The big education technology investment opportunity
Why ed-tech warrants investment more than Silicon Roundabout. Edxus CEO Benjamin Vedrenne-Cloquet makes a case
Europe is watching as the rest of the world seizes the big investment opportunity that is education technology.
Look at the figures. A $91bn global market in 2012, e-learning is predicted to grow at 23% p.a. until 2017. Large strategic players are making acquisitions, capital markets are responding and VC funding is available. 2012 saw $8.5bn worth of M&A activity for example, while $1bn was raised in fundraising initiatives.
And it’s the US – with its single educational and regulatory systems – that accounts for 58% of total fundraising deals.
Many of the leading US universities were first to market with online platforms such as EdX and Coursera, which are attracting vast numbers of students from all over the world. Indeed, MIT has reported that one of its pilot courses has now been taken by more students than all the university’s previous living alumni combined. The US is racing away, while Europe accounts for just 6%, also lagging behind both India and China.
To date, the European market has been characterised by a lack of scale and access to capital. Although UK universities have started to launch online platforms to rival the US with the Futurelearn alliance and there is EU-backed progress in Poland, the European market risks being dominated by US content and software platforms.
Some leading US professors are already achieving celebrity status in the e-learning world. It would be a missed opportunity for Europe not to lay its own claim to the education of its students by producing serious contenders.
The case for investment
The fact is, e-learning has the power to radically change the future of how education is resourced, taught and consumed. While education costs are rising dramatically, growing by an incredible 84% since 2000, the link between spend and efficiency appears to be broken, with no similar increase in standards.
Delivery of traditional education incurs the vast majority (70%) of the costs through infrastructure and teaching staff, for example. Yet e-learning is relies on internet penetration and mobile connectivity, affordable data storage and smart analytics.
So what needs to change in Europe? There are more than 3,000 e-learning companies fighting for market share in Europe and the fragmented and small scale of the industry players has generally meant it has been classified as too young for investment.
Where there is investment, it tends to be for start-ups or established players, creating a crucial investment gap for late stage start-ups. Thus companies are generally undercapitalised and lacking in expertise – led by educators rather than entrepreneurs. A large proportion of current industry players will reach the point at which their executional capabilities prevent them from getting to the next level of product or service deployment. Expertise and capital injections are urgently required.
Consolidation for scale and efficiency
Even talented entrepreneurs however face strong headwinds because of regulatory frameworks and slow reaction or adaptation of key players to new technologies and methods. Government legislation will play some part in ‘legitimising’ e-learning across Europe to encourage growth.
Accrediting e-learning courses to make them equivalent to current academic qualifications and transitioning schools from physical to digital content for example will help grow the market, as well as improving education standards.
Obviously top-down change of this form can be slow to take effect however, so the majority of industry impetus needs to come from within. There is enormous potential for consolidation and investment, bringing the industry together to create economies of scale and operational efficiency both through geographic footprint and complementary products and services.
There is a need to create a strong European e-learning community with a shared vision, bringing key players together for direct investment and market consolidation in order to compete with the better funded US edtech players. Without this, the European e-learning space will be dominated by American content and software.
Education is an asset-light industry so a little bit of investment will go a long way, while the return on investment will be far greater than other technology initiatives such as the Silicon Roundabout because of the social impact, which creates a double payback. Once one or two key players are established, Europe will start generating the attention and scale it requires.
Benjamin Vedrenne-Cloquet is the CEO and co-founder of Edxus Group, which with IBIS Capital is running an exclusive one day summit, EdTech Europe at the London Business School on June 14 2013. For more information visit: http://edtecheurope2013.eventbrite.co.uk/.