EdTech Investment and the Digital Transformation of Education Systems Globally

Emerging Technologies and Edtech December 07, 2021

The last two years have seen a record amount of capital flowing into EdTech as the world emerges from the ‘shock’ phase of the COVID-19 pandemic and begins to rethink how learning might occur going forward. Over the next five years, education systems globally will go through a digital transformation like no other, building infrastructure and capabilities that place digital at the core of learning and delivery. 

Material Changes to Education Globally

By 2025, the world will spend $7.3T on education and training, and yet just over 5% of that will be spent on digital. Compared with other industries, education has a long way to go before digital, whether infrastructure and systems, content, or delivery, is seen as a core strategy or capability.

However, the COVID-19 pandemic thrust digital to the forefront, forced urgent and often not well designed ‘emergency’ online teaching. It also exposed significant gaps in education systems’ ability to reach learners and maintain continuance of learning, with an estimated 1.6B children out of school at the peak of the pandemic. While no-one can predict the future, what is becoming clear is that governments around the world are preparing for ‘digital’ as a foundation to their education systems, not a peripheral ‘nice to have’ as we have generally seen to date.

EdTech Investment surges as the world turns to digital solutions to support learning

In the first three quarters of 2021 alone, almost $15B of venture capital was invested into EdTech, almost matching the whole of 2020 and more than doubling that of 2019. With the exception of China, every region of the world has seen a sharp rise in EdTech investment, particularly in Europe, with the most investment growth (2021 has tripled on the previous year from $08.B to $2.3B to Q3 2021) and the United States, which has a broad EdTech investment footprint across many segments has gone from $2.5B VC investment in 2020 to $4.8B in the first three quarters of 2021. India’s momentum continues to build with $3.2B of venture capital deployed to Q3 2021, mainly in direct-to-consumer solutions, with a favorable policy and regulatory environment for EdTech, and large, upwardly mobile population. 

Globally, general investors are looking more closely at EdTech as demand for solutions remains strong and exits are clearer, with a record number of IPOs in 2021, more than double from each of the prior 5 years. 

2021-2025 will see a major global investment in digital infrastructure for education

In 2019, governments and schools around the world spent approx. US$15.5B on K12 Digital Instruction and Assessment, making up nearly 6% of global EdTech expenditure that year. 

In 2020, expenditure surged to $19.4B to support remote learning, and is expected to grow to $42.5B in 2025 as K12 starts a broad digital transformation worldwide. 

5 shifts driving investment growth in K12 digital instruction & assessment:

1. Print to Digital. Over time, the market has seen an increasing level of digital interactive resources and we are likely to see a continued trend to ‘flip’ the model from core print with digital adjunct, to digital core with some print additions.

2. LMS/SIS to Interactive Digital Assets/Content/Instruction. Schools are demanding more from ‘workflow and process-based systems’ such as LMS and SIS and seeking student facing content, instructional materials and formative assessment tools to employ in the classroom and for virtual or homework.

3. Summative (High Stakes) to Formative (‘In-Class’) Assessment. We’ve seen a significant sentiment shift away from high stakes, standardized testing towards more classroom based, more regular formative assessment. K12 Digital tools and resources are building assessment and analytics directly into products.

4. Device Penetration + Connectivity Acceleration. The digital divide has been clearly identified through COVID and the public and private sector are seeking to accelerate close this gap.

5. Local to Global. Curriculum, and its underlying learning content, is increasingly applicable beyond state or federal borders, particularly in foundational areas such as STEM and literacy, along with ‘non-academic’ content including areas such as social-emotional learning.

While schools will eventually return to physical classroom teaching and learning, intermittent closures resulting from a pandemic, natural disasters, or other local factors, are more likely than not in the future. Expectations about digital access have forever changed, as have our definition of ‘what’s possible’ and the impact of the COVID-19 pandemic has created worldwide impetus to get digital infrastructure in place and to build digital capabilities into education systems.