Why the Time is Now for Asian EdTech Startups


Why the Time is Now for Asian EdTech Startups

2014 marked the largest year ever for investment in education technology. With over US$2.3 billion invested in the space last year, it is certainly an exciting time to be sitting at the intersection of the learning and the digital world.

However, after five consecutive years of unprecedented amount of capital being poured into the space, some are starting to wonder, what’s next?

From where we sit, it is overwhelmingly clear that Asia will be fueling the next leg of growth in ed tech. Whether you are an entrepreneur, investor, employee, or simply watching from the sidelines, here’s why right now is the best time in history to be in ed tech in Asia.

Massive market size. The numbers speak for themselves.

  • There are 600 million K-12 students in Asia, 10x that of the United States.
  • The average Asian family spends >40 per cent of their income on education related products and services.
  • By 2020, China’s college-educated talent pool is expected to number 195 million people, more than the entire US labor force that year.
  • There are 300 million people learning English in China. That’s more than the entire English speaking population of the United states.

Large amounts of capital. Investors in Asia are leading later stage funding rounds for start ups in both the US and in Asia.

  • In 2013, only 10 per cent of the total capital invested in ed tech went to companies operating in China. In 2014, that number increased to 24 per cent. Given the market size and opportunity set (see point number one), we expect this number to continue to grow.
  • China-based tech giant, Alibaba, alongside Singaporean VC fund Temasek led a stunning US$100 million Series B round for Tutor Group last year.
  • Together with two other Chinese investors, TAL Education took the lead on Minerva Project’s US$70 million dollar Series B late last year.
  • Other corporate venture arms have allocated US$100mln+ to follow suite. These include New Oriental, Qualcomm, NetEase, Bertelsmann, McGraw Hill, Benessee, just to name a few.

Exit opportunities. Whether they are in the business of traditional education, software, gaming, or social, companies in Asia have explicitly stated that they are hungry to acquire new talent, technology, and content in order to gain an edge over their competitors.

  • Education technology exits +200 per cent in 2014, mostly in the form of M&A. The largest acquisition, that of Skillsoft, was over US$2.3billion.
  • Tech giants care about diversifying their product offerings and getting access to users at younger and younger ages. These include: Baidu, Alibaba, and Tencent.
  • Publishers want to acquire digital technologies and education platforms to navigate the impending digitisation of the textbook industry: Pearson, Benessee, and McGraw-Hill.
  • Social networks such as YY, Jiayuan, RenRen, Kaixin want to reach new users and keep their existing users engaged.
  • Gaming companies like NetDragon and Sohu have established their desire enter the education technology market as they want to increase their subscriber base and increase their content offerings.

Indeed, these are exciting times. No matter where you fall on the map, you should start paying attention to the potential of education technology in Asia. From both a financial and an impact perspective, we could not be more thrilled to be part of the rapid acceleration of innovation and value creation in education.

About the Author
Author: Allison BaumWebsite: http://frescocapital.com/
The author is the Managing Director of Fresco Capital, a Hong Kong and Silicon Valley seed fund.

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