Its a story common to all sectors today: investors only want to see “uppy-righty” charts in a pitch. However, the growth of edtech over the past 18 months has accelerated to such an extent that companies have to exhibit 3x + growth in their annual recurring revenue to even get noticed by their favorite funds.
Some companies are able to blow that out of the park – like GoStudent, Ornikar, and YouSchool – but others, arguably less suited to the conditions presented by the pandemic, have had a harder time exhibiting this kind of growth.
One of the most common themes Brighteye sees in start-ups is the emphasis on international expansion for growth. To gain further insight into this trend, we asked edtech companies about their expansion plans, priorities, and pitfalls. We received 57 responses and supplemented it with interviews with leading companies and investors. Europe is home to 49 of the companies surveyed, six are based in the United States and three in Asia.
Going international later in the journey or when more funding becomes available, perhaps due to a venture capital cycle, seems to make facets of expansion more achievable. Higher budgets also allow access to multiple markets almost simultaneously.
The survey revealed a roughly even distribution of target customers between businesses, institutions and consumers, as well as a good distribution of national markets. The largest contingents came from the United Kingdom and France, with 13 and nine respondents respectively, followed by the United States with seven, Norway with five, and Spain, Finland and Switzerland with four each. About 40% of these companies had not yet made a foray beyond their home country and the rest had gone international.
International expansion is an interesting and nuanced part of an edtech company’s growth path. Unlike their fintech neighbors, it is speculated that electronics tech companies need to expand into a number of large markets in order to achieve a scale that makes them attractive to VCs. This is less true than at the start of 2020, as digital education and work is now so mainstream that it is possible to build a billion dollar edtech in a single and bigger European market.
But naturally, almost all ambitious edtech founders realize that they need to expand overseas to grow at a rate that is attractive to investors. They also have good reason to believe: The intricacies of selling to schools and universities, for example, are widely documented, so it may seem logical to take your chances and gain market share internationally. It follows that some see expansion as a way to diversify risk – for example, we are doing well in market X, but what if the opportunity on Y is greater and our business starts to decline for some reason in market X?
International expansion looks good, but what does it mean? We posed this question to a number of organizations as part of the survey analysis. The responses were quite broad and their magnitude reflected to some extent their target customer groups and how those customers are reached. If the product is web-based and accessible anywhere, then it is relatively easy for a company with a good product to reach customers in a large number of markets (50+). The company can then build teams and a larger infrastructure around this traction.