Commentary: Investors are betting that new, AI-driven approaches to education will persist after the COVID-19 pandemic.
Education technology was a sleepy corner of the startup world until COVID-19 hit. It's wide awake now.
Coursera's IPO in late March 2021 valued the company at nearly $6 billion. Meanwhile, according to HolonIQ, an education market research firm, ed tech companies raised more than $16 billion globally in 2020, with China and India accounting for over three quarters of that total.
This is perhaps not surprising, given that the coronavirus pandemic pounded the traditional education paradigm and suddenly everyone, from parents to teachers to administrators and, finally, investors began hunting for solutions. Among the most promising companies are those harnessing artificial intelligence to improve education.
Riiid, AI and education
Korea's Riiid, which makes test-prep apps for companies like Kaplan and is developing an app to prepare students for Colombia's national college entrance exam, raised $41.8 million in mid-June 2020, bringing its total venture capital raised to date to $70.2 million. The company, already well-established in Asia with the top-selling ed tech smartphone app in both Korea and Japan, is using the funds to expand further across the U.S., South America and the Middle East.
CBInsights cited Riiid in its report on game-changers for 2021 and included Riiid in its AI 100, an annual ranking of the most promising AI startups in the world.
Riiid's technology quickly learns a student's strengths and weaknesses and optimizes learning plans accordingly. "We thought it would take a decade before people were ready to accept this kind of methodology," said David Yi, CEO of Riiid Labs, the company's California-based global arm. "But COVID-19 accelerated everything."
More money for education
Another sector attracting attention is companies that provide institutions of higher education with industry-relevant training programs.
Holberton, for example, started as a software engineering boot camp but now offers universities and other organizations the tools to build their own programs. The company recently partnered with Mexico's Anahuac University to create a software development and IT operations training program to meet surging demand for those skills in Latin America. Venture capitalists noticed and pumped another $20 million into Holberton, with Redpoint eventures leading and Pearson Ventures joining as a new investor.
Seeing Redpoint invest is a sign of real change in education technology. While specialist investors like GSV Ventures and Pearson Ventures dominated EdTech funding before the pandemic, some of the biggest VCs piled in during 2020, including Andreessen Horowitz and Facebook cofounder Eduardo Saverin's B Capital.
Investors say that the pandemic unleashed demand for tech solutions that had been met with skepticism before. Indian multinational educational technology and online tutoring firm Byju raised $1 billion last year and has raised $460 million so far this year in an ongoing Series F round, pushing the company's valuation to a whopping $13 billion.
Though China and India accounted for most of the ed tech funding, the U.S. saw significant growth as well. U.S. ed tech investments surged to $2.2 billion in 2020, according to EdSurge, up from $1.7 billion the previous year. The question now is whether technology has become embedded in education and will grow or whether the appetite will dwindle as the pandemic recedes. Investors are now watching to see if all the money will yield real change in education.
But will these investments in education tech pay?
Much of the money went to startups offering tools to help schools and teachers improve the online educational experience, but it's not clear that demand will survive when in-person teaching resumes. With so many of those startups still early-stage, there will likely be a wave of consolidation, as well as corporate failures, as the market settles down.
Even so, the pandemic normalized the use of digital products for education. Some of the largest U.S. ed tech investments went to B2C companies like Outschool and Juni Learning, which offer private online classes for kids. These kinds of companies may have a better chance of survival as busy parents opt to continue online extracurricular education instead of facing the logistics of moving their kids around after school.
The other hot area is re-skilling or up-skilling employees, or certification programs focused on preparing people for the job market. There is a growing skills gap, particularly in the tech space, that is not being met by traditional educational institutions. This isn't a COVID problem: it's a problem that has been around for decades and will persist for decades.
While the wealthy markets will drive profits for these companies, they will also play a critical role in democratizing education globally. AI-powered solutions can be delivered to any internet-connected device anywhere in the world, opening up efficient, data-driven teaching methods to people globally. Riiid is engaged in building back-end systems for companies and countries from Asia to the Middle East to the Americas, promising to revolutionize teaching.
"Traditional education institutions weren't that much interested in AI just a few years ago, but now they all want to integrate AI," said YJ Jang, Riiid's founder and CEO.
Soraya Sesto, founder of Casa Grande Interactive, an education technology company working with Riiid to implement AI-enabled educational technologies in Latin America, says the big issue now is loss of learning and improving student engagement. She says one of the most important features of Riiid's technology is that it can predict when students are losing interest, allowing them to shift strategies to try to keep them motivated.
All of which means that, while we may see the pace of education technology investment ease from the 2020 boom, we're unlikely to see ed tech innovations slow. There's too much at stake.
Disclosure: I work for AWS, but the views expressed herein are mine.
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