Exploring the potential of EdTech
There are several portfolio verticals that are attractive to impact investors, namely clean tech & health tech, but EdTech, the new buzzword for education technology, is still a largely unexplored ground for the impact investing sector.
With COVID-19 and the subsequent closure of schools worldwide, the capacity for remote learning has become increasingly important. Laptops and tablets have accelerated the pace at which students are utilising digital tools and content, allowing the introduction of new entrants into the space and compelling incumbent education providers to evaluate new technologies and models.
Even prior to COVID-19, the global education sector was booming. Berkery Noyes tracked 1,213 education transactions between 2016 and 2018, of which 238 disclosed financial terms, and calculated the aggregate value to be US $29.38 billion. Based on known transaction values, it was projected that the values of the 975 undisclosed transactions was approximately US$8.19 billion, totalling US$37.57 billion worth of transactions in the education sector tracked between 2016 – 2018.[1] The disclosed median enterprise value multiples for the education segments combined in the report during the 2016-2018 period were 2.1x revenue and 10.2x EBITDA.[2]
With opportunities at various points in the market, there’s evidence that impact capital can help education in a number of important ways. Where government is absent, impact capital can help fill a basic gap that the state cannot. Where the government provides basic services, there is also ample room to supplement public services through congruent education for at-risk children, vocational training or adult literacy services.[3]
Beyond this, impact investors can do their part to strengthen the sector by:
- supporting early-stage experimentation and innovation in education
- innovating new kinds of financial approaches that support education and the ecosystem around it
- investing alongside venture capitalists and venture philanthropists in scalable education businesses
The value of innovation in education lies not just in promoting the future prosperity and development of our society, but in building our structural capacity to respond effectively to inequalities – to ensure no one is left behind. Every human, regardless of their geographic location or socio-economic circumstances, should be given equal opportunity to thrive and contribute to their community.
[1] https://berkerynoyes.com/full-year-2018-education-ma-industry-trends/#:~:text=The%20median%20EBITDA%20multiple%20improved,from%2071%20to%2091%20transactions.
[2] Ibid.
[3] http://maximpactblog.com/whats-keeping-impact-investors-away-from-education/
