Michael E. Spencer is the CEO / Founder of Global Expansion Strategies, a global growth, advisory, and investment firm working with education companies to expand globally. Michael Spencer is an education executive with more than 30 years of global C-level leadership, management, operational, business development, and investment experience in the K-12 marketplace. Michael Spencer has been a founder, co-founder, investor, and board member for numerous EdTech companies. All achieved 100%+ growth year-over-year, received multiple awards for innovation, and led to A and B rounds of funding as well as successful exits.
The path to sustainable impact and diverse revenue in K-12 edtech is a global sales strategy from the get-go.
Sixty percent of edtech startups fail in the first few years. Put simply, it’s hard to get an edtech company off the ground and even harder to keep it going.
After the boom of 2020, when students around the world switched to online learning in droves, the frenzy has settled and edtech startups are now facing a quieter reality.
A funding logjam at all stages. Steep drops in venture funding in key US and European markets. A crackdown in China. A chilling effect in India. Founders reeling from two years of tough economic conditions. If investor warnings are to be believed, struggling startups will face a bloodbath this year as cash starts to run low.
Until now, this climate has been largely offset by unprecedented government subsidies, as COVID-19 thrust the outdated state of K-12 education into the spotlight and $190bn in ESSER funds flooded US schools and districts. Many startups will struggle with the transition as these funds come to an end this year, and those who manage to continue solving real problems for schools and districts will be faced with the limitations not only of traditional edtech business models but also of more innovative approaches like freemium or pay-per-use.
Following the example of many unicorns, edtech