Impact Investing: Education & Training Sector Insights
Head of Enterprises and Sector Lead for Education & Training, Chris Parsons shares his insight and observations of the current climate and its effects on investor appetite in the education sector.
“Market appetite for EdTech has grown substantially in recent years. Many solution providers are ideally placed to both assist individuals and organisations and thrive in this accelerated shift to more remote learning and training. ClearlySo still believes that the strongest business models amongst these, are those that fully understand and are built around addressing underlying social, environmental and ethical challenges that the world faces.“
ClearlySo shares its insights on how the education and training sector is adapting and evolving, both in response to immediate social changes caused by COVID-19 and looking further out.
Whilst many institutional investors are understandably focusing on their portfolio companies, we believe that high quality companies and transactions are still attracting new investment. In our view, recent developments illustrate how companies that have developed strong digital services for individuals (parents, students, employees) or institutions (teachers, enterprises) and can provide high-quality, personalised virtual content and support are ideally placed to adapt and do well.
So much has changed in the last few weeks, but we believe recent events represent a rapid acceleration of trends that were already emerging.
The Government, in 2019, announced various initiatives to encourage deployment of EdTech across schools including its Education Technology Strategy (encouraging leading tech companies to work with schools and colleges to improve student outcomes, reduce teacher workload and support professional development) and supporting investment in EdTech hubs at various selected schools in the UK, such as through the launch of the EdTech50 awards. Nesta and the DfE announced also in April 2019 a £4.6m Education Innovation Fund to help finance and stimulate industry innovation, support development of EdTech products and build an evidence base to ensure technology meets student and teacher needs. Ofsted announced the new Inspection Framework in 2019 that requires education providers to focus much more on the quality of education and learning outcomes for children, including their personal development and maintaining a broad curriculum of subjects.
Key drivers behind these initiatives include:
- Recognition that the UK is losing its leadership position in world education due to underinvestment in digital technology in schools and colleges, leading to rising concern amongst employers that students are not learning the right skills for the 21st century work-place which continues to change and evolve at a unprecedented pace;
- A need to develop and enhance technology skills fit for the 21st century where AI is expected to become more prevalent. It is equally important for education providers to help children, students and adults develop key human skills such as critical thinking, empathy, negotiation, problem solving and creativity;
- The importance for ensuring that online safeguarding of children is prioritised and enhanced, given that online platforms and usage of smartphones have become mainstream;
- The need to find ways to ensure more teachers join and stay in the profession, given staff shortages and high numbers of teachers leaving the profession; and
- Reiterating the importance of ensuring organisations’ workforces have the optimal skills, training and interaction with each other to maximise productivity, revenue generation and profitability. This recognises that many employers are facing financial and strategic challenges currently, which will demand a strengthened skill base.
Investor appetite and deal flow in EdTech has also increased substantially. Total EdTech investments in Europe rose from $0.6bn in 2018 to $1.2bn in 2019, with over half representing VC investment and a noticeable increase in Series B raises as European EdTech companies grow and mature. 
These themes discussed above are even more vital today, with UK schools physically closed for the spring (and potentially the summer) term(s), teachers having to adapt to teach remotely, children learning and studying at home and workers (wherever possible) having to work from home and communicate virtually and electronically.
But we also believe that, whilst the current situation is extreme, some underlying themes are here to stay: more studying and working remotely, developing 21st century skills and expertise through education and training and safeguarding (and entertaining) children online.
What we find extremely encouraging in these worrying times is that we know and are working with many organisations in the education and training sector have developed strong B2B or B2C business models that can help teachers, parents, schools, employers and workers in this new remote-working focused world whilst also generate attractive financial returns and positive impact for investors.
At ClearlySo, we believe that the strongest organisations are those that have built scalable businesses around tackling a key social, environmental or social challenge – and so can demonstrate measurable positive impact and deliver financial returns to investors. The challenges and opportunities in education and training perfectly illustrate this.
We remain open for business as normal at ClearlySo and are working with high-quality organisations providing content and services across the education and training markets – ranging from online safety and entertainment to personalised remote learning, teacher support, teaching students and employees key life skills, using gamification and other inventive ways to engage children and improve learning outcomes and providing employers with a more diversified talent pool in recruitment. We have a strong pipeline and are in regular discussions with our extensive institutional investor network to understand their preferences and focuses, especially in these current markets.
If you would like to discuss these developments, or investor attitudes to them, and how we could assist you, please get in touch at firstname.lastname@example.org.
 Source: BrightEye Ventures, “The European EdTech Funding Report 2014 – 2019”, January 2020