fbpx

Education Technology: A Giant Awakens

Coronavirus has changed many things over the past year. However, one of the most noticeable trends has been the forced adoption of technology across almost every aspect of our lives.

It is not as if this “digital revolution” has come out of the blue. In fact, it predates the pandemic by many years.

But in the face of strict lockdowns, our reliance on digital devices for everything from our work to our social lives has increased almost overnight.

We have crossed a tipping point. And now, it seems certain that technology will play an even more important role in our lives even once “normality” returns.

 

The changing face of EdTech

One sector where this trend has been particularly noticeable is education.

This may have escaped readers who do not have children or are not in the education system themselves. But as everyone else can attest to, things are now very different.

The ubiquitous transfer of learning from the classroom to the home has kick-started a widespread movement of digital integration that is very much here to stay.

Just look at global education intelligence provider, HolonIQ’s forecasts for expenditure on educational technology – or EdTech – over the coming years.

Before the arrival of Covid, HolonIQ had forecast that the amount spent on EdTech globally would increase from US$183 billion in 2019 to US$341 billion by 2025.[1] That is already an impressive growth trajectory. But in a post-Covid estimate, the company revised its figure to US$404 billion.[2]

That is a compound annual growth rate of 12.2% over the next 5 years from a 2020 base of US$227 billion.[3]

Whether its augmented reality, virtual reality, AI, robotics or blockchain, the door to firms offering technology that can change the way people learn has been opened.

This comes at the right time, too – it is estimated that there will be some 2 billion more learners around the world between by 2050.

As GDP grows, and as affluent middle classes emerge in developing markets, more and more people are going to need education. The absence of some level of formal childhood schooling is simply no longer an option for an increasing portion of the world.

Technology will have to step in where physical infrastructure cannot.

And that is before mentioning the blurring lines between where education finishes, and work begins.

Today, employees with unique or specialised skills – “knowledge workers” if you like – are becoming increasingly attractive to employers. Not only is this forcing more individuals to pursue post-secondary schooling – a degree or some equivalent – but it is also leading to the rise of adult learning.

To remain competitive in a world of robotics and automation and rapid technological advances, constant reskilling and upskilling will be required. Lifelong learning will become the norm, which includes learning on the job but also learning how to learn.

 

Stretched at the seams

The reality is that today’s education systems were not built for enormous growth. In fact, they are already buckling under the pressure of current demands.

As we have seen in countless other sectors, technology represents a powerful solution. Whether its banking, retail, or healthcare, digitalisation can reduce costs, increase efficiency, and ultimately extend capacity.

However, until now, education has been a chronic digital laggard. Even if we go back just two years to 2019, digital expenditure accounted for just 3.1% of total educational expenditure globally.

The colossal growth potential has also been noted by venture capitalists. EdTech investment has increased by many multiples between 2010 and 2020, with 2020 being the blockbuster year.

But it is also becoming an increasingly viable opportunity for regular investors thanks to a marked increase in education IPOs over the past five years.

Yet this remains a ground-floor opportunity.

Although strong EdTech sector growth is in motion, years of underutilisation mean the growth is coming from a very low base.

The market cap for education firms globally currently sits at around US$300 billion against a total market size of US$5 trillion.[4] Compare that to a global market cap of US$5 trillion for healthcare companies against a total market size of US$8 trillion, and the sheer scale of potential long-term returns start to become clear.[5]

Indeed, even if EdTech spend meets HolonIQ’s new US$404 billion forecast by 2025, it will still only account for 5.2% of total education expenditure worldwide.[6]

The bottom line is the wheels of the EdTech sector are now in motion. Covid has been an accelerant. And thanks to a combination of historical underinvestment and future digital dependence in the face of enormous increases in global learners, the outlook looks exceedingly positive.

It will be early investors who are the most richly rewarded.

 

Related ETF

LERN: Rize Education Tech and Digital Learning

 

References:

[1] HolonIQ, “Global EdTech Market to reach $404B by 2025 – 16.3% CAGR”, August 2020. Available at: https://www.holoniq.com/notes/global-education-technology-market-to-reach-404b-by-2025/

[2] IBID

[3] IBID

[4] HolonIQ, “10 charts to explain the Global Education Technology Market”, January 2020. Available at: https://www.holoniq.com/edtech/10-charts-that-explain-the-global-education-technology-market/

[5] IBID

[6] IBID

  • 1
  • 2
  • 3

Select Your Country

United Kingdom
Germany
Italy
Switzerland
Austria
Denmark
Finland
Ireland
Luxembourg
Netherlands
Spain
Sweden

Select Your Investor Type

======