A peek into the investment required for Europe’s e-learning ecosystem.
GUEST COLUMN | by Benjamin Vedrenne-Cloquet
There is a paradigm shift underway in the education industry as traditional methods of teaching are being challenged by a new breed of edtech entrepreneurs, with e-learning in particular radically changing the future of how education is resourced, taught and consumed. This shift is partly the result of digitalisation – just as we’ve seen in other industries such as media and entertainment – and partly a response to the current skyrocketing costs of education and the accompanying inefficiencies.
According to a recent research report conducted by IBIS Capital for example, education costs have risen by 84 percent since 2000; a huge 46 percent higher than the rise in the consumer price index. However, the link between this rising education expenditure and educational performance appears to be weak. In the U.S. reading and maths scores have remained stagnant despite the increased spending. Moreover, it is estimated that 85 percent of every dollar spent on education is spent delivering it – the costs of bricks and mortar and teaching staff, amongst other things.
E-Learning has the opportunity to capitalise on these inefficiencies, reducing the price tag associated with traditional education delivery at the same time as improving and democratising standards. Just as the disruptive effects of digitalisation (profusion of new content, audience fragmentation, data centricity and ultimately convergence between content and platform players) transformed the media industry, so will they impact education in the very same way, leading to massive growth. Both industries are after all about delivering compelling content and engaging audiences. Indeed, with e-learning representing $91 billion in 2012 and set to grow at 17 percent p.a. until 2017, there is enormous potential for the e-learning and educational technology markets in the coming years, but both private investment and public initiatives need to be aligned to create a fertile ecosystem.
Large strategic players in the U.S. are already recognising this fact and making acquisitions in this area, while capital markets are responding and VC funding is available. 2012 saw $8.5 billion worth of M&A activity for example, while $1 billion was raised in fundraising initiatives. The U.S. is leading the e-learning field, while Europe accounts for just 6 percent of total fundraising deals, lagging behind both India and China.
The European e-learning market proposition has, however, been growing and the appetite within the industry is becoming more apparent with more than 3,000 e-learning companies seeking to build market share. This nascent industry is characterised by fragmentation and a shortage of investment. The lack of scale and access to capital for these e-learning companies is stifling growth and creating a clear impediment to the development of next generation European education champions.
In order to foster this ecosystem, the opportunities and investment trends need to be articulated to a wider European audience. If established professional learning and education players, innovators disrupting the established market order and leading European institutional investors can share ideas and work together, they can act as a catalyst for the consolidation and investment required in the sector. If private funding becomes more widely available to support innovation and consolidation in the sector and historical impediments to the development of digital education are diminished, the transition to digital education will be even quicker and more disruptive than that observed in the media industry over the past decade.
With the future of education following in the footsteps of the media industries and the e-learning principles for both the US and European markets being very similar, there is a huge opportunity for Europe to step up its role in the education ecosystem. There, of course, needs to be a different market approach to Europe as there has been in the U.S. with varying barriers to entry for each country and region but what is clear is that companies in Europe need the same capital investment that the U.S. is enjoying.
European players are currently stymied due to being undercapitalised even though new, talented, European entrepreneurs are now bringing the expertise required to scale businesses. A large proportion of current industry players are prevented from getting to the next level of product or service deployment due to the lack required capital and a true multi domestic and pan regional consolidation approach which only seasoned management teams and investors with previous experience in other sectors such as Tech or Media could bring.
While capital investments are urgently required, as has been seen in the U.S. market, there is a need to create a strong European e-learning community with a shared vision that defines the business model of distribution and monetization of Educational content on Digital platforms. Once this is established, Europe will start generating the attention and scale it requires.
Benjamin Vedrenne-Cloquet is co-founder and CEO of Edxus Group. IBIS Capital and Edxus Group are creating a new event for the education technology and e-learning industries. EdTech Europe 2013 will be held in London on June 14. Click here for more information.