Edtech Industry Developments to Watch in 2023

The adult edtech industry is rapidly growing and evolving. M&A opportunities, geographic hotspots, user expectations, and the corporate market are undergoing significant shifts.

FREMONT, CA: Over the past few years, the education-to-employment part of the edtech industry serving adult learners have experienced significant expansion. The valuations of these education-to-employment edtech companies have experienced a roller-coaster ride as existing companies attract a massive influx of capital, thousands of new competitors enter the market, and investors question what scalable and profitable business models look like the sector. There are currently dozens of edtech "unicorn" startups valued at over $1 billion.

These are a few trends in edtech that market participants may want to consider when planning their future steps:

Capital inflows are at an all-time high: Due to fast technological change and company digitization, many businesses seek to continuously upgrade their workforces. Simultaneously, internet connection has become more accessible, and distance-learning technologies have progressed. These advancements have contributed to the expansion of the edtech industry; venture capitalists (VCs) invested $20.8 billion globally in the edtech industry in 2021. This is more than 40 times the investment made in 2010.

While public valuations have recently cooled, private companies continue to raise money at revenue multiples in the double digits. During the pandemic, professors, administrators, students, and employees have become more accustomed to education technology, which continues to attract venture capital. Researchers believe these practices will persist, and online education will become the norm.

Edtech companies combine and cooperate for scale and efficiency: Edtech companies want their customers' lifetime value to exceed the cost of obtaining them. According to financial disclosures, sales and marketing expenses at significant edtech companies have varied between 20 and 60 percent of revenue in recent years.

Some edtech organizations seek mergers and acquisitions (M&A) to achieve economies of scale as they seek sustainable solutions to the industry-wide issue of high customer acquisition costs (CAC). In June of 2021, 2U announced an $800 million acquisition of edX, a nonprofit organization operated by Harvard and MIT. This acquisition provides 2U access to a powerful customer-facing brand, over 40 million registered users, and many university partners. These assets offer 2U a significant footprint in growth regions outside the U.S. and might help reduce CAC while the company develops its free-to-degree strategy.

Some recent significant mergers and acquisitions have occurred in the edtech industry. Anthology and Blackboard, for instance, agreed to a $3 billion merger. All of these mergers and acquisitions have been made possible by abundant cash. Yet, after the contract has been signed, organizations must integrate their respective operations to obtain the promised benefits.