The education technology sector has become an “attractive and promising new market” for venture capital investors, especially in the Mena region, as the Covid-19 pandemic accelerates shift to digital education, according to a new study.
Globally, EdTech companies received a massive $8.3 billion in the first three quarters of 2020 alone, Dubai-based venture capital firm Global ventures said in its inaugural EdTech research report.
“The EdTech sector started the last decade with $500 million of venture capital investments in 2010 and finished 14 times higher at $7bn in 2019,” according to the report.
The EdTech industry has played an integral role in ensuring continuity of education at a time when physical schools had to close to contain the spread of the coronavirus pandemic.
Emerging markets attracted the lion’s share of investments last year, with India surpassing the US in capital allocated. Although only $30m was invested in EdTech companies in the Mena region in 2020, investment is set to increase steadily from a low base, according to Global Ventures.
“EdTech is set to grow consistently in the next decade,” Noor Sweid, founder and general partner at Global Ventures, said. “From early childhood to lifelong learning, opportunities to improve access, quality and affordability of education and redefine them, are many and immensely exciting.”
The next decade will be critical for EdTech businesses in emerging markets. Supportive government policies and technology may even mean emerging markets potentially "leapfrog the developed world”, she added.
In the Mena EdTech landscape, start-ups are focused mostly at the K-12 level and specifically, in the online learning space. The tutoring market is also rich, with 69 per cent of Egypt’s state school students relying on private tutoring, underlining the growing culture of supplemental learning. Early and higher education segments, however, remain underexplored in the Mena region, according to the report.
“As the rest of the world moves toward personalised and adaptive learning, and focuses on learning outcomes, start-ups in the region are simply scratching the surface in terms of addressing the quality gap in education,” the report said.
“In regions like the GCC, the digitisation of business and industry is set to continue into the near and far future, translating into a growing need for upskilling, reskilling and frequent professional development. Yet, the continuous learning market is still in its infancy.”
The global expenditure on education and training was valued at $7 trillion last year. Since 2010, the industry has grown by 70 per cent and is projected to be worth $10tn, contributing to about 6 per cent of the worldwide gross domestic product.
However, the industry took a hit last year as Covid-19 pandemic forced school closures, affecting nearly 1.6 billion pupils in more than 190 countries, underling the need for imparting quality education through online platforms and hybrid model of education.
The pandemic has already accelerated investment in EdTech start-ups. Investments the education sector ventures amounted to 5 per cent of all deals in the Mena region in 2020, accounting for 3 per cent of total $1bn invested by VC firms, the report cited data from start-up portal Magnitt.
"While the number is relatively small, it is growing rapidly … in the Covid aftermath, EdTech’s funding share in Mena is poised for accelerated growth,” it said.
EdTech initiatives could also receive a boost from the changing dynamics in the job market.
Globally, about 75 million jobs are expected to be displaced in the coming years, with digitisation forecast to create 133 million unique jobs. It is anticipated that 65 per cent of today’s primary school children will ultimately work in jobs that don’t yet exist.
Due to the evolving nature of the modern economy, a university graduate in the 21st century university changes careers five times in their first 10 years of employment.
“Not only is this presenting an urgent need for K-12 and higher education institutions to revamp curricula, it is also feeding a worldwide upskilling and reskilling imperative,” the report said.
“The way we see it, EdTech will continue to grow … at Global Ventures, we are optimistic about the possibilities in this space.”