned into a self-study app for students where they can monitor each others’ progress and live stream while studying. With community led approach, it has reached over 1M+ DAUs in a short period of time, and growing really fast.
With a sticky userbase, which is spending hours on the app every day, there would be several avenues to monetize.
Solving for Supply & Staying Personalized 🧑🏫
As discussed above, we are dealing with limited supply and it can increase over the course of time. The fastest way to fix it in the most efficient manner would be tech-led, where teachers or teacher assistants can be empowered with technology to bridge the gaps for students. To build personalization in systems, a whole lot can be done with adaptive learning.
Case study: Ding Dong Ke Tang (叮咚课堂)
Started in 2018, DDKT is a Chinese live English learning platform with small group (2 students) classes, at affordable prices. It solved the teacher supply problem by building AI enabled live class where the class is empowered by a recorded teacher, but the students can interact with the platform in a live fashion and it is smart enough to recognize voice, etc.
It solves two pertinent problems: High quality supply at scale and CAC reduction, since the course is 10X affordable.
Online Merged Offline 💻 🏢
Certain media, like 1 to 1 or group classes with 3-5 students has worked really well online, where personalized attention has not been compromised along with added convenience. But the large format classes haven’t worked out well and we are already seeing students wanting to go back to class rooms for more effective learning. Hence, future of education will be omnichannel! It’s very important to rethink the covid assumptions and build models which enable both online and offline channels of education, along with software and hardware integrations.
Case Study: Squirrel AI/ 松鼠AI
Started in 2014, Squirrel AI is a China based online-offline after school tutoring platform which is using adaptive learning at its core to create personalised learning solutions for students. With tech-first approach and its adaptive engine, the platform enables supervised learning to improve efficacy and engagement across its online learning platform and offline learning centers. Currently it has over 1700+ schools across 200 cities in China with 3000+ teachers.
There are several players in China focusing on OMO approach with New Oriental and TAL Education leading the efforts. Bytedance also launched a lamp (hardware) in 2020 under its ‘Dali Education’ brand, which enables parents to tutor their kids and check in remotely, if they are studying or playing mobile games 😉
Not planning to dive deeper into sectors, but a quick highlight on which sub-sectors seem very exciting for 2021:
Higher Education
Vocational and Skill based Learning
Early Childhood Education
If you are an early stage founder thinking on similar lines, feel free to ping me: rahul@oldrope.club
Hi Rahul , agree that the product first approach will help bridge the supply side challenges ! the challenge / opportunity lies in creating a new category dynamics i.e. pricing / consumer preferences / innovation.