(by Tom Eberle)
As a reader of this newsletter, you might have experienced the reality of today's higher education: staring at a shared-screen for hours, trying to follow the monotone explanation of a professor, while watching, from time to time, the faces of the other few students that dared to switch their webcam on. Luckily, a whole industry is focusing on developing new technologies to improve education: EdTech. In this article, we will try to explore how new education technologies can improve or disrupt higher education as we currently experience it.
Before diving into higher education, let's have a general look at the EdTech market and its dynamics. You can find the full deep dive hosted on Notion HERE.
🛰️ A high-level overview of EdTech
At first, a definition to put everyone on the same page.
"EdTech – education technology – covers not only online learning, but also the whole suite of software, hardware and digital tools and services that can help deliver education." - Credit Suisse.
Key Trends in the EdTech Space:
- Education is noticeably under-digitized compared to other industries, with less than 3.6% of global expenditure on technology (representing around $220bn). In comparison, the health industry in Europe spends 7.4% on HealthTech. However, this is changing, and digital spending in education is expected to grow up to 5.2% in 2025, bringing an additional $170bn in expenditures.
- From a VC perspective, EdTech has experienced rapid growth in investment in the last years: $16bn have been invested globally in 2020 - twice the amount of 2018. China has positioned itself as a major player, with $27bn of VC funds invested over the last 10 years. Europe, however, has ways to go when it comes to VC investments in EdTech, with just $2.6bn invested. In total, there are 20 EdTech unicorns worldwide (vs. 50 for HealthTech). This is a great time to invest in EdTech as a VC, due to the market timing. The education sector has great potential for value creation through digitization (supported by widespread penetration of mobile and the internet in underserved markets). Moreover, the education industry is massive - valued at $7 trillion+ in 2025 and expects an increase in participation of 2 billion people by 2050 across the board. Digital spend from these players is expected to grow to $404 billion by 2025. Check out Holon IQ’s super interesting research for more details on the topic here.
👩🎓 The impact of EdTech in higher education
EdTech for higher education captured 16% of the total amount invested by VC in 2020 globally (source). Its underlying market, higher education, is expected to grow to around a quarter of the $10 trillion expenditure on education and training in 2030 (source).
An attempt to map the market shows that EdTech for higher education is a fragmented market in itself, with 4 dimensions, 16 domains, and 70+ capabilities.
As mentioned by Erik Torenberg in the Village Global podcast, common critical remarks on higher education include the following:
And more recently...
- Remote learning the old-fashioned way: the pandemic pushed university in-person classes on Zoom, drastically degrading the learning experience for students while keeping costs almost identical. Little has been done to improve the online experience, such as adapting the courses to the digital format.
- Student engagement in a remote setting is low: far from campus, it is hard to feel engaged and the online experience is not helping. Many students complain about online classes (or events) consisting of one helpless professor sharing his screen for 1h30 hour, and 60 black Zoom-tiles of students that might, or might not be attentive.
EdTech as a replacement of the current system?
During the last years, EdTech companies have started to capitalize on the weaknesses of the current education system by developing online platforms to distribute MOOCs (Massive Open Online Courses).
Wave 1: MOOCs to learn skills
EdTech unicorns such as Udemy ($3.3bn) or Coursera ($2.5bn) fix a major problem of higher education: they offer skills rather than knowledge, at a low cost. For example, Udemy's best-selling courses give the opportunity to learn Python, Web Development, Advanced Excel or Financial Analysis from scratch for less than $30 per course. When compared to classic higher education courses, MOOCs are easily scalable and accessible. For instance, Google has started to offer professional career certificates to learn 'job-ready skills'. What they offer is simple: you can learn to be a data scientist, UX designer, or project manager in three to six months, for free. In terms of quality, they tap into large datasets of usage data to improve classes and drive engagement up on a continuous basis.
The limitation of standalone MOOCs
However, although some MOOCs platforms did become EdTech unicorns, they did not replace the classic higher education system. As expected, they also have their limitations. Some key limitations include:
- Completion rates are low: students feel no accountability to finish the course, maybe induced by the low price.
- Credentials are not as credible: hard to compare a university degree with known evaluation methods, to an online certificate with shady automated grading.
