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The Evolution of EdTech


A historically “in-person-only” industry, education has become available for consumption through a wide variety of mediums. The way we learn and obtain information is evolving at a rapid pace. 

The disruption caused by COVID-19 has made EdTech – broadly defined as the incorporation of technology into education – a particularly attractive investment for private equity buyers. Even when the pandemic is in the rear-view mirror, we should continue to see major investment and innovation in the space. In fact, digital spending in education is forecast to grow from $227B in 2020 to $404B by 2025, according to Holon IQ, an education industry market intelligence platform.

What are the factors driving the significant increase in digital education spend?

  1. Education, an industry long resistant to change, has been forced to quickly adapt. Historically, less than 4% of overall expenditure in education was allocated to digital investment. While some minor advancements took place in the past, COVID-19 proved to be the forcing function needed for educational institutions to embrace new digital technologies (remote learning being the most obvious beneficiary). That said, other technological advancements are taking place behind the scenes, like the administrative tools used to manage educational operations. While virtual education did not always have the same cachet as traditional education, COVID-19 has changed the mentality of employers, students, and parents to the point of mainstream acceptance.
  2. Education is a growing market, expected to reach $10T worldwide by 2030, according to HolonIQ. This includes all segments of the industry: early childhood, K-12, higher education, corporate, and B2C. Population growth and greater participation in education should help drive investment in the space for years to come.
  3. We are experiencing a shift to private investment in the space. Budget-strapped governments have been forced to pull back from investment in education, and private EdTech companies are proving to be critical in filling the ensuing economic gap.
  4. EdTech is highly fragmented, making the space more appealing to private equity buyers. Like the home services industry, acquirers are flocking to EdTech to get a foothold where no existing players are too dominant. Education itself is a broad industry and the wide-ranging verticals of EdTech include Online Learning, Learning Tech, Administrative Tech, and more. Business models range from SaaS to tech-enabled services, as well as digital and web delivery for a fee.

Growth Beyond the Pandemic

We do not expect enthusiasm for EdTech to end with the COVID-19 pandemic.

In many ways, COVID-19 merely exposed flaws in the industry. Socioeconomic disparities in education, for example, will continue to be a major problem, and digital infrastructure will play a role in solving it.

The Case for Investment in EdTech

Valuation in EdTech is wide-ranging. Chegg, a publicly traded learning platform, trades for around 22x revenue. We have seen smaller private-market deals trading at 3-10x annual recurring revenue for growing, niche companies with strong business models and strategic alignment for larger platforms.

Growth is not the only factor in valuation. Contractual nature, pricing stability, and customer churn are all fundamental elements of the valuation and attractiveness of EdTech companies. Non-recurring business models might garner a valuation based on a profitability metric like EV/EBITDA, especially if it is maturing and dependent on tech-enabled services or one-time purchases of products or services.  


We will continue to see strategic buyers looking to add complementary products and services via acquisition. Understandably, they want to gain wallet share of segments they already serve, as well as increase the platform’s total addressable markets.

In a high-growth industry, growing total addressable market (TAM) and market share is critical. In a recent instance, Copper Run Capital helped a PE-backed EdTech company find and acquire a complementary business that added new capabilities in overlapping end markets. These are the types of synergies that are proving attractive in today’s landscape.

From virtual tools used to teach toddlers to read, to language-learning programs for world travelers, EdTech’s reach is broad and growing. There are new applications and use cases coming to market on an almost daily basis.

There has never been a more exciting time to be involved in the EdTech space. It has become clear that the accelerated growth catalyzed by Covid-19 is here to stay.

Michael Shaw is a Partner and Managing Director at Copper Run. He specializes in private equity buy-side advisory.

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