Article
The quarantining of more than a billion students and their teachers worldwide has resulted in unprecedented experimentation with education technology (EdTech), and interest in the sector has soared.
November 16, 2020
With home learning increasingly becoming a necessity, one cannot help but wonder: are innovative EdTech applications a fundamental format for learning going forward? And how does EdTech significantly increase the quality of education and lower its costs around the world?
We are at a “Netflix moment” for education as the traditional education system is being disrupted. The transition to online education has not been easy. Many educators, schools, and universities – not to mention parents – have lacked the capacity, equipment, and training to use EdTech effectively. But this is changing. Digitalization and the growing demand for new skills and new ways of delivering education are driving the EdTech market.
Since March 2020, a wave of educational apps, software, and hardware solutions supporting remote learning, many offering free access, have gained millions of new users around the world. The EdTech companies that supply them can offer investors strong financial returns by deploying technologies that significantly enhance the learning experience of billions of students in both developed and emerging markets, often at low cost.
The coronavirus pandemic has accelerated the adoption of a blended learning model that combines traditional teaching and learning methods with EdTech solutions. And with rising unemployment that has seen millions of people indefinitely furloughed or permanently laid off with some form of termination payment, EdTech in the form of online adult training and reskilling courses is helping to equip workers for reintegration into the job market and to improve their competitiveness when applying for new types of jobs.
"The need to reskill those laid off to enable them to quickly reintegrate into the workforce is more urgent than ever before. As a result, online professional training and the certification sector will see a significant boost in demand,"says Dr. Kirill Pyshkin, a fund manager at Credit Suisse Asset Management.
Going forward, we expect to see a surge in global EdTech use. Many educators’ and administrators’ resistance to new technologies has abated. Schools and governments around the world are addressing the digital divide. Laptops and tablets are now cheaper and thus more accessible, and, with reductions in broadband costs and government commitments to ensure digital access regardless of family means, this should result in a huge take-up of EdTech.
Seesaw, an app that allows students to build a digital portfolio of their schoolwork, increased its reach tenfold within a month of schools shutting down in March 2020 and has continued to grow strongly. Google Classroom, which enables teachers to send lessons and materials to students, doubled its users to 100 million in March 2020 and has added another 50 million since then. Byju’s, the Indian online learning app for K-12 students, has added 20 million new users since the lockdown and recently completed a USD 500 million funding round that increased its valuation to USD 10.5 billion.
In October, Yuanfudao, China’s leading online education platform, announced that it raised USD 2.2 billion in funding to further boost its educational technology. The latest funding round brings Yuanfudao’s valuation to USD 15.5 billion, making it the world’s most valuable EdTech startup. Earlier this year, one of Yuanfudao’s competitors, Zuoyebang, also started a new fundraising round at a valuation of USD 10 billion.
Some EdTech companies are using the opportunity created by the EdTech boom to enter public markets. The share price of iHuman Inc., a leading Chinese online childhood edutainment provider, surged by more than 30% on its first day of trading on the New York Stock Exchange.
In China, Koolearn, GSX, and Youdao – three purely online afterschool tutoring services – each saw over 10 million enrollments in free courses during the first three months of the lockdown. In the US, Chegg registered a 69% increase in subscriptions to its online learning services in Q3 2020, and the biggest online school, K12 Inc., reported 49% growth in enrollment year-on-year over the same quarter – the highest in over a decade – driven by K-5 kids, for whom social distancing is difficult. Two-thirds of US schools have used Newsela, an app providing engaging digital content and learning resources, since the outbreak of the novel coronavirus. EdTech is rapidly gaining an audience. According to surveys, 50% of US teachers believe that online learning is effective, compared to just 38% six months ago, while 73% of US students say that the coronavirus has made them more likely to consider online programs.
EdTech apps excel in high-quality video content and gamification – edutainment – meaning that students are engaged for longer. Artificial intelligence and adaptive learning algorithms can provide personalized learning while e-textbooks let students highlight text, search for keywords, and open relevant video content.
Technology is empowering teachers as well. Rather than an alternative to traditional education, EdTech is an enabler, helping teachers better identify which students are having trouble with which areas and helping the most gifted students to make the most of their talents.
In developing countries (and in disadvantaged areas in developed countries), where schools are severely under-resourced, effective EdTech implementation can give teachers a lifeline to enhance their teaching and deliver a basic level of education that has been impossible to provide to date.
The coronavirus pandemic, while causing so much loss of life and economic harm, has also had an unintended positive effect: it has fast-tracked the adoption of EdTech, bringing tremendous benefits to learners of all ages around the world. With the extra resources and the vast population of educators and students who are now more open to digital learning, EdTech will continue to transform education as we know it.
Impact and engagement report
To learn more about the profound changes underway in the education sector and the attractive investment opportunities emerging as a result of those changes, and to find out how the Credit Suisse (Lux) Edutainment Equity Fund is helping to reshape the education industry, read our impact and engagement report.
Video
Watch fund manager Dr. Kirill Pyshkin as he explains how EdTech contributes to achieving UN Sustainable Development Goal no. 4: ensuring inclusive and equitable quality education for all.
