Edtech startups bank on continuing demand for online learning

STARTUPS operating in the education technology space are banking on continued demand for online learning post-pandemic, but could face trying times as countries re-open fully and lives return to normalcy. 

Last week, news emerged that Temasek-backed unicorn Unacademy had let go of about 1,000 staff over the past few weeks. The company had axed jobs ahead of an impending slowdown in venture funding and overall economic tightening, according to a report in India’s The Economic Times. After its recent US$440 million funding round in August 2021, Unacademy is reportedly valued at US$3.4 billion.  

Yet a recent pick-up in funding suggested that investor attention has returned to the sector, which has long lagged behind markets such as fintech and e-commerce. 

Over the last 9 months, Singapore-based startups such as Emeritus, LingoAce and Cialfo have amassed support from investors through significant fundraising rounds. 

In August 2021, Emeritus raised an eye-popping US$650 million in a Series E round led by Accel and Softbank Vision Fund 2, quadrupling its valuation to US$3.2 billion from its last funding round in August 2020 when it raised US$113 million (including secondary sales).

LingoAce, a Mandarin language learning platform founded in 2017, completed Series B and C funding rounds in 2021 and raised a total of US$180 million. Investors include Sequoia Capital India, Owl Ventures, Tiger Global, Shunwei Capital, SWC Global & Decent Capital. 

And most recently in January 2022, college application platform Cialfo raised US$40 million in a Series B round and extended the round by US$20 million in February, counting Tiger Global, Square Peg, SEEK investments, SIG Global and Vulcan Capital among its investors.

The wave of interest mirrors recent moves in Europe, where Austrian edtech unicorn GoStudent raised US$340 million led by Prosus, and 360Learning raised US$200 million last year from Silver Lake, SoftBank and others, as reported in Sifted. In 2021, Oslo-based Kahoot, which makes e-learning tools widely used in Singapore schools, went public at a valuation of over US$5 billion. 

Emeritus offers courses, degree programmes and professional certificates from about 70 universities including Harvard, Cambridge and Imperial College, London. Before the Covid pandemic upturned routines and careers, the company was working with about 25 universities. The number of students it has enrolled with its online courses jumped from 50,000 in 2019 to around 250,000 students in 2021.

Yet Emeritus recorded a net loss of US$264.2 million on revenue of US$131.2 million for its FY2021 ended June 30, 2021, latest available regulatory filings of its Singapore entity indicate.  The company did not respond to queries from BT on its financial performance.

Emeritus chief executive officer and co-founder Ashwin Damera attributed the surge in investor interest to a higher demand for upskilling in the workforce and more universities jumping on the shift to digitalisation. 

“The more universities are putting courses online, the fact that companies are investing more in upskilling and reskilling, the fact that students are learning more online, all of this leads to the digital enablement of higher education that has led to an increase in investments,” he added.

Damera believes the business will continue to grow as consumer behaviour has changed.

Alex Ng, managing director of EduSpaze, pointed out that the business of corporate learning, or higher education for working adults, has been growing fast. EduSpaze is a Singapore edtech accelerator backed by government agency Enterprise Singapore. The accelerator supports startups such as mathematics practice platform Practicle, corporate learning company ArcLab and virtual reality education startup VERE360. 

Ian Chiu, managing director of major edtech investor Owl Ventures, noted that he has seen growth in virtual graduate and certificate education where professionals can improve skills without leaving the workforce. Owl Ventures has closed over US$1 billion in funds for global edtech investment.

“We believe this shift to virtual delivery is here to stay as it enables more flexible and accessible learning while also creating valuable benchmarking and outcome data, especially as the world undergoes significant workplace and demographic change in the coming years,” he added. 

Hybrid models for young learners

In the market for young learners, called the K-12 sector and covering education from kindergarten to the equivalent of American grade 12, edtech took off as schools worldwide closed during the Covid lockdowns of the last two years. But with preschools, primary and secondary schools now fully open and students turning back towards physical learning methods, edtech startups could see a falloff in demand. 

Chiu believes the application of edtech will continue with schools increasingly adopting hybrid learning for students and teachers to switch between in-person and virtual contexts.

EduSpaze’s Ng too sees potential for more hybrid learning systems as they offer greater convenience for students and parents, and may encourage lower cost of tuition. He noted that more Singapore tuition centres are experimenting with the provision of both offline and online classes.

LingoAce, a Chinese language learning startup, has begun to provide both online and offline teaching for its students.

With blended learning, students have 2 short classes a week instead of 1 long class, which LingoAce thinks engages them while enhancing their language learning, general manager of South-east Asia Goh Aik Chuan said. 

Class bookings at LingoAce, which caters to students from ages 5 to 15, have grown by more than 2,000 per cent since 2020, according to LingoAce CEO and founder Hugh Yao.

Yao expects the business to continue growing with increasing interest worldwide in learning the Chinese language.

Spurred by its success in the Chinese language arena, LingoAce has also just launched a new English language learning program.

Besides tuition centres, primary schools are expected to maintain hybrid learning protocols in the near to medium term as well, due to the possibility of Covid-19 flare-ups, DealStreetAsia’s head of research Andi Haswidi said. 

Chiu from Owl Ventures, which has invested in LingoAce, agrees that edtech will continue to be an integral part of schools even as Covid-19 restrictions loosen, as experts predict future periods where schools and businesses will again need to be remote.

Apart from platforms that focus on teaching, companies focused on other areas of edtech are optimistic as well.

Cialfo supports students transitioning to university and graduates looking to explore options, as well as counsellors, in the early career exploration and college search and selection process.

Rohan Pasari, CEO and co-founder of Cialfo, believes the college application platform has led to structural changes in people’s lives and in the high schools or universities it partners with. After adopting a new technology, schools will not abandon it to go back to the old ways, he added.

Akadasia, which provides training and social networking platforms for educators as well as access to teaching content to aid lesson planning, has grown from 30 users in 1 country in August 2020 to 160,000 educators in 35 countries today.

“Covid-19 has altered the landscape of education. Even large universities are adopting e-learning and thus in turn saving on investment in more physical infrastructure. This is also making education more accessible and affordable,” said CEO Neelesh Bhatia. Akadasia, founded in 2019, is funded by EduSpaze.

Still, aside from whether online learning has changed for good, a rocky road lies ahead for growth companies. Economies are emerging from the pandemic to face rapidly increasing inflation, monetary tightening and an uneasy environment of geopolitical risk.

DealStreet Asia’s head of research Andi Haswidi said investors will be forced to rebalance their portfolios and head for safety. He expects less equity investments this year across all industries but noted that South-east Asian economies are in a better position relative to other emerging markets.