World Reimagined: The Future of Education and EdTech

Pens, pencils, notepad and other school supplies on a rustic wooden table
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The pandemic accelerated profound shifts that were already taking place in the global economy. Examples of such shifts include brick & mortar moving towards online shopping and business travel being replaced to a degree with virtual meetings.

Two areas that have seen significantly relatively less innovation with respect to our increasingly digital lifestyle are education and healthcare. Education in much of the world has remained relatively unchanged for decades, and healthcare has remained much more “brick-and-mortar” than online. The pandemic exposed the vulnerabilities intrinsic in these two sectors overnight. Here, we discuss the ways in which education has been forced to undergo dramatic change almost overnight and what it may mean for the future.

As COVID-19 spread, many governments chose to lock down their economies to such a degree that schools were forced to move into the virtual world, which meant that students from pre-K to post-grad were catapulted onto online learning platforms. Teachers had to essentially re-write nearly overnight their curriculae and their teaching methods. By the end of March of 2020, an estimated 1.4 billion students, or roughly 80% of students worldwide, were kept out of their schools. Early last year, the Chinese government instructed 250 million full-time students to resume their studies through online platforms, creating the largest platform shift in the history of education. In early February, an article in the Wall Street Journal discussed how parents lost faith in their closed public schools and sought alternatives.

While most adults who know school-aged children would agree that the education process for the kids they know is very similar to what they experienced, we were starting to see some shifts in investing in education technologies even before the pandemic. According to the Metaari white paper on 2019 Global Learning Technology Investment Patterns, in 2018, $16.3 billion was invested in learning technologies worldwide, and in 2019 that number rose to $18.7 billion. In those two years, the total amount invested in EdTech companies exceeded that for the entire twenty-year period between 1998 and 2017.

According to Metaari’s Worldwide 2020-2025 Advanced Learning Technology Market, the growth rate for Advanced Learning Technology worldwide is 22.8%, with revenues expected to more than triple to $129.7 billion by 2025, with a heavy concentration in North America, Asia Pacific, and Western Europe. North America is expected to see the most rapid growth, with advanced learning revenues increasing from $15 billion in 2020 to $33.7 billion by 2025. During that time period, Western Europe is expected to see a growth rate of about 29.0%, 20.2% in the Middle East, and 40.2% in Africa, thanks to the massive adoption of Mobile Learning across the continent. According to a recent study by Fortune Business Insights, the global EdTech and Smart Classroom Market size was $74.33 billion in 2019 and expect to reach $251.78 billion by 2027, a CAGR of 16.6%.

The pandemic has forced educators and educational institutions to get creative and has accelerated the pace of identifying what works and what doesn’t work. Just like with Zoom, what was once foreign and uncomfortable is becoming normal. This opens the door for vast improvements in education in the future. Imagine students all over the world having access to lessons taught by the most inspiring teachers and to the tutors that best fit their individual needs. Rather than relying on already overworked teachers to try and identify what learning style best suits each student, technology can provide students, teachers, and parents with regular, objective feedback and support. Students can become more self-directed, learning at a pace that suits them, rather than forcing educators to pace the class at roughly the median level (which inevitably leads to some students being underwhelmed while others are overwhelmed).

That said, while the technology is available, the digital divide between those students who have access to devices and minimum connectivity and those who don’t is critical and varies widely by nation (and often by school district in the U.S.). This divide is something that will need to be addressed to fully leverage the potential for EdTech to improve the productive capacity of a nation's future labor force, thus accelerating their economic growth potential. For example, according to OECD data, only 34% of students in Indonesia have access to a computer for their schoolwork, while 95% of students in Norway, Switzerland, and Austria do. Here in the U.S., the Biden administration is looking to address that divide.

We aren’t the only ones paying attention to this space. Last year, privately-held U.S. EdTech startups raised a record $2.2 billion, and globally, EdTech’s raised $16.1 billion. Some of the more well-known EdTechs include Coursera, Course Hero, and Duolingo. And while publicly-traded education technology companies have been rare, that is changing. TPG Pace Tech Opportunities (PACE), a special purpose acquisition company, this week announced that it is acquiring Nerdy, the parent company of Varsity Tutors, an online tutoring platform. The deal gave Nerdy a valuation of $1.7 billion and is expected to close in the second quarter of 2021 and Nerdy will go public through a SPAC and will be listed under the ticker NRDY.

Several other SPACs have recently raised money with the intention of acquiring an EdTech company, such as Class Acceleration Corp (CLAS.U), which raise $225 million in its IPO Adit EdTech Acquisition Corp (ADEXU), which raised $276 million in its IPO last month, and EdtechX Holdings Acquisition II (EDTX), the second blank check company formed by IBIS Capital to acquire an EdTech business raised $100 million in December. Skillsoft, a corporate learning company, was merged with IT skills provider Global Knowledge Training and taken public by Churchill Capital Corp (CCX) last October.

The space is getting more attention worldwide. In December, Meten EdtechX (METX), an omnichannel English language training service provider in China, announced that its overseas training service was accredited as the “2020-2021 Most Famous Brand in the International Education Industry” by the Overseas Education Research Center of the China Education Think Tank Alliance, the Development Research Committee of Overseas Education Institutions (DRCOOT) and the National Academic Alliance of International Education Teachers (NAAIET).

Other non-EdTech focused companies are also looking for opportunities in the space, such as Boxlight Corp (BOXL), which recently announced the installation of 110 Clevertouch IPACT Plus panels on mobile carts in Canon City School District in Colorado. Other more well-known companies that have offerings in the EdTech and smart classroom space include SAP (SAP)Apple (AAPL)Alphabet (GOOG)2U (TWOU), and Dell (DELL). Private companies include Blackboard out of Reston, Virginia and Ellucian.

EdTech is clearly a segment that is expected to enjoy outsized growth in the coming years.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Lenore Elle Hawkins

Lenore Elle Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, her focus is on macroeconomic influences that create investing headwinds or tailwinds. Lenore co-authored the book Cocktail Investing and in addition to her Tematica work, provides M&A consulting services for companies in Europe looking to expand globally. She holds a degree in Mathematics and Economics from Claremont McKenna College, an MBA in Finance from the Anderson School at UCLA and is a member of the Mont Pelerin Society.

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Mark Abssy

Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.

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