As the coronavirus pandemic has prompted governments across the world to introduce draconian quarantine measures, hundreds of millions of youngsters have had no alternative other than continuing their studies online.
Almost overnight, the demand for online education hit unimaginable highs. In China alone, the coronavirus has disrupted the routine of 280 million school and higher education students, and most of them will likely remain out of school until September.
This spike in demand crashed the platforms of China's online learning providers. Yungfudao, one of the country’s largest education technology (edtech) companies, suffered a two-hour meltdown in February after 5 million people signed up for its offer of free live courses.
Into the spotlight
Edtechs have been around for years, but they were largely overshadowed by other ‘sexier’ start-ups, such as fintechs. That is no longer the case, with the fallout from the pandemic pushing them into the spotlight. While companies in other sectors are fighting to survive, edtechs are scaling up and hiring, and even building a pipeline of foreign investment.
“People need online learning right now,” says Daniel Pianko, co-founder and managing director of Achieve Partners, a US investment firm focusing on the education sectors. “One of our portfolio companies, AdmitHub, went from having 100 customers to 700 new sign-ups in 72 hours when it launched its Covid-19 chatbot service.
“We are witnessing a switch from demand generation to demand processing for many companies in the edtech space. In the US, it took us 20 years to get to about 35% higher education students taking at least one course online, 3% in the K12 [school age] space. We have gone from that to 100% almost overnight.”
The coronavirus crisis has forced countrywide school closures in 188 countries, affecting as many as 1.54 billion students of all ages, or 89.5% of the total enrolled learners globally, according to figures from Unesco as of April 3. Those who have access to the internet have switched to online learning. Adults have also been increasingly active on online learning platforms, as many are trying to use their time in quarantine to improve their skills or learn new ones.
If this is a lifetime challenge for society as whole, it is a lifetime opportunity for edtechs across the globe, as they rush to enlarge their operations to meet this burgeoning demand. “We are certainly growing faster than planned and we are working very hard to meet the new demand,” says Kiril Bigai, the co-founder of online educational platform Preply, which experienced double-digit, if not triple-digit, growth in its main markets of the US and Europe in March.
Most edtechs are built on easily scaleable platforms that allow them to rise to the challenge relatively rapidly. However, they still face the perils of having to grow this rapidly in a market environment where disruptions and limitations to movement are higher and wider than ever experienced in recent history. Edtechs have to think outside the box to get around these today’s limitations.
“We continue to hire people, but they join remotely. They will join our offices Barcelona or Kyiv once this situation is over,” says Mr Bigai.
Preply closed a $10m round of funding earlier in 2020 just before the coronavirus reached Europe and the US. Other edtechs have been able to raise money even later. Chinese Yuanfudao, the first unicorn in the Chinese K12 space, managed to raise $1bn in late March in a round of financing led by Asia-focused private equity Hillhouse Capital.
“Education was among the industries that people had projected [to bring] disruptive change since the dawn of the internet, but entrepreneurs in the past two decades failed to make it happen,” Yuanfudao founder and CEO Li Yong said in an internal letter reported by DealStreetAsia.com. He added that two key factors have matured in this decade, including the popularity of mobile internet, and the first generation of 'netizens' becoming parents and making learning decisions for their children.
Yuanfudao is no exception when it comes to scaling up in 2020. Indonesia's Prospark, the UK's Lingumi and Ireland’s Code Institute are among the edtech start-ups that raised capital in March, despite unstable capital market conditions.
The current pandemic may well prove to be a make or break moment for edtechs. Many are offering their learning modules for free to gain exposure and potential customers. But the experience of Chinese learners under quarantine has not been all plain sailing and the risk for edtechs in China, as elsewhere, is to face a limited conversion rate of free customers into paid customers in the medium term once schools and offices reopen.
“The peak in demand we are seeing is because of this special situation, but conversion numbers from free to paid in the tutoring industry will be low, below 10%,” says Claudia Wang, a Shanghai-based partner at consultancy firm Oliver Wyman. “The same is true for the K12 space. It will [affect] some of the perception and behaviour of some parents, but a relatively small part.
“In vocational training, there are two possible scenarios. If the impact of Covid-19 is limited to the short term, then adults may want to use this period to develop their skillsets, so that once the economy recovers they are in a better position in the job market. But if the impact is going to be mid-term, then people will see less value in this training, and will likely not spend money on it.”
The length and magnitude of the economic recession triggered by the coronavirus will eventually define the mid-term demand for online learning services, although Preply’s Mr Bigai believes some of the changes being witnessed are here to stay. “The current situation is accelerating some tech trends,” he says. “We will see a huge growth of online tutoring, and I believe it will be even bigger in the long term than in the short term. It is a paradigm shift.”
Edtechs have been given a unique chance to engage with learners of every age on a mass scale. To retain these newfound customers, they will need to ensure that they learn their lessons from the current period of instability.
This article first appeared in the April-June edition of fDi Magazine. The full digital version of the magazine is available here.