Webinar on WHAT, WHY and HOW of Edtech Investment, 14 October 2020

John C Tsang said at the beginning of the webinar that COVID-19 had accelerated the digital transformation of the education system. Successful implementation of the e-learning experiment would require effective collaboration among a complex network of players outside the classroom, from policy-makers and educators to edtech providers and funders. HolonIQ, a leading global ed-tech intelligence platform, expects the global education and training market to reach USD 7.3 trillion by 2025. He believed the allure of edtech investments should not stop with mainstream investors looking for financial returns. With edtech’s potential for delivering market rate returns as well as creating enormous social value by transforming our outdated education systems, we started to see venture philanthropy organisations co-investing with VC firms in edtech ventures. He called for foundations to consider setting aside additional resources to support edtech ventures besides making donations to non-profit organisations. “In a new era of relying on market-based approaches to address social problems, impact investors could play a vitally important role in addressing the global education crisis through supporting sustainable, business-based solutions and by learning how to work collaboratively with a range of other investors, locally and cross-border as well.” he said.

WHAT and WHY of Edtech Investment

Facilitated by Andy Ann (Co-Founder of GoImpact Capital Partners), this panel looked into the WHAT and WHY of edtech investment from the perspectives of:

    • A specialist early stage edtech VC fund founded in HK (Atin Batra, 27 Ventures)
    • A corporate and family office perspective (Josh Zhou, LEGO Ventures)
    • An early stage VC fund based in HK doing cross-border investments (Joseph Fung, Saltagen Ventures)

Atin said that edtech had moved from sheer sharing of learning materials online, e-tutoring to community learning nowadays. Josh highlighted LEGO’s interest in learning through play, hands on experience and how technology could improve learning experience an develop 21st century skills. LEGO Ventures see edtech as a growth catalyst for their soon to be 100 years old business.

Joseph said their fund did not invest solely in edtech but other technology (e.g. medtech) that could have a positive impact. Starting from his grandfather, his family believed that education could make the largest impact on society. He saw the value of technology in enabling personalized learning. The pandemic had certainly accelerated schools’ digital adoption, with significant increases in investment in both infrastructure and professional development of teachers. 

Atin (also Tytus and Yat) highlighted the importance of an impact/purpose mindset for both the startup founder and investors in edtech businesses. Domain knowledge in education would also be vital. He (and Tytus) said their children were an important driver of their interests. They did not want their children to go through the same rote learning experience they went through.

The panellists agreed unanimously to the huge potential of data analytics in evaluating learning outcome and engagement level; and the current gaps in the market. The switch to online or blended learning would provide the opportunity for education to be more data-driven. Joseph added that there was a long lead time for research to be able to validate the pedagogy, especially for early childhood education. 

Joseph’s venture fund uses Hong Kong as a nexus for managing cross-border deal flows between North America and Asia. There was an element of trust in Hong Kong as the nexus. On the potential of Hong Kong as an edtech hub, Josh said Hong Kong had a strong talent pool and the advantage of having a British education system that made it easier to transfer knowledge and applications to other markets. Hong Kong also possessed strong academic research capability with international scholars and researchers. He added that there was considerable room for pedagogical improvements in China and India. This could be an opportunity for Hong Kong. Joseph remarked that Hong Kong had high PISA scores in Math and English. He hoped to see more partnerships between Hong Kong and international universities in doing pedagogy validation research.

The panelists urged Hong Kong entrepreneurs to look beyond the domestic market and do more technology innovation. It would take time for Hong Kong to build itself as an edtech hub but it would bring benefits in the long term. Yat said in another panel that the government and also parents in Hong Kong could play an important role in encouraging the systemic changes.

Responding to a question on the freemium model of edtech startups, Atin was not in favor of the advertising business model with the potential ethical issues. He suggested breaking the offerings into small modules to make them affordable.

HOW of Edtech Investment

Jennifer Poh (Sustainable Finance Initiative) facilitated this panel with:

  • Tytus Michalski, Managing Partner, Fresco Capital
  • Yat Siu, Founder and CEO, Outblaze

Tytus and Yat said that investing in edtech would take a longer time horizon as building scale took time, albeit the pandemic would possibly accelerate the growth. It is important to invest with a vision. Tytus remarked that the K12 space might be more mature. He saw opportunities in adult learning and workforce reskilling/upskilling. Yat was interested in personalized learning and related to it,  user-generated contents. The pandemic made it opportune to look into new models of edtech that were not attached to the past mode of learning.

On advice for novice edtech investors, Tytus pointed out the need to figure out one’s personal aspirations and the market gaps. He advised a diversified portfolio and it took time to build it. He looked forward to more innovation across the capital spectrum e.g. revenue-based financing. This would be a good time for investors to experiment given a zero interest rate environment.

Both remarked that there was a lot of capital for late stage financing. Early stage investment would add more value. Tytus said there were a lot more of young and talented entrepreneurs but they need experienced mentoring. He advocated more co-investment across the capital spectrum as each party could bring different skills to the table.

On the relationship with strategic investors, Tytus highlighted the importance of aligning objectives and expectations. Yat added that startups should be aware that strategic investors would seldom do passive investments.

Responding to concerns on exposure to screen time, Tytus and Yat did not believe edtech was the cause of addiction. Instead, we should see technology as providing new learning opportunities.

Edventures Global Business Acceleration (GBA) Fellowship and Summit

Rachel Chan introduced Esperanza’s partnership with Cyberport in organizing the Edventures GBA Fellowship and Summit to bring innovative edtech talents and solutions to Hong Kong and to develop Hong Kong as an edtech hub in the region. She invited the audience to join the upcoming Edventures GBA Summit at the Cyberport Venture Capital Forum (3-4 Nov) and the concurrent virtual expo (23 Oct – 22 Nov). The finalists of the Fellowship (a global edtech startup competition) would present their solutions and look for partners in Hong Kong. Experts would share their insights on the latest edtech market developments and trends globally and in China.