One to watch: the rise of EdTech

We’ve had FinTech, RegTech and InsureTech — now brace yourselves for the rise of EdTech. This emerging sector is rapidly becoming the 21st century’s answer to the textbooks and night courses of old. And with university fees rising and the publishing industry in a state of decline, now is the time to start looking at the companies promising to revolutionise education through everyday technology.

The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results
EdTech

Last year, a report from EdTechXGlobal and IBIS Capital predicted that the global EdTech market was on track to grow by 17% a year, reaching $252 billion (£192 billion) by 2020. Already, 2017 has seen some huge fundraising campaigns within the EdTech sector, including $190 million for education software firm EverFi, $35 million for celebrity-led training platform MasterClass, $21 million for educational virtual reality firm NearPod, and $59 million for staff learning portal Absorb.

Yet this is still a fairly nascent industry. Hardly any EdTech companies are listed on the global stock markets, so it is hard for investors to take advantage of the sector’s growth story.

Instead, prospective investors must think outside the box if they want to benefit from the rise of EdTech, by following one of these strategies:

  1.  Invest directly

As with any emerging sector, EdTech’s earliest champions have been venture capitalists (VCs) and angel investors. Privately-owned VC companies are constantly being approached by up-and-coming innovators, so they can pick and choose their investments. EverFi, MasterClass, NearPod and Absorb were all funded by VCs, and the majority of new EdTech investment comes from similar channels.

For non-millionaires, crowdfunding platforms can offer access to EdTech fundraising rounds with more affordable investment goals. Earlier this year, UK-based learning platform Bedrock raised £155,000 through a crowdfunding round which promised investors an equity share in the business and a portion of future dividends, and there are currently thousands of education-themed projects listed on popular crowdfunding site Kickstarter.

However, while crowdfunding can be a great way to access early investment opportunities in niche sectors, it comes with substantial risk. If the venture fails, you can lose everything. And even if it ends up being the next big success story, there is no guarantee that you will share in the riches — many of these campaigns offer gifts and gimmicks instead of equity, so it is important to read the fine print very carefully.

  1. Invest in existing publishers

One of the most interesting trends in the EdTech revolution is the way existing publishers are being forced to adapt.  As early as 2012, leading educational publisher Oxford University Press purchased online subscription service MyMaths for a reported £3 million and last year, publishing giant Pearson announced a strategic partnership with video clip archive Knowledgemotion. Exam revision app Gojimo has created a similar partnership by making premium content from McGraw-Hill Education and the Oxford University Press available as in-app purchases. The app itself was acquired by the Telegraph Group earlier this year for an undisclosed fee.

These are just a few of the many strategic partnerships and acquisitions which have brought EdTech into the mainstream, and helped established players such as Pearson, Wiley, Oxford University Press, and McGraw-Hill to maintain their status in a changing world.

  1. Wait for the next IPO

Edtech IPOs have had mixed success over the past few years.  While online course provider 2U has seen enormous growth since it began trading in March 2014, interactive whiteboard provider SMART Technologies was acquired for just $4.50 per share in May 2016, an 88% drop on its launch value. There are only a handful of EdTech-focused companies listed on the stock markets today, but the next IPO probably isn’t too far away.

Leading Massive Open Online Course (MOOC) providers Coursera and Udemy have both appointed new CEOs this year, accelerating rumours of upcoming IPOs. Meanwhile, highly-funded brands such as Kaltura and EverFi are strong contenders for either public listing or acquisition.

Whatever happens in the short term, it is all but inevitable that EdTech will become a byword for education in the long-term future. As teachers and students become more reliant on technology, traditional publishers will have to acquire or adapt if they want to remain relevant. EdTech may be on the rise, but it's growth story is just beginning.

EdTech stocks and shares that you can buy now

EdTech has yet to really make its mark on the stock markets, but there are a few listed companies which can offer some exposure to the sector.

  • 2U

One of the biggest EdTech companies in the world, 2U provides universities with its ‘software-as-a-service’ (SaaS) platforms, which are then used to create online degree programmes. When it raised an IPO in 2014, it was valued at just over $400 million. Today, it is worth more than $2.3 billion.

  • Cambium Learning Group

Founded in 2009, Cambium creates learning software for children and adults. Currently, it is worth more than $222 million, and as of 1 September 2017 it was trading at an all-time-high, thanks to a series of savvy acquisitions and steady quarterly growth.

  • K12

One of the first EdTech companies — K12 sells curriculums and online courses to schools across the US. It launched its IPO in 2007, but has suffered from some volatility in the wake of board member scandals and accusations of poor performance.

  • Chegg

An online textbook company with a valuation of more than $1.4 billion, Chegg, listed in 2013 and quickly announced a partnership with book publisher Ingram Content Group to digitise all of its existing textbooks. The stock has been trading at an all-time-high since May 2017.

  • Instructure

Owner of the Canvas platform — one of the leading MOOC platforms, Instructure is used by more than 2000 organisations (mainly school districts and universities) across the US. Stock performance was strong in the first part of 2017, returning 51.41% by 31 August 2017.

Get your free beginner's guide to investing

●  Discover the benefits of investing your money

●  Learn about the different investment options available and how to get started

●  Understand how to build a diversified portfolio and manage your risk

Form has failed to submit. Please contact IG directly.

  • I’d like to receive information from IG Group companies about trading ideas and their products and services via email.

Get my guide

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

Form has failed to submit. Please contact IG directly.

  • I’d like to receive information from IG Group companies about trading ideas and their products and services via email.

Get my guide

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

●  Discover the benefits of investing your money

●  Learn about the different investment options available and how to get started

●  Understand how to build a diversified portfolio and manage your risk

Get your free beginner's guide to investing

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.