Opinion

Ed-Tech’s ‘Asian Triple Threat’ and ‘Triple Threat-Plus’ Companies

One of the leading investors and thought leaders in educational technology, or ed-tech, space, is Michael Moe. In an interview with EdSurge two years ago Moe explained that while he was an analyst at Lehman Brothers, many of the CEOs of the fastest-growing companies often complained that one of their main barriers to even faster growth was the inability to “attract and retain knowledge workers.” This “gigantic problem,” he said, created immense opportunities for companies in the ed-tech space. To put this in perspective, education in the U.S. accounts for 10% of GDP, second only to healthcare.

Peter Drucker was the first business consultant to use the term “knowledge worker.” He defined them as those with formal training and expertise in a particular field of work. Two essential qualities of the knowledge worker are the ability to make decisions independently by applying both factual and theoretical knowledge and having strong communication skills.

Moe likes to use the term “weapons of mass instruction” when referring to the qualities of the most innovative and fastest-growing ed-tech companies. GSV (Global Silicon Valley) Capital, his investment platform, has invested hundreds of millions in some of the biggest ed-tech companies in the world, including Chegg and Coursera. Coursera recently IPO’d, reaching an $8B market cap.

According to Moe, the changes in the global “digital infrastructure” with 3.8 billion people on the internet and 20% of the world’s population using online learning platforms, have created the ability to “reach millions of people at breathtaking speeds.” Digital education or ed-tech is expected to be a $1 trillion global industry by 2027 according to GSV Ventures.

From the GSV website:

“The sustainability of growth for the most valuable EdTech companies will be directly aligned with the educational effectiveness and opportunities created by a company’s offering. The largest and most valuable EdTech companies of tomorrow will have delivered the greatest positive education impact.”

It appears that those companies that possess a “triple threat” — a world-class delivery platform, proprietary content, and a large and growing market — have the biggest market caps. Most of them appear to be based in Asia.

Yuanfudao: $15.5 Billion Valuation Heading to $20 Billion

Consider Yuanfudao, founded 9 years ago, a homework tutoring app with 400 million students in China. In late 2020, they raised $2.2 billion at a valuation of $15.5 billion and on February 24, 2021, Bloomberg News reported that they are seeking another round at a valuation of $20 billion ahead of a potential 2020 public offering. They offer live tutoring and their own proprietary online coursework. They also have their own teaching centers with 30,000 employees. Even more impressive is that they have their own research and technology labs and are partnered with elite universities in China, including the Chinese Academy of Sciences and Microsoft.

Trading significantly higher than two of Moe’s favorite U.S.-based ed-tech companies, Chegg Inc. and Coursera, Yuanfudao has what I refer to as the triple threat: a great technology delivery platform as well as physical sites, proprietary content, and a large and growing market in China. Five years ago, Deloitte wrote in a report on China’s education industry that it is entering a “golden age.” Capital flow and technological innovation are the two of the key drivers. According to ResearchAndMarkets.com, the China education market is expected to reach $572.51 billion by the end of 2023, growing at an 11.3% CAGR.

Byju: $15 billion Valuation

Byju, based in India and started in 2015, is also an education tutoring app for grades K-12. They use digital animation to help teach subjects and concepts. They now boast 40 million users with 3 million paid subscribers. They also help students prepare for examinations in India as well as the GRE and GMAT. With their most recent funding round valuing them at $15 billion, they expect to generate revenue of $1.2-$1.3 billion in 2022. And yes, they have proprietary content, a large and growing market expected to increase to $35 billion by 2025, and an easy-to-use innovative online delivery platform. Triple threat, yes!

Now let’s take a look at two of Moe’s favorite U.S.-based ed-tech Companies.

Coursera: NYSE: COUR-Market Cap $5.1 Billion

Chegg Inc. NYSE: CHGG-Market Cap $10.5 Billion

Coursera recently IPO’d reaching a high of $62.53, an $8.3 billion market cap. Partnered with over 200 universities, they offer “a broad catalog of content and credentials,” offering bachelor’s and master’s degrees as well as courses designed to upskill workers in areas such as data science, technology, and business. But they do not possess the third quality of their Asian counterparts. They do not offer their own proprietary content.

Chegg offers 24/7 homework help for millions of students with a delivery platform that provides the ability to ask an expert for help on a homework problem and the ability to buy or sell textbooks. While Chegg sports a $10.5 billion market cap, it does not possess the triple threat, as it does not have proprietary content.

The Genius Group: Valuation-Unknown

A company I recently discovered called the Genius Group, based in Singapore, may be worth a look by Moe, as this ed-tech company not only has the triple threat, but they possess something more. Genius Group brands itself as “The World’s No 1 Entrepreneur Education Group.” It is a global education company with 1.8 million students in 200 countries.

Large market opportunity, yes, delivery platform, yes, proprietary content, yes but here is the difference: Roger James Hamilton, a futurist and NY Times best-selling author, has built an educational platform grounded in an actual philosophy of education that has created “a more relevant curriculum that prepares students of all ages and skill levels to be impactful changemakers. Their entrepreneur-based curriculum teaches students not how to get a job, but how to create a job. They are creating knowledge workers with an entrepreneurial edge. The Genius Group is an ed-tech company with a “Triple Threat Plus” package.

 

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Michael Busler

Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University where he teaches undergraduate and graduate courses in Finance and Economics. He has written Op-ed columns in major newspapers for more than 35 years.

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