Education in Evolution: EdTech is Dead. Long Live EdTech.

The last 12 months have set a record low for EdTech Venture Capital funding. The global economic downturn paired with increased cost of capital have resulted in one of the most difficult  times ever for EdTech startups to attract investments. 

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Overlooked and underserved for years, the EdTech sector entered a new era in 2020, fueled by the impact of the Covid-19 pandemic. Market operators and analysts were hopeful this would be a turning point for the industry. Looking at recent investment trends, it may seem that the promise of Edtech has been broken. 

Generally, investment data is a relevant indicator for the growth of a sector but we argue that it fails to provide a complete and accurate outlook. In this article we seek to provide a different perspective to evaluate the progress of innovation in education, and argue that a new era for EdTech has emerged.

We define EdTech, short for ‘education technology’,  as everything that involves the use of technology in education to improve its delivery, impact, and user experience. Notably, this definition suggests that the term EdTech shall not be confined to a specific type of players (e.g. startups) or a business or delivery model (e.g. online learning, apps).

Looking back, three districts eras of EdTech can be defined:

• EdTech 1.0 (1980-2010): traditional education started to see the introduction of internet and Learning Management Systems (LMS)
• EdTech 2.0 (2010-2020): smartphones and online learning/tools became a key component of a student’s learning journey
• EdTech 3.0 (2020-2023): education experienced fast digitisation, primarily driven by new entrants (i.e. startups, tech platforms)

Just as EdTech 3.0 emerged as a reaction to the Covid crisis, EdTech 4.0 is emerging as a consequence of the AI revolution. To appreciate current market developments, one must look beyond reported investment figures.

First, the mass-availability of AI tools has resulted in an implied digital adoption rate of an unprecedented magnitude. This has a direct impact on productivity level and therefore business outcomes. Figure below shows that education is amongst the sectors that will see the biggest impact.

Second, the EdTech market is maturing and education institutions and large technology companies (e.g. Microsoft,OpenAI, Amazon) are playing a crucial role for innovation in education. In particular, our research suggests that 70-80% of universities globally are already testing or implementing AI in their institutions. Education institutions have been challenged to respond with developing in-house innovation capabilities for both internal use (e.g. tools that can improve teaching and learning or operations) and external commercialisation opportunities (e.g. solutions developed internally that can be licensed to other organisations).

This trend is further accelerated by the evolving regulatory landscape and market changes. On one hand, regulators are introducing new frameworks to regulate AI and mitigate related risks. Guidelines are in progress but organisations are now facing new obligations to enhance their internal control and oversight systems with clear guidelines and principles for users. As a result, institutions are likely to focus on strengthening their innovation management infrastructure. On the other hand, current difficult market conditions and overall uncertainty are increasing the complexity of the environment in which startups operate, ultimately hindering growth and capacity to meet customer demand and needs.

Both these phenomena are expected to have a positive impact on the appetite that traditional players (e.g. higher education institutions) will have to play a key role in the EdTech market. This is in consideration of their i) need to build in-house innovation infrastructure, ii) distribution capacity (e.g. access to students, alumni), and iii) IP and talent availability (e.g faculty, academic staff).

To conclude, the quasi-ubiquitous availability of AI is driving a new era in EdTech. Institutional players are actively developing new strategies for education innovation to drive improvements such as increased enrolment, enhanced student engagement and new business models. Simultaneously, organisations need to ensure core mandates such as equity, fairness and data security are maintained. The challenge lies in resolving the tension between having a proactive approach to innovation and a framework that ensures academic integrity and standards. This will come ultimately through developing effective plans of action for measuring and implementing digital and AI transformation.

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