EdTech in Russia: 3 Key Changes and Forecasts

Contents:

• EdTech Evolution: Before and During the Pandemic
• EdTech Investment Activity During the Pandemic

EdTech Evolution: Before and During the Pandemic

Since the early 2000s, the global education market, including the EdTech sector, has demonstrated steady growth. According to the analytics company HolonIQ, the market grew by $1 trillion between 2010 and 2015, reaching $5.2 trillion. However, by 2020, the growth rate had slowed, and by the end of 2021, the market was worth $5.4 trillion. Forecasts indicate that it could grow to $7.3 trillion by 2025. This demonstrates significant opportunities for investment and innovation in education, highlighting the importance of adapting educational technologies to modern requirements.

According to HolonIQ research, one of the key drivers of the growing demand for digital educational solutions is the growing number of learners. Over the past three decades, the number of education consumers has increased by 2.3 billion people, and this trend is expected to continue, especially in developing countries. In the context of globalization and digitalization, the education market continues to evolve, opening up new opportunities for the implementation of innovative technologies and adaptive solutions that facilitate learning.

In 2018, investments in digitalization of the education sector amounted to $152 billion, accounting for only 2.6% of the total education market. These funds were insufficient to fully prepare educational institutions for the pandemic. During self-isolation, there was a sharp increase in demand for online education, and in 2021, spending on EdTech reached $227 billion, accounting for 3.6% of the total market. According to HolonIQ forecasts, EdTech's share could grow to 5.2% by 2025. Thus, the importance of investments in digitalization of education continues to grow, highlighting the need for educational institutions to adapt to modern realities and technologies.

Anton Sazhin, CEO and founder of the CORE platform, emphasizes the importance of digitalization in education. He notes that educational systems remain conservative, not only in Russia. The transition to an online format has revealed long-standing problems. Traditional teaching methods, used since the 19th century, do not meet modern requirements and demonstrate low effectiveness. Digitalization of education is a necessary step to improve the quality of education and adapt to the challenges of the modern world.

The pandemic has exposed serious issues of digital inequality. In France, despite a developed IT industry, the number of students with limited access to technology has increased. This situation highlights the need to invest in infrastructure and ensure accessibility of technology for all segments of the population. Eliminating the digital divide is a key step towards creating a more equal society and ensuring equal opportunities for learning and development.

An analysis of startups during the pandemic shows that the majority of European EdTech projects are focused on corporate training. In North America, 30% of startups target this segment, while the rest focus on K12 and higher education. India and South Asia see a more even split between these sectors. This trend highlights the differences in educational needs and approaches to learning across regions.

As of mid-November 2020, 20 unicorns were registered in the EdTech sector, with the majority representing the Asian market. For example, Yuanfundao, a developer of an online platform for school education, managed to attract an impressive $15.5 billion in investments. American startups such as Duolingo, valued at $2.4 billion, and Udemy, valued at $3.3 billion, also stand out among the unicorns. These companies offer innovative solutions for learning languages ​​and various academic subjects, making them key players in the edtech market.

Investment activity in EdTech during the pandemic

In the first half of 2020, the global venture market showed a decrease in activity compared to 2019, when 78 deals worth $240 million were recorded. However, prior to the pandemic, the EdTech sector had been experiencing steady growth: from 2014 to 2018, investment volume quadrupled, from $2 billion to $8 billion. Importantly, edtech startups have already raised $16.1 billion in 2020, demonstrating significant interest in educational innovation and the potential for further investment. China, the world's largest education market, attracted approximately 50% of all venture capital investment in education prior to the pandemic. In 2020, this share increased to 60%. The United States received approximately 15% of investment, India 14%, while the European Union and the United Kingdom accounted for only 5%. This growth in investment in Chinese education underscores the country's importance on the global stage and its attractiveness to investors seeking to develop innovative educational solutions.

Sergey Bogdanov, expert in Venture capital, emphasizes that in 2020, Russian investors actively invested in startups at various stages of development. One example is the $1 million raised by MyBuddy.ai from LETA Capital. Furthermore, Angelsdeck recently signed a deal with Educate Online, demonstrating growing interest in investing in educational technologies and startups offering innovative solutions. According to Bogdanov, Mail.ru Group's activity in EdTech is a positive signal for the market. The company has already invested in projects such as Skillbox and SkillFactory, and also owns the GeekBrains and Uchi.ru platforms. The presence of strategic investors plays a key role in the development of startups and helps attract the attention of venture capital funds. Mail.ru Group's investments in educational technologies highlight the growing interest in this segment and create opportunities for further growth and innovation in online education.

Despite the existence of major players in EdTech, Bogdanov is confident that the market still offers opportunities for new ideas and company creation. In 2021, he predicts the rapid emergence of numerous innovative startups that could change the landscape of educational technologies.

Alexander Zemlyak, Senior Analyst at LETA Capital, highlights the strong interest of venture investors in the EdTech sector in 2020. He notes that 40% of the total funds raised this year went to education startups. Projects in the General e-Learning and Education Management segments have proven particularly attractive to investors. These areas demonstrate significant growth potential, making them a priority for investment.

Igor Ryabenkiy, Managing Partner of AltaIR Capital, emphasizes the increasing competition among investors seeking to invest in promising educational projects. According to him, after a period of instability in March-April 2020, the education market recovered, and the value of startups increased two- to fourfold. This indicates a growing interest in innovations in the educational sector and that investors see significant potential for further development.

Ryabenkiy reports that the fund has increased its investment plans, selecting 25 startups instead of the initially planned 10. This decision is due to the emergence on the market of many promising projects that can generate significant profits and contribute to the development of innovative technologies.