In the post-pandemic classroom, tech-driven transformation continues

Jason Celino, VP, Sr. Research Analyst, Vertical Software, KeyBanc Capital Markets, March 2021

In the post-pandemic classroom, tech-driven transformation continues

The COVID-19 pandemic upended education systems around the world in 2020, forcing teachers and students to transition from traditional classroom settings to remote learning. This rapid transformation accelerated adoption of new tools and systems, creating a surge of opportunity in the education technology (EdTech) sector.

As the pandemic subsides and schools reopen for in-person instruction, the outlook for EdTech remains bright. Jason Celino, VP, Sr. Research Analyst, Vertical Software for KeyBanc Capital Markets (KBCM), recently hosted a panel on the post-pandemic classroom as part of the KBCM Emerging Technology Summit featuring Harish Chidambaran, CEO, iLearningEngines; Matthew Glotzbach, CEO, Quizlet; and Don Spear, CEO, OpenSesame. For these three industry leaders, the disruption of COVID-19 has forever altered the way learners around the world approach both classroom education and on-the-job training – and EdTech is a driving force behind this evolution.

Schools are reopening, but blended learning continues

“Blended learning is here to stay,” says Chidambaran. He anticipates that in some settings, such as corporate training sessions, people who have adapted to online learning are unlikely to return to in-person instruction once the pandemic is over. Spear, whose company specializes in corporate training solutions, agrees. In addition to safety and sexual harassment training, which businesses frequently conducted online pre-pandemic, demand is growing for new courses around topics like unconscious bias and cybersecurity.

“We see this disruption accelerating adoption across companies, even among companies that were slow to adopt online training,” explains Spear. Additionally, online training offers companies the advantage of being able to create and roll out high-quality courses much more quickly than they could develop similar material for in-person learning.

In academia, the outlook is slightly different. “The pandemic has shown us the importance of in-person learning, especially among younger students,” says Glotzbach. In the K-12 space, post-pandemic educators may be more inclined to adopt supplemental technology to augment in-person learning, for example by providing more effective and personalized homework help. But for higher education, a larger shift is underway. The pandemic has accelerated the trend toward more distributed, part-time, online community college offerings. While traditional four-year colleges are by no means expected to disappear, alternative or hybrid models that lower the cost of tuition and make education more flexible are rapidly gaining traction.

Critical components of digital learning

When it comes to elements of successful digital learning, Spear defines three necessary components to drive consumption of training not only for compliance reasons, but also to help people advance in their careers:

  1. Accessibility – making it easy for learners to access courses when and where it is convenient to them. With online training, accessibility often comes in the form of a learning management system (LMS) that provides mobile access.
  2. Usefulness – courses that facilitate reskilling or learning new skills are much more useful to learners than those required to “check a box” for compliance purposes.
  3. Quality – thanks to the proliferation of online entertainment platforms, learners’ expectations have evolved beyond a basic slideshow accompanied by a voiceover. Modern digital training needs to focus on production value to engage its audience. For example, if actors in a training video are wearing clothes from ten years ago, modern learners may dismiss the content as outdated.

Glotzbach sees opportunities to improve on traditional education methods by using technology to make learning more personalized, efficient, and effective. “We point out that our biggest competitor is the traditional study method – paper, pencil, highlighter, books – which learning science has shown don’t work all that well.”

Chidambaran agrees that learning systems and artificial intelligence (AI) have the potential to transform learning methods for the better by improving content augmentation to make existing content more learnable, engagement and delivery of learning to mesh with the flow of activity and work.

Plentiful opportunities for B2B and B2C business models

Due to the broad and growing market for EdTech products and services, companies in the space can operate from either a business-to-consumer (B2C) or business-to-business (B2B) model. According to Chidambaran, “The EdTech market is a tremendously exciting market to be in for the next 15, 20, 30 years supporting both B2B and B2C business models.”

For the purposes of corporate training, B2B is the most common model, with EdTech companies like OpenSesame working directly with corporate clients to develop training programs. While large companies with established LMSs tend to be the earliest adopters of digital training, small and midsize businesses are increasingly leveraging these tools, particularly as LMS costs are dropping.

In academic settings, securing buy-in at the state level, then from school districts and individual schools can be challenging. In addition, public and private school systems are typically budget-constrained. For Glotzbach and Quizlet, adopting a B2C model allows the company to align its interests directly with those of the end user: the learner. The B2C approach also enables the company to scale directly via technology and the internet, rather than having to work through the gatekeepers at universities and school districts.

Chidambaran points to the nonprofit nature of school systems in the U.S. and Western Europe as an obstacle to innovation. “We believe nonprofits are always designed to preserve the status quo, while for-profit businesses are designed to disrupt the status quo.” For iLearningEngines, regardless of whether the core business model is B2C or B2B, the international market is often more receptive to EdTech solutions – and more eager to invest in new approaches to learning.

Burgeoning demand in the international market

Glotzbach characterizes the EdTech opportunity abroad as significant: With more than 1.5 billion students from kindergarten through graduate school on the planet, and only 70 million in the U.S., that leaves more than 1.4 billion potential customers around the rest of the world. Additionally, because of the way public education works in the U.S., most Americans generally expect their tax dollars to pay for education, and thus spend a comparatively low portion of their discretionary incomes on learning–especially relative to Asian countries, where many of the most successful EdTech startups emerged.

In Chidambaran’s experience, tapping into that massive international opportunity requires cultivating solid relationships with local partners. “Everyone talks about how in a startup your first five hires have to be ‘can’t-miss,’ and the same thing is true of your first five partners.” A good local partner with in-depth knowledge of consumer trends in a new market is invaluable and can help an EdTech company endure the initial growing pains and build a thriving international business.

On the corporate side, Spear notes that career-advancing training programs can be a differentiator for companies not only in the U.S., but also abroad. Machine learning algorithms and AI can translate educational content into new languages with remarkable speed and accuracy. While English remains the primary business language in many cases, OpenSesame can make courses originally published in English instantly available in 12 languages.

Looking ahead to the future of EdTech

All three panelists express enthusiasm and optimism about the next five years in the EdTech space. Chidambaran predicts that increased connectivity will extend new learning opportunities to students in remote rural areas. Spear anticipates that the U.S. college system will undergo a massive transformation, due in part to the tools and technologies that emerged during the pandemic. And Glotzbach believes that in the next five to ten years, the way learners ingest, process and use educational information will change dramatically.

In both academic and professional settings, the EdTech opportunity is evolving quickly, and possibilities for innovation abound. To learn more about how KeyBanc Capital Markets is approaching this dynamic sector, reach out to your investment banker. For more information on or to be considered for an upcoming KeyBanc Capital Markets equity conference, connect with Corporate Access.

About the 2021 Emerging Technology Summit

After a tumultuous 2020 in which technology outperformed during a year of multiple crises – health, economic and social – the virtual Summit focused on what's next for the sector. We brought together investors, executives and founders from top private and public companies, and industry thought leaders to discuss the role and opportunities for technology as we progress toward the "new" normal. Attendees included 650+ institutional investors, 450 private equity/venture capital corporate development investors, 125+ private companies, and 30 public companies for 67 Fireside Chats/Presentations, 10 panels, and 3 Keynotes.

This article is for general information purposes only and does not consider the specific investment objectives, financial situation, and particular needs of any individual person or entity.

KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp® and its subsidiaries, KeyBanc Capital Markets Inc., Member FINRA/SIPC, and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A.

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