Edtech: What to look out for and what to avoid

In January I found myself reading various reviews of the year and predictions for the coming one. The website of Professor Scott Galloway, professor of marketing at NYU Stern School of Business, No Mercy/No Malice, is always worth a read.

Another notable addition to my New Year’s reading list was Schoolhouse Solutions. Schoolhouse’s review of 2023 crossed my desk a couple of weeks ago, and there is much in it worth sharing. Written more from an investment perspective than the usual international education reviews, it has much to recommend it for those working in higher education and investors alike.

In summary, Schoolhouse’s predictions for 2024 are:

• A tough year lies ahead for tertiary international education with declining international student numbers, growth focused on postgraduate taught degrees, with a far lower yield and increased regulation, particularly in the major English-speaking destination markets.
• Student accommodation will remain a headache for the sector despite lower student visas than in 2023 due to housing shortages in major cities. Investment in tertiary infrastructure will be difficult as university deficits grow and access to finance is restricted due to high interest rates.
• Pressure on international student visas will benefit other English-speaking markets (New Zealand and Malaysia). Many universities will look for transnational education solutions to offshore more teaching operations.
• While times for tertiary are tough, private K-12 education will continue to grow despite rising fees and pressures on affordability. International schools are benefiting from the closure of schools in China, with Southeast Asia a key destination.
• Private equity will drive the investment agenda. There will be significant consolidation among private providers and services providers, with more mergers and acquisitions ahead. For the first time in several years there will be several notable initial public offerings in the education space, most likely in the second half of the year.
• When it comes to edtech, online education will continue to grow and there will be increased integration with artificial intelligence to provide a more personalised learning journey. Edtech will consolidate and the axe will fall on some high-profile names when funding runs dry.

It is edtech where I would like to focus. So much was made of record levels of investment in edtech during the pandemic: record funding rounds and unicorns abound! Between 2019 and 2023 ApplyBoard raised US$375 million in series D investment; BYJU’s raised US$785 million in investment; Coursera US$458.9 million; Duolingo US$183 million; GoStudent US$640+ million and upGrad US$210 million.

The picture now looks far less rosy, as does the share price for a number of listed edtech companies. Homework help edtech company Chegg’s share price was down 55% in 2023, while 2U and Cluey both fell by 80% due to funding concerns.

AI has had a massive impact, with Chegg losing customers in droves to ChatGPT and seeing an accompanying reduction in its share price, while language learning platform Duolingo, whose share price in contrast is up 218.9%, has been able to expand outside its core in languages to start offering maths and music.

Edtech in China has been hard hit and continues to be impacted by frustrating government regulation, a weak Chinese economy and high levels of graduate unemployment.

It’s a minefield out there

The Schoolhouse report got us thinking about what defines the success or failure of edtech as we move into 2024. We think there are some key warning signs when it comes to edtech investments.

Plus, for ex-ministers and higher education leaders tethering their horses to edtech through various board positions and universities eager to invest what may be severely curtailed marketing and recruitment budgets in ‘the next big thing’, it is vital to tread carefully as it is a minefield out there.

Aggregating facts and data is no longer desirable or in fact useful as AI does it for you. So, any companies with a focus on gathering and re-selling existing data are due for a rough ride. Any platforms providing search functions are now, due to AI, pretty much obsolete.

So, too, is anything that generates what is largely vanilla content, as this can now be generated automatically by anyone who can type in a sensible prompt to one of the AI platforms.

Unpredictable revenue streams are a no-no with so much uncertainty around, particularly in major education markets such as Australia, Canada, China, the United Kingdom and the USA, with several facing upcoming elections and governments looking to regulate more tightly.

Finally, anything that maintains the status quo. Old student recruitment models facilitated by middlemen characterised by a lack of transparency and perhaps subject to abuse will be increasingly regulated and weeded out.

While money may have piled in during the pandemic to shore up “the way we have always done it”, brighter minds than mine will be focusing on true disruption (student marketplaces and guaranteed places, for instance) rather than maintaining the status quo for agents with some online, virtual tweaks.

What does good look like in 2024?

So, by contrast what will define good edtech? Where should folks invest?

Firstly, anything that fills a data gap. While data is plentiful and now, thanks to AI, very easily aggregated, any company that can find and exploit a gap in the data available has significant opportunities in a sector that is hungry to redefine its mission and grow in the face of adversity.

One example would be alsocan, our platform which allows students to select a university with their career in mind. Putting employment first, the student indicates what company they would like to work for and the platform provides a choice of universities with a track record of placing graduates in their most desired companies.

Because little if any data exists on graduate outcomes and destinations, particularly for international students returning home, this fills a significant gap in the data available to enable informed student decision-making when it comes to higher education.

Secondly, any company that truly facilitates and personalises learning, not just by putting content online, but by engaging and ensuring learning is both continuous and ‘sticky’. Duolingo is a great example, and its share price is testament to that, and we hear Coursera has plans for AI teaching bots.

Efficacy will continue to be the watchword for digital resources, and AI-powered teaching has that in spades. This includes Socratic teaching with course-educated chatbots; optimised learning scaffolds, with data-driven and evidence-based teaching; lesson and unit plans with teaching methodologies that work.

Edtech that supports community and shared solutions will continue to grow, for example, software companies like MyStay (the Australian Homestay Network) and MyStudentDigs.com that respond to the student housing shortage and match students with homes.

Not only are there huge opportunities to respond to the student housing crisis, but these could also be leveraged, for instance, for care for the elderly, matching students with elderly homeowners to provide companionship and help with a light touch, at the same time as providing housing which is otherwise in such short supply.

Finally, edtech that does things differently and provides solutions to the many challenges that face international education as it responds to what is great uncertainty now and in the future.

The same old stuff packaged slightly differently will not cut it with Generation Alpha. They are aware of the power of technology to innovate and move beyond the status quo. It’s time to think out of the box as they do. While they may not be the ones investing, they will be the ones consuming.

First published on University World News, by Louise Nicol, at 10 February 2024, Edtech in 2024: What to look out for and what to avoid