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There are several factors pointing to EdTech’s continued adoption and growth. One is the flexibility it affords learners who would be otherwise constrained by geography or time.francescoridolfi.com/iStockPhoto / Getty Images

The immediate need for remote learning during the COVID-19 pandemic thrust education technology, or EdTech, into the limelight. The ability to leverage video, interactive software, and educational games helped keep education systems running and accelerated the sector’s growth. Yet, it will be after the pandemic that EdTech’s long-term success is determined, which is why there’s now an attractive window of opportunity for investors.

The global market size for EdTech is expected to reach US$404-billion by 2025, according to New York-based global education research firm HolonIQ. That represents a 16.3 per cent compound annual growth rate, or an overall growth of 250 per cent, since 2019. Even then, EdTech would still be in its early phase of adoption, making up just 5.5 per cent of the US$7.3-trillion global education market by 2025.

For investors, there are several factors pointing to EdTech’s continued adoption and growth through 2025 and beyond.

The big one is the flexibility it affords learners who would be otherwise constrained by geography or time. Online learning allows individuals to complete coursework at their own pace as well as keeping their schedules flexible for work or family reasons.

The decade-old massive open online courses (MOOC) movement is the epitome of how EdTech addresses flexibility. Platforms like the one offered by Coursera Inc., COUR-N, which just went public on March 31, provide affordable, modular classes for those who may not want to enroll in a holistic educational program. By the end of 2020, MOOC platforms have attracted 180-million learners and offered more than 16,000 courses.

For EdTech companies, flexibility is an increasingly important value proposition as they aim to reach more customers beyond students in a traditional classroom setting. In December 2020, the largest online kindergarten through Grade 12 education provider in the U.S., K-12 Inc. officially changed its name to Stride Inc. LRN-N.

The company took this step after a series of acquisitions that broadened its scope to align with its mission of providing “lifelong learning solutions,” including higher education, professional training and coding boot camps, among others. To gain from this expanded market, which Stride puts at more than US$100-billion, it has to serve well a more complicated demographic. Think young adults juggling jobs and study as well as parents who have become learners themselves.

If flexibility speaks to the “pull” aspect of EdTech’s appeal to individuals, the “push” may be its potential role in helping employers improve labour force competitiveness. After all, the trend of lifelong learning is arguably more out of necessity today and a byproduct of two fundamental long-term shifts in society: we are living – and working – longer, and the required skill set continues to increase in the age of rapid technological change.

Toronto-based software provider Docebo Inc. DCBO-T is an example of an EdTech company that’s likely to benefit from stronger global demand in workforce education. Docebo provides a cloud-based learning management system to train internal and external workforces, and currently has more than 2,300 enterprise customers, up from about 1,800 as of March 2020.

Its client roster includes the likes of Walmart Inc., Thomson Reuters Corp., L’Oréal SA and Amazon Web Services. Docebo’s software-as-a-service business model combined with the business-to-business focus can also lead to sticky recurring revenue and high margins.

Besides individual learners and employers, the perspectives of parents and educators are equally consequential in greater adoption of EdTech. A critical consideration for both of these parties is EdTech’s ability to improve educational outcomes.

For example, educational video games allow for interactive learning and increased engagement among students, using game play and performance monitoring. Kahoot! ASA KHOTF, one of the largest, recent European technology initial public offerings, runs a platform that enables users to create, share, and play learning games. The company boasts more than a billion players a year from more than 200 countries and claims that more than 50 per cent of U.S. teachers use the platform.

Also pertaining to positive educational outcomes, technologies like artificial intelligence (AI) within EdTech have highly transformative potential. In China, the world’s largest education market, the mass-implementation of such technologies is already evident.

For example, LAIX Inc. LAIX-N claims to have the world’s largest bank of Chinese speakers learning English. The platform collects audio data through an automatic speech recognition system and analyzes it through natural language processing. The algorithm then recommends content suited to the student’s level and gives feedback via text-to-speech. HolonIQ projects that global AI-EdTech expenditure is expected to reach US$6-billion by 2025.

Finally, sustainably-minded investors may know that education is one of the United Nations Sustainable Development Goals. As EdTech makes education more accessible and effective, it could have a further tailwind from increased adoption on the back of public sector policy support and funding.

For example, in France, all workers are eligible to receive €5,000 through their careers as of 2020 to spend on continuous learning, with low-skilled workers and those with special needs receiving up to €8,000. Programs like this one indicate a promising opportunity for EdTech companies.

Warner Wen is research director, Canada, at Global X Management Co. LLC in Toronto.

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