The Economist - UK (2022-02-19)

The Economist February 19th 2022 Business 61

Educationtechnology

Learnings growth

B

yju’s waspiling  on  users  even  before

covid­19  closed  classrooms  around  the

world.  India’s  most  valuable  private  start­

up was co­founded in 2011 by Byju Raveen­

dran, a celebrity maths tutor whose classes

have drawn crowds big enough to fill stadi­

ums.  By  2019  tens  of  millions  of  Indian

children  had  signed  up  to  use  the  firm’s

flagship product, an app that serves up on­

line lessons intended to supplement regu­

lar schooling. That year Byju’s began spon­

soring India’s national cricket team.

Since  then  India’s  schools  have  spent

more  time  shut  than  open—and  the  for­

tunes  of  Byju’s  have  only  improved.  The

number of children whose parents pay for

them  to  have  full  use  of  its  app  has  more

than  doubled,  to  7m.  Late  last  year  inves­

tors valued the firm at over $20bn, a three­

fold increase since pre­covid days. In Janu­

ary  Bloomberg  reported  that  Byju’s  may

soon unveil plans to go public in New York,

by merging with a blank­cheque company.

The news agency had previously rumoured

that  such  a  deal  could  raise  around  $4bn,

valuing the firm at a cool $48bn.

Byju’s is the biggest of a clutch of young

companies  benefiting  from  breakneck

growth in online learning. Venture capital­

ists  (vcs)  plonked  around  $21bn  into  edu­

cation  technology  companies  in  2021,  ac­

cording  to  Holoniq,  a  research  firm  (see

chart).  That  was  three  times  the  amount

raised  in  2019  and  40  times  more  than  a

decade ago. Seventeen ed­tech startups be­

came  “unicorns”  (private  companies  val­

ued at more than $1bn), three times as ma­

ny as had passed that milestone during any

previous  year.  Half  a  dozen  of  them  went

public. They included Coursera, a market­

place  for  online  courses  with  a  stock­

market value of nearly $3bn, and Duolingo,

an  app  for  language  learners  which  is

worth around $4bn. Holoniqhas predicted

that global ed­tech revenues could almost

double  from  $227bn  that  year  to  around

$400bn in 2025, a fifth higher than its pre­

pandemic forecast.

Until  recently  ed­tech  firms  had  rarely

made investors sit up. Schools and univer­

sities  control  much  of  the  $6trn  spent

globally on education each year. They tend

to  be  cash­strapped  and  conservative.  In

2019 only about 3% of all education spend­

ing  went  on  software  or  online  teaching.

Tory Patterson of Owl Ventures, who began

investing in ed­tech firms in 2009, admits

that  speaking  up  for  the  sector  has  some­

timeswonhim“blankstares”.

Nomore.Theclosureofschoolbuild­

ingsandcollegecampusesforcededuca­

torstotryoutnewkit(especiallyinIndia

andAmerica,wheredisruptionstolearn­

ing have been particularly drawn out).

Governmentshavegivenchildrenstacksof

tabletcomputersandspedupeffortstoim­

provebroadbandinschools.Theyhaveal­

sogiventeachersextracashtospendon

toolstheythinkwillhelppupils“catchup”.

LawmakersinAmericahaveearmarkedan

extra$200bnorsoforschoolssincethe

pandemic started.That sum isequal to

about one­quarter of what is spent on

theseinstitutionsina typicalyear.

Foryearsmanyofthezippiested­tech

firmshavechosennottoselltoschools

anduniversitiesbuttogodirecttolearn­

ers.Thiscategoryofcompanieshasalso

benefitedduringthepandemic.Parentsin

Asiahavelongbeenkeentopayfortutor­

ingandotherservices(suchasByju’sapp)

thatmight givetheir offspringanedge.

NowfamiliesinEuropeandAmericaare

also getting keen. Supervising remote

learning has made parents everywhere

moreengaged intheirchildren’seduca­

tion,moreawareofhowtheyareperform­

ingincomparisonto classmates andin

somecasesmorecriticalofwhattheyare

beingtaught.Companiesthatofferafter­

school lessons—such as Outschool, an

Americanunicorn,andGoStudent,anAus­

trianone—aregrowingfastasa result.

Anothertypeofoutfitgettingaboost

fromthe pandemicare those that offer

learning to adults. Workers furloughed

duringlockdownscommonlytookonline

coursesthattheythoughtwouldimprove

theirprospects.Remoteworkinghasmade

morerolesplausibletomorejobseekers,

givingthemmorereasontoreskill.Atthe

sametime,a flurryofjob­switchinginBrit­

ainandAmericahasmadebigemployers

nervous. They are becoming more con­

vincedthatspendingonstafftrainingcan

helpthemhangontoworkersandcutthe

costofpluggingholes.Thisisbenefiting

companiessuchasCoursera,whichsays

sellingsubscriptionstocorporate custom­

ers is its fastest­growing business. Up­

and­coming firms include Guild, which

helpsblue­collarworkersatgiantssuchas

WalmartandDisneygainnewqualifica­

tions,andBetterUp,anAmericancompa­

nythathelpsprofessionalsfindcoaching.

Ed­tech’spandemicreportcardisnot

withoutblemishes,however.InChina,its

single biggest market, the Communist

Party declared last July that businesses

couldnottypicallymakea profitfrompro­

vidingafter­schooltutoringtochildrenin

primaryandmiddleschools.Theregime

hasworriedforyearsthathugedemandfor

privateeducationiswideninginequalities

andimpoverishingthemiddleclass.Even

charitabletutoringcouldnolongertake

place duringholidays andat weekends.

WithindaysthesharepricesofNewOrien­

tal,talEducationandGaotu,theindus­

try’sthreelistedChinesegiants,hadfallen

bytwo­thirds,wipingout$18bninstock­

market value.Since February 2021 their

collectiveworthhasshrivelledfrommore

than$100bn tolessthan$10bn.China’s

mostcelebrateded­techunicorns,Yuanfu­

daoandZuoyebang,couldbewortha frac­

tionoftheirpre­crackdownvaluationsof

$15.5bnand$10bn,respectively.

TheChineseexperiencehasrattledin­

vestors,saysThomasSinglehurstofCiti­

group,abank.Itblockedapossibleexit

routeforWesternstartups,someofwhose

vcbackersmayhavehopedtosellthemto

China’sed­techtitans.Itmayalsoinspire

The pandemic has turbocharged the ed-techbusiness.Canitlast?

Atech-ablemoment

Star pupils

Venture-capital investments in

education-technology firms, $bn

Source:HolonIQ

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Rest of world

China

European Union

India

United States