Education technology is a global opportunity

$8.15 billion. That’s the amount global investors staked in edtech companies in the first 10 months of 2017.

Education used to be simple: there was a blackboard, a teacher and desks in a classroom. Today, a student can practice English online, upload homework through a portal and learn chemistry through 3D immersion — such is the rise of educational technologies. And nowhere is the advent of edtech climbing more quickly than in Asia.

In 2016, global investments in Chinese edtech companies rose to $1.2 billion, according to Goldman Sachs — to put that into perspective, that’s more than triple the amount raised in 2014 and comparable to Lyft’s most recent funding round. Going forward, the edtech industry in China is expected to grow 20 percent annually, while a joint report released by Google and KPMG estimates that India’s online education market will rise more than 6x to $1.96 billion over the next four years. The entire Asia-Pacific region is projected to represent 54 percent of the global edtech market by 2020.

Of course, you can’t always believe future valuations. But the underlying fundamentals are compelling — and they’re playing a major role in driving the acceleration of edtech in Asia.

Appetite for the product

It could come down to a numbers game. The Asian education system is the biggest in the world: more than 600 million students are enrolled in K-12 schools in Asia, a figure that positively eclipses that of the U.S. by a magnitude of 10. There are more young people in Asia than anywhere else in the world. Indonesia’s 67 million youths (ages 10-24) is third-biggest in the world — incidentally, standing behind only China’s 269 million and India’s (drum roll, please) population of 356 million young people.

This sheer potential is compounded by the way Asia’s population places a premium on education. services. As Charles McIntyre, co-­founder of EdTechXEurope 2016, notes, the desire to invest in children’s futures and pressure to get into prestigious universities in Asia is resulting in a willingness to spend on educational services. IBIS Capital projects that after-school tutoring in China will grow from $50 billion to $90 billion by 2020. Then there’s Singapore, where parents spend $70,939 a year on their children’s education, almost double the global average.

In this education-fixated atmosphere, Asian massive open online courses (MOOCs) in particular have enjoyed immense success. Asia also is becoming more global-thinking, and nowhere is this more apparent than in China. English language-learning education platforms are on the rise: there are 300 million English language learners in China. Taiwan-based Tutor Group, the biggest English-learning education platform in the world, boasts a total enrollment that could place it alongside UC Berkeley and the University of Georgia. Meanwhile, VIPKID provides video English tutoring sessions for students between the age of five and 12, concentrating on the early-childhood education market (which, thanks to the implementation of China’s new two-child policy, is also poised to break out).

Strong government support

The Chinese government has a goal: Its 13th Five-Year Plan aims to modernize China’s education system entirely. One of the primary emphases is on the growth of online education, which means that policies have been favorable, to say the least. The Chinese government invested a record $1.07 billion in edtech startups in 2015 alone. It has announced that it will invest an overall $30 billion in edtech by 2020 (though not specifically in startups) and is working to provide all K-12 schools with resources and create an overall student to computer ratio of 6:1 in the next three years.

In India, the future education policy is heavily emphasizing digital, as the government has implemented programs such as Digital India and Skill India to spread digital access. Malaysia also announced in 2016 that primary schools will start teaching coding, while a report co-authored by Ernst & Young notes that Southeast Asia’s government regulations in the private sector are particularly friendly and geared toward boosting foreign investment.

Technological innovation meets a tech-enabled population

Sure, Asia might have the advantage when it comes to the sheer size of its population, but it means precious little if many of them can’t access one of tech’s catalysts: the internet. But that’s fast transforming.

China recently crossed the 50 percent threshold; more precisely, 53.1 percent of its population is now online, which equates to 731 million Chinese internet users. As Jon Russell notes, that’s almost on par with the entire population of Europe. And it’s set to jump further in the coming years. Then a big shout-out is due to Southeast Asia: a report co-authored by Google projects 480 million people in Southeast Asia to have internet access by 2020.

This is welcome news as Asian edtech innovates and crosses roads with hot tech industries such as gaming, VR and AR in the future. NetDragon, a huge Chinese mobile and game developer, is one of the companies making a move into the Asian edtech market to “gamify” education, acquiring global edtech company Promethean World and JumpStart, a provider of K-12 educational products. This promise of education and technology’s successful intersection is ripe with possibility. For instance, Room to Read, the charity organization with which Reedsy partnered for our #IWriteBecause campaign, is now working with Google.org to launch a platform that promotes literacy in Indonesia by increasing access to Bahasa children’s stories through digital platforms.

“Over the next five years, more and more teachers will be able to access valuable online resources through their mobile devices to enhance teaching and learning in the classroom, as well as their own professional development,” says Joel Bacha, Room to Read’s director of strategic expansion. “In addition, more will be learned about how to further break down the digital divide and by introducing ways to utilize technology in offline environments, which will still be very much a reality in many parts of the world.”

Capital influx

It should come as no surprise that major investors are paying close attention to the developments in Asian edtech — and taking action.

Key foreign players are coming into the market and funneling capital into the region to support edtech, from Goldman Sachs to Times Internet. Mark Zuckerberg’s investment fund, the Chan Zuckerberg Initiative (CZI), for instance, is making edtech one of its priorities. CZI wants to help digitalize education worldwide — and one of the first startups that it backed in Asia was Byju’s, an Indian MOOC that seeks to “Disney-fy” education, in its founder’s own words.

Chinese tech giants from Xiami to Baidu also have sought to get involved in the changing edtech landscape. Tencent invested heavily in China’s first billion-dollar edtech unicorn, Yuanfudao, while Alibaba Group was one of TutorGroup’s backers in a $200 million round in 2015. Now that the edtech industry in China in particular has shown capable of minting unicorns, we can expect to see investor interest grow. According to Metaari, 16 companies that raised more than $100 million in the first 10 months of 2017, seven were in China.

Conclusion

It isn’t exactly going to be smooth sailing from here. Long sale cycles set edtech apart; it could take years to test, sell and improve a product that changes students’ education for the better. Localization also presents a challenge to Asian startups expanding into multiple markets, as a product that helps education in a certain country might not necessarily be useful beyond the border. But with continued capital inflows and a population that increasingly embraces edtech, it’s hard not to see the trend ticking up for Asian edtech.

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