With Brexit Looming, Is There a Place for the UK in Global Edtech?

With the Brexit limbo set to linger for a few months yet, uncertainty looks likely to continue affecting the U.K.’s commercial relationships. Foreign direct investment in the country has fallen by nearly 20% in the last three years, and the same period has seen British companies less likely to enter into foreign trade than before.

Despite a difficult short-term picture, though, there is some hope that the U.K. can continue to thrive in areas such as education—a sector that can tap into the country’s strong heritage and international reputation. To be one of the leading players in a $250 billion global industry would be a huge win. But can the country make the necessary step up?

The edtech sector certainly shows promise. It is one of the U.K.’s fastest-growing industries, with a 22% revenue growth year-over-year. It accounts for 4% of all U.K. technology companies, and is projected to be worth £3.4 billion by 2021. Roughly a quarter of Europe’s edtech companies are based in the U.K., attracting 35% of European edtech startup investment. London is a launch pad for edtech startups and has a growing reputation as a leading hub where many foreign nationals choose to establish their edtech companies.

Nonetheless, from a global perspective, the U.K. and Europe as a whole are presently dwarfed by bigger players. More than 3,000 edtech companies are currently active across Europe, but they receive just 6% of global edtech venture capital. On the other hand, just China and India together represent more than 70%. Moreover, UK edtech is currently only generating around £170 million in exports—much smaller than one would expect for a service-centric economy that ranks as the world’s fifth-largest.

However, changes are underway – both from government and within the sector itself – that aim to secure London’s future as a global edtech powerhouse. While the UK is abundant in the technical and creative skills required to create world-class edtech products, it has until recently lacked the ecosystem necessary for products to achieve exposure and make the transition to global markets. But this is beginning to change.

One of the most difficult issues in marketing—and buying—edtech is demonstrating that a product will bring tangible, measurable benefits. Creating such evidence requires both skill in empirical research techniques and, crucially, access to pupils in order to measure impact. To solve this problem, the government has recently announced the creation of a series of school “testbeds” that will work with startups to develop an evidence base for the best innovations.

Alongside this, other institutions are beginning to work with edtech businesses to help them understand how to use research to create solid evidence for the suitability of their product. A prime example is University College London’s EDUCATE initiative, which brings together edtech entrepreneurs, academics and educators in a structured research mentoring program.

The second critical element in supporting this industry is an ecosystem that connects new companies with funders, potential customers, experts—and each other. An increasing number of organizations are aiming to nurture London’s many fledgling startups and create these links. Established events such as the BESA’s Bett show are now working in tandem with new, innovative conferences such as Learnit and peer networks such as the Edtech Exchange. Investment groups like the Nasdaq-listed EdTechX has launched the EdtechX Europe conference and Edtech Week (a series of 40-plus events) in London, as well as hosting other events across Europe, Asia and Africa.

At the government level, the U.K.’s Department for International Development is looking at targeting learning outcomes, supported by edtech, through the development of an EdTech Research and Innovation Hub that focuses on the developing world. And at the same time, Nesta supports edtech impact investment and Emerge Education is building a funding network to accelerate promising edtech projects.

These emerging networks will be hugely important in creating opportunities for U.K. edtech in the coming years. Although Chinese and US startups attract more attention, the fact that they tend to focus on their own large domestic markets means there is a huge opportunity for European and U.K. companies to step in and scale internationally at an earlier stage.

Nonetheless, despite these supports, U.K. education entrepreneurs must be conscious of the future risks to their place in the global tech ecosystem. Many London-registered startups rely heavily on development operations based in other European countries, as well as a good deal of funding from European businesses. There is strong competition from hubs in Berlin, Stockholm and Paris, so it will be important to continue nurturing the country’s overseas links, regardless of what version of Brexit the UK arrives at. However, if London can continue to strengthen its reputation as an international edtech hub, there’s no reason it can’t be a global leader in creating positive educational impact.

Vikas Pota is group chief executive of Tmrw Digital

This article appeared on EdSurge on 19th May 2019

A continental shift in education technology?

While the sector is currently dominated by the US and China, Europe can be the powerhouse helping edtech come of age, says Tmrw Digital’s Vikas Pota

Last month I attended a rooftop event in London hosted by Edspace.io, where a cross-section of European edtech startups and VCs gathered to discuss the latest innovations in education. The talent, energy and enthusiasm of those in attendance was palpable – a sign of the growing confidence within Europe’s edtech sector, a market holding immense potential for companies looking to make a global impact.

