One of the largest and most important sectors of the world economy, the education industry, is in a digital revolution. Artificial intelligence, automation and digitization are redefining educational norms as more efficient and engaging forms of educational channels emerge.
There has been very little innovation as education is one of the most traditional sectors in the world, where “service” has been provided in much the same way for centuries. In fact, prior to COVID-19, digital technology penetration was low at just 2-3 percent, well below most other sectors of the modern economy. However, COVID-19 has brought educational technology, now commonly known as Edtech, into the mainstream, removing key bottlenecks, namely teachers’ reluctance to try new digital tools and the perception of students and parents that education is not available online can be.
COVID-19 has been a powerful catalyst for the sector
Before the pandemic and the night shift to work from home, online learning operated on the edge of offline offerings. In most cases it complemented the traditional learning process or replaced live tutors where there was no other way to access them. During the crisis there were no alternatives and online suddenly became the norm. Acceptance and usage have increased and the demand for edtech solutions has grown at an extraordinary pace, accelerating the digitization of education by five to ten years. With the additional resources and large numbers of teachers and students now much more open to digital learning, Edtech could transform education as we know it.
Edtech can specifically make the educational process more appealing and therefore more efficient and effective. We believe this is an interesting sector in the early stages of development. At Credit Suisse, we focus on young innovative companies that are breaking the traditional approach to education, skills and entrepreneurial learning. They are predominantly small to medium-sized and have seen strong growth in sales and earnings. Their products and services are well received by tech-savvy millennials and also serve the silver economy as we live longer and want to learn and experience more in life.
EdTech in India
In India, EdTech is no longer a sector of the future, but an industry whose moment has come with more than USD 5 billion in private equity investments in the last five years. Two unicorns have already been created in this area, with Byjus being the most valuable unicorn from India with a valuation of $ 16.5 billion and Unacademy also recently joining the elite billion dollar club. There are currently more than 4,500 start-ups in the Edtech space in India, an industry that, according to a recent report by RBSA Advisors, will grow from the current market size of around $ 800 million to $ 30 billion over the next 10 years should.
The pandemic lockdown has given the already growing industry a huge boost as schools go online and work from the home culture ready to become an accepted way of life. Byju alone has added 20 million new students to its platform since the pandemic broke, according to a recent report by The Ken, with over 64 million currently registered students.
The key factors for the rollout of Edtech across the country are high nationwide internet penetration (~ 450 million active internet users according to IAMAI’s India Internet 2019 Report) and increasing access to smartphones (smartphone base of over 700 million) even in rural areas Areas where encouraging trends in online content consumption are emerging in all population groups. In addition, a young, workable population seeking education and certification and a growing need for retraining in a changing world means that distance learning is a trend that will persist after the economy opens up.
Edtech has the power to transform India and pave the roadmap for a level playing field for education across the country with online platforms that offer the same content to urban and rural populations, rich and poor, all castes and beliefs, and so the divide to bridge more efficiently than ever before. The Indian government has recognized the power of EdTech in the education of India and has launched several programs such as Skill India, SWAYAM, SANKALP, STRIVE, DIKSHA and the National Digital Library.
Currently, K-12 is the largest edtech segment in India, followed by online test prep and online certification. In the future, corporate training, teacher training, performance monitoring, AI / ML-based personalization tools, gamification of pedagogy, training related to hobbies and interests, and vernacular-medium semi-urban and rural population products / services, among others, could throw up many interesting investment opportunities. India’s education sector is expected to grow from $ 117 billion in FY21 to $ 225 billion in FY25, according to a report by PGA Labs and IVCA. The industry would have something to offer every investor, be it non-profit or private equity capital.
UN Sustainability Goal No. 4
Education helps eradicate poverty and inequality and is the foundation of socio-economic development. It can be directly linked to wealth, health, contentment and quality of life in general. Therefore, access to quality education is the fourth goal of the United Nations for sustainable development.
From the perspective of sustainable investing in line with the ESG (environmental, social, governance) criterion, education falls into the “S” (social) category. So far, however, it has rarely been possible to find products that focus on the social component of ESG. Therefore, in the current scenario, it makes much more sense to target these new opportunities in the education sector.
While the pandemic was a shot in the arm for the edtech industry, the current edtech landscape will continue to evolve with new products and focus on providing users with a more personalized and personalized learning experience long after the age of lockdowns and curfews hits is an end. With these seismic changes giving the education sector a new future, this is a space investors can use if they want to purposefully incorporate profits.
(Kirill Pyshkin is Senior Portfolio Manager, Credit Suisse Asset Management. Sandipan Roy is Head of Products for India, Credit Suisse Wealth Management. Views are their own)
source https://dailyhealthynews.ca/education-industry-how-investing-in-edtech-startups-can-combine-profit-with-purpose/
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