Can Edtech’s Newfound Momentum Last Beyond the Coronavirus?
The educational and enrichment sector, fuelled by Asian-centric values in Singapore, has always been known to be resilient. Even in a recession, these centres are known to be fairly stable revenue generators in an industry worth $1.4 billion annually. As such, the industry is a favoured hunting ground among private equity investors. Case in point, in 2014, American private equity firm, Advent International shelled out US$212 million for a controlling stake in The Learning Lab.
However, since the coronavirus outbreak, the scale of economic damage is like no other. In Singapore, the government has promulgated circuit breaker measures and social distancing rules in order to curb the spread of the deadly virus (which appears to be asymptomatic on some counts). Tuition centres, having been labelled as a non-essential service, have shut down completely for the month of April. As institutions, schools and centres turn to e-learning solutions as a means of delivering educational content to students, this “whole new setup” has put a tremendous amount of stress on educators, and in the process, created one too many irate parents.
According to UNESCO, approximately 776.7 million students worldwide have been affected by school closures. Whether they like it or not, parents, educators and students have had to make the transition from traditional classroom learning to online learning. While many parents doubt the efficacy of the latter, educators are trying to come up with creative ways to keep learners engaged.
Parents who send their children to tuition view it as a necessary investment compounded by the fear of missing out. It also frees up their time to attend to their personal needs, which is why some tuition centres are strategically located in shopping centres to act as “fishing nets” for student enrolment. In fact, many parents would rather send their children to a tuition centre located in a mall than spend it on an online learning service. But all that is about to change.
Unexpected Upside in Edtech
Within a short span of time, the uptake in e-learning solutions has skyrocketed, aided by the high mobile penetration in Singapore of around 90 per cent. Before the Covid-19 outbreak, edtech was an unsexy industry in comparison to fintech. And the figures don’t lie: In 2018, global edtech funding was US$18.66 billion, while funding for fintech companies was around seven times more at US$135.7 billion.
Having been in the edtech sector for 7 years, very few venture capitalists show keen interest, despite the potential returns. One reason is that the expected market growth rate in edtech is 12.84% less than fintech’s. Another is how the Singapore government has made a purposeful push to be a fintech hub by providing innovation grants to grow the sector.
In the last 5 years, edtech was on the verge of death. Founders who had obtained funding previously had to seek acquirers amongst the well-established tuition centres with little success. There was also a gap in the Series A to D funding rounds in Singapore which made growth an uphill task. To make matters worse, sceptical parents in Singapore were reluctant to pay for services related to online learning. Ironically, all it takes is a virus to breathe life into edtech industry as educators, students and start-ups grapple with the concept of home-based learning. Singapore Math Guru (an edtech platform that I run), which offers free video explanations to primary school examination questions, saw a 159% increase in monthly active users over a 3-month period.
Globally, edtech companies like Khan Academy, a non-profit video-learning platform offering short video tutorials, has had an increase in total visits from 51 million visitors to 79 million visitors over a 1-month period. Closer to home, Ruangguru.com, an Indonesian edtech start-up founded in 2014, providing video courses, experienced a jump from 7 million visitors to 11 million visitors over 3 months.
Snapask, a Hong Kong-based online learning website, has also seen an increase in the number of visitors from 80,000 to approximately 120,000 over 3 months. As recent as February 2020, the company raised US$35 million in venture funding. Some believe that the growth in online learning is just getting started. According to Oliver Wyman, the online learning user base is set to double or triple in 2020 and customer acquisition costs will decline over the short term. If that proves to be true, players in edtech may gain an economic windfall.
A typical lesson on Zoom starts with administrative work which takes between 15 and 30 minutes. This may include class attendance, worksheet distribution and technical issues for both educators and students. If it’s a 90-minute lesson, that means only an hour goes into learning. Technology has proven to be a stumbling block for some educators. A teacher I spoke to said that the mechanics of managing an online class differed greatly from a physical class. The lack of responsiveness from students is an ongoing issue, as a result, teachers don’t know if they are fully present unlike a classroom setting.
A tuition centre which I spoke to found an approximate 25% drop in revenue on a month-to-month basis. Even with discounts, parents lament that the quality of online learning does not match up to classes conducted at the centre itself. Just a few days ago, Starhub’s Internet service was down for several hours, disrupting all home-based workers and students. This opened up another can of worms as students in instructor-led environments were cut off completely from guidance.
Although edtech eases the transition to e-learning, the viability is still up in the air. Even Education Minister Ong Ye Kung has admitted that online and home-based learning is “far from ideal.” Only time will tell if the edtech industry can rise to the occasion and figure out its sweet spot.