Indeed, Europe is the second largest worldwide market when it comes to education spending, totalling over €700bn each year for its 110 million students. The pedigree of its countries’ education systems is world class, with relative minnows such as Estonia, Ireland and Finland consistently riding high in the OECD’s PISA rankings.

Yet, despite 3,000 edtech companies currently active across the continent, they receive just 8% of worldwide investment in the sector. Instead, the US and China dominate, with more than 58% of all edtech funding in 2017 going to US companies and 19% to China. It’s no surprise, then, that the members of edtech’s unicorn club – those with valuations worth more than $1 billion – are either Chinese (such as Hujiang or iTutorGroup) or American (such as Coursera or Udemy). India’s Byju’s is the sole exception.

Can Europe add a name to this list and stand alongside its other tech titans such as Sweden’s Spotify or Germany’s Zalando? Sceptics will argue that lack of access to funding and a fragmented market of 44 countries – many with complex school procurement processes – will hold it back. I take a more positive view. For example, from 2014 to 2017, investment in European edtech start-ups more than tripled in size, from €140mn to €490mn. Yet transactions per year have remained broadly consistent, meaning that investors are devoting more significant sums, in more mature projects. While €490mn represents but a third of the venture funding invested in US edtech last year, just four years ago it was a tenth. Clearly, the historical reluctance of investors to back European edtech companies is abating.

UK stands tall

Attracting 35% of this €490mn figure, the UK stands tall as the main player on the European edtech stage. Of course, Brexit uncertainty poses challenges – particularly to the workforce in the UK tech industry – yet the country has some natural advantages. At the top level, the government is engaged, establishing a national computing curriculum and recently calling on tech companies to help revolutionise the education sector, identifying five key areas of focus. The UK is also home to a host of world-class universities and publishers that can act as key local partners and collaborators for entrepreneurs. And, with its influential Tech City community, London is unparalleled in Europe as a launch pad for edtech start-ups, ranking as a global top five edtech hub.

Other European cities are also rapidly establishing themselves. Paris, for example, is developing into one of the most dynamic edtech ecosystems in Europe. The edtech Observatory, which comprehensively lists French edtech players and researches major trends in the industry, was recently established in the city, as was the EdTech France association. Two venture capital funds dedicated exclusively to edtech investment – Brighteye Ventures and EduCapital – were also recently launched in Paris, closing almost €100mn between them.

Take Helsinki, too. Finland’s education system has created a world-class “’ade in Finland’ brand, with Finnish edtech companies developing best-in-class products that are highly regarded for their quality and innovation, particularly in gamification. Importantly, edtech start-ups in the city have access to one of Europe’s leading edtech start-up accelerators, xEdu. While the US leads the field with more than a dozen such structures dedicated to edtech, Emerge in the UK and LearnSpace in France are examples showing Europe is heading in the right direction.

Europe’s natural advantage

Assuming a European startup achieves success at home, scaling up to become a unicorn requires international expansion. This is where European edtech companies have a natural advantage: its diversity and deep historical links to the rest of the world give it a uniquely international outlook. While Chinese and US startups understandably tend to focus on their large domestic markets before taking products overseas, European companies have an incentive to capture the considerable opportunities overseas.

There are huge markets in the developing world with young, growing populations clamouring for edtech – India, for example, has 300 million children aged 6 to 17. This is where European companies can step in.

A European edtech company that has successfully implemented its product or service across European countries, with different barriers to entry, has proven staying power; if you make it in Europe, the door to the rest of the world swings open. The worldwide popularity of European curricula – such as the International Baccalaureate and iGCSE – further serves to help internationalise European edtech startups. So, too, the similarities of foreign countries’ educational systems to those in Europe, with the UK and Commonwealth a prime example.

Let us not forget the cultural richness and variety of lifestyles on offer in Europe’s major tech hubs, from the uber-cool Berlin startup scene to the more relaxed Barcelona. The continent is a melting pot of different cultures, languages, and ideas like no other, where budding entrepreneurs from all over the world flock to make their big break. Indeed, with President Trump’s H1-B visa program crackdown, and with many European countries creating startup visa programs making it easier to hire foreign talent, Europe is ideally positioned to continue attracting the brightest tech talent.

Over the longer term, if Europe can play to its natural strengths, it could nurture the next generation of start-ups and help edtech truly come of age.

Vikas Pota is group chief executive of Tmrw Digital

This article appeared on the Education Technology website on 29th October 2018