it’s a story Common to all sectors today: Investors only want to see the ‘uppy-righty’ chart in the pitch. However, edtech’s growth in the past 18 months has accelerated to such an extent that companies need to present 3x+ growth in annual recurring revenue to focus on their preferred funds.
Some companies have been able to blast it out of the park — like GoStudent, Ornicar and YouSchool — but others, arguably less suited to the circumstances presented by the pandemic, make such growth more difficult to render.
One of the most common themes Brighteye sees in young companies is the emphasis on international expansion for growth. To gain some additional insight into this trend, we surveyed edtech firms on their expansion plans, priorities, and pitfalls. We received 57 responses and were supplemented with interviews with leading companies and investors. Of the companies surveyed, 49 are home to Europe, six are located in the Americas and three are located in Asia.
Going international later in the trip or when more funding is available, possibly due to the VC round, makes the expansion aspects more viable. The high budget also enables entry into multiple markets almost simultaneously.
The survey also revealed an almost equal division of target customers into companies, institutions and consumers, as well as a good spread of domestic markets. The largest contingents were from the UK and France with 13 and nine respondents, respectively, followed by the US with seven, Norway with five and Spain, Finland and Switzerland with four each. About 40% of these firms were yet to move from their home country and the rest went international.
International expansion is an interesting and nuanced part of an edtech firm’s growth path. Unlike its neighbors in fintech, it is recognized that edtech companies need to expand into several large markets to reach the scale that makes them attractive for VCs. This is less true than in early 2020, as digital education and work have become so commonplace that it is possible to create billions of dollars in edtech in a single, large European market.
But naturally, nearly every aspiring edtech founder realizes that they need to expand overseas in order to grow at an attractive pace to investors. They also have good reason to believe this: for example, the complexities of selling to schools and universities have been widely documented, so it may seem logical to take your opportunities and build market share internationally. It follows that some see expansion as a way to diversify risk – for example we are moving well in market X, but what if the opportunity in Y is large and in market X for some reason When does our business start to decline?
International expansion sounds good, but what does it mean? We asked this question to several organizations as part of a survey analysis. The responses were quite broad, and their breadth reflected to an extent their target customer groups and how those customers were reached. If the product is web-based and accessible anywhere, it is relatively easy for a company with a good product to reach customers in a large number of markets (50+). The firm can then build teams and comprehensive infrastructure around that traction.