Wave 2: MOOC-based degrees
As a solution to these problems, MOOC platforms, and higher education institutions together started to offer fully-accredited online degrees. When compared to in-person degrees, they seem to be a perfect choice as they are:
- Less expensive (but not cheap): for example, the tuition fees for a Boston University MBA are $24k for the online experience and $57k on-campus.
- More flexible: students are not forced to take a certain number of credits per semester, and only pay for the courses they take, alleviating the financial burden.
- Stackable: students can collect certifications while completing their courses, and thus prove their skills even if they didn't finish their degree.
Today, around 55 MOOCs based degrees are available worldwide. Still, I find it hard to imagine that MOOCs based degrees are the only future of higher education.
What is missing?
In theory, MOOCs based degrees seem to be the perfect alternative to old-school in-person degrees. In practice, they are missing an important aspect: the campus experience. The campus experience facilitates social interactions with other students, fosters the feeling of community, helps to develop lifelong friendships, emotional intelligence, and networking skills.
For this reason, it is hard to believe that EdTech MOOCs unicorns will replace higher education institutions as we know them once students return to campus. In-person education has a clear added value when compared to online learning. Nonetheless, without the introduction of new technologies in universities to improve the learning experience, the incredible price gap is no longer justified.
EdTech as a boost to higher education institutions
Learning from MOOCs, I believe higher education can address some of its critics with the help of EdTech in the coming years.
Improving remote learning and cutting costs - At first, to cut costs and improve the remote learning experience, higher education institutions can rely on next-generation Learning Management Systems (LMSs) and examination tools.
- Learning Management Systems (where course content is hosted). From my student perspective, established LMSs (Blackboard, Canvas, Brightspace, and Moodle) still have limited capabilities. The experience is far from what can be found on MOOCs, with interactive videos, instantaneous grading, and peer-to-peer feedback.
- With better pedagogical tools, higher education should be able to compete with the low costs and quality of MOOCs. For instance, by developing engaging online content for repetitive learning tasks, and proposing face-to-face interactions when it is most needed. For an illustration of the possibilities, check out Wizeprep.
- Furthermore, when compared to MOOCs, LMSs appear to be short of AI-driven analytics and automation and, therefore, lack a sufficiently personalized learning experience. Some EdTech companies such as Anthology or Intelliboard are working on bringing those capabilities to already established LMSs. This could open up new opportunities such as adapting the learning material to each individual student based on behavior or helping a student in danger of abandoning her studies and facilitate an early intervention.
- Examination and proctoring. After two exam sessions during a pandemic, I can report that current solutions are far from being perfect. Luckily, some EdTech startups have better tools for proctoring and examination in the works: Proctorio, EvalBox, Evalmee. In the long run, this will allow higher education institutions to reduce human effort and expenses in the assessment of students.
Further, EdTech solutions could help to address the low engagement of students in remote classes and improve campus life (the added value when compared to MOOCs).
- Interactions in online classes. I believe video-conferencing is not engaging enough for remote learning. Zoom is a stop-gap at best - the specific needs of students can’t be adequately addressed when you develop for the more lucrative corporate market. Luckily, new tools already exist to complement the learning experience and improve remote engagement. Prominent ones include Kahoot!, a game-based learning platform that proposes live quizzes to add interaction during classes, or Liveboard.online and Miro (although not only for education) which simulates whiteboards and allows online collaboration.
- In-person or remote campus life. While living on campus, it is always hard to find your way through the ocean of information. Many institutions still push tons of emails to inform about administrative tasks, classes, events, associations, exams - you get the point. Some startups, such as Beecome, propose tools to align communication on-campus. Others, such as ReadyEducation, Involvio, or Stucomm, provide campus-apps as a service to centralize information for students.
All in all, EdTech appears to be a trending and growing market, well stimulated by the pandemic. The emergence of MOOC unicorns definitely challenged the current higher education system and addresses some of its weaknesses. The battle, however, is probably not lost yet as MOOCs are not the perfect substitute: they cannot replace the campus experience. On the other hand, many solutions have been developed to support higher education institutions to bring their teaching to the 21st century and start justifiying soaring tuition fees.
However, more likely than not, universities will need more than fancy tools to live up to expectations. Some initiatives, such as Stanford 2025, demonstrate that a profound change in the classic system inherited from the Bologna Process is required to achieve this.
In the meantime, there are lots of opportunities for the next EdTech unicorn-to-be in boosting the current university experience.