Education technology (edtech) is one of the fastest growing sectors in the UK, driven largely by the pandemic and its aftereffects. Figures from the Digital Economy Council value the UK’s edtech businesses at over £3.4bn.
Edtech refers to the use of technology in education, in both the public and private education sectors, as well as continuing professional development (CPD) and lifelong learning. It supports digital and blended learning styles, and can involve both online platforms and extended reality (XR).Will Davis, Beauhurst
The UK has seen a boom in edtech activity. Data from Dealroom.co puts the UK as the fastest growing home to edtech in Europe, with London beaten only by New York and San Francisco in edtech deal volume since 2014. As with most tech industries, London is the UK’s edtech capital, with approximately 80% of edtech startups that have successfully raised investment rounds based there.
Research from Tech Nation shows growth in the edtech sector in the UK mostly took place before the pandemic, with investment into UK-based edtech businesses growing 91% between 2018 and 2019.
Rory Nath, Investment Director at ECI, recently explained the long-term potential of edtech businesses:
“Edtech as a market has got those two things we love: growth and resilience. Speaking generally, adoption of edtech is still growing really quickly and that’s down to a couple of things.
Firstly, a new generation of teachers is coming through, who are more tech-savvy and willing to experiment. Then if you look globally, government budgets for edtech are growing quickly too. Both are tied to the fact that people are realising edtech is a great leveller. It can give kids much better opportunities to progress, but also it gives teachers more time to focus on them.
On the resilience side, clearly demand for education is pretty cyclical. But what you also find in this market is that once a school finds a brand they trust, they stick with it almost indefinitely. That was at the heart of CPOMS’ success. I’ve never seen such a loyal customer base.”Rory Nath, Investment Director at ECI
With the potential for growth in edtech widely recognised, here’s what’s important to consider when investing in an edtech business:
Things to know about an edtech business before investing:
1. Is there user research and an effective product strategy?
The strongest edtech businesses we’ve seen have an effective product strategy backed by data and objective user research. They’re regularly consulting this strategy to guide decisions and prioritisation, resulting in a product customers want to use – and enjoy.
A non-existent or poor product strategy means disinterested customers, loss of revenue and wasted effort. It’s essential businesses seeking to grow get this right.
Product strategy influences how edtech businesses tackle subjects such as user experience, scalability & internationalisation and third-party integrations.
2. Is the user experience seamless and intuitive?
Teachers are short on time. Technology should be supporting and enabling their core duties, not adding to them. Systems don’t need to be flashy or overcomplicated. Instead, criteria like speed and simplicity are key. For example, simple alerts provided to teachers can have a big impact on ensuring important tasks are performed on time.
Systems that work with the government in any capacity will likely need to meet accessibility guidelines such as WCAG2. Failure to do so could even be breaking the law.
3. Can the product scale in its current market, in new markets and internationally?
Edtech’s growth is not unique to the UK, and it is not surprising that investors would want to replicate the success of their businesses in international markets. However, this is often easier said than done.
Systems that have been built with configuration in mind are likely to be more successful in this space.
Making things configurable allows for features to be enabled, disabled and tweaked to fit different regional requirements, without seriously impacting development overheads.
Capacity and multi-region hosting are further important considerations to enable international success. We wouldn’t expect an early-stage business to have all of this figured out, but preparation and forward-planning are encouraging indicators.
4. Is the business effectively managing third-party relationships and integrations?
Depending on the nature of their work, edtech businesses may need to integrate with a range of third parties. These typically include local authorities, qualification bodies and other edtech providers. Effective communication with partners like these makes for a smoother user experience, greater product-market fit, and less wasted development effort.
Perhaps the most straightforward way to make for easy third-party integrations is to create standard APIs. Seamless and open integration between partners is important. Platforms that rely heavily on bespoke integrations and ‘one-offs’ can distract from value creation and be a source of technical debt.
5. Is the system secure?
Security was the most common issue across the edtech businesses we have assessed. This is particularly concerning given the sensitive data held, particularly for the systems used by schools.
It’s essential to ensure robust security controls and monitoring are in place to minimise user/financial/reputational impact risk.
Open source software is very popular in education environments, largely because it’s free. However, as we discussed previously, there was a 650% increase in software supply chain attacks in 2021.
The overwhelming majority of these attacks used open source software as an attack vector. While open-source software shouldn’t be avoided, businesses need to monitor and mitigate the risks that come with it.
6. Is AI being used?
There’s lots of discussion around AI when it comes to edtech. The impact that AI and machine learning is having on content creation and assessment is significant, and tasks that used to require extensive teacher input are becomingly increasingly automated (like marking written answers, for example).
We expect that AI will transform the way we approach personalised learning, tailoring education to fit students and thereby increasing its effectiveness. We’re already seeing this happen in how some businesses are creating learning paths. As this is still relatively new to the industry, businesses that are effectively researching and developing AI stand in good stead to reap the benefits – if they build it right.
Our work with edtech businesses:
We chose the six questions above after revisiting previous projects and identifying the key areas most relevant to edtech businesses.
We’ve worked with around 20 edtech businesses since 2018. Here are some of our standout projects:
- IT Due Diligence for a leading provider of corporate e-learning software (successfully raised PE investment from a top mid-market UK-based firm)
- Vendor Due Diligence for a popular safeguarding SaaS platform provider for schools (successfully acquired by a leading US technology business)
- Vendor Due Diligence for an award-winning provider of remote CPD delivered by experts (successfully raised investment from a top UK-based growth investor)
- Vendor Due Diligence for an assessment, proctoring and reporting SaaS business that works in the academic, corporate and governmental sectors (successfully acquired by a fast-growing edtech business based in Ireland)
- Governance and Strategy support for an educational, residential and transitional services provider for young people
- CTO-as-a-Service and mentoring for a digital campus platform that provided digital dashboards to students
- AI and Machine Learning to connect freelancers with appropriate business on behalf of a fast-growing learning management aggregator in the US and UK