The US$6 trillion global education market is full of investment opportunities because the industry’s low rate of digitalisation makes it ripe for disruption, while a shortage of academic resources create potential for growth, said Credit Suisse.
“Education is one of the few sectors which has been very traditional, which means it is currently at a very low level of digital disruption, much more so than other industries,” said Credit Suisse’s Kirill Pyshkin, who manages a thematic fund of more than US$500 million focusing on companies that derive at least half of their sales from disrupters of traditional education. “It is like mobile phone penetration in 1998/99. [We expect] many years of growth … to get to anywhere near the decent level of penetration of digital [education],” he said.
The market for education technology is projected to grow 11 per cent annually to US$341 billion by 2025, according to global education market intelligence platform HolonIQ. Last year, US$142 billion was spent on education technology, less than 3 per cent of global expenditure in the sector, HolonIQ said.
That means opportunity for growth, especially where technology could be used to address some of the shortages and deficiencies in traditional education, Pyshkin said in an interview with South China Morning Post. Common problems in the industry include the remoteness of many communities from education infrastructure, and the overcrowding in many schools.
“Technology is the solution to many of the problems of traditional education. The growth in technology adoption is expected to be very strong,” said Pyshkin. “Education has been done – for many years – almost in the same way. It has some problems in reaching everybody at the right level, and also of scalability.”
In China, the world’s most populous nation and the largest market for education in the world, the outsize demand for quality education by single-child families attracted investments into tuition academies, distance learning, language classes, extracurricular activities, early education and a variety of smartphone-enabled applications to augment the industry.
China attracted more than half of the world’s venture capital investments in education last year, and has been the biggest destination of such funds in the last five years, according to HolonIQ’s data.
“In China, there is a clear demand [for tutoring] because if you look at the number of children who take the gaokao exam after graduating from school, only [some] of them get university places, and only a small part of those go to the best universities, which means a lot of competition,” Pyshkin said. “That is why China has been leading the way in terms of investing in innovation and disrupting the system. There are a lot of new companies appearing, and a lot of them up to now have been supported by venture capital and private equity.”
The growth in education technology is also being driven by changing job profiles and the emergence of new jobs.
According to the Future of Jobs Report 2018 by the World Economic Forum, 65 per cent of children entering primary school today will ultimately end up working in completely new job types that do not exist yet.
“New types of jobs are emerging, people living longer and people often thinking about second careers and changing jobs. It is a long-term trend, which is happening regardless of what’s happening in the market,” said Pyshkin.
More from South China Morning Post:
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- China must boost research and education to ‘break US-imposed technology containment’, academic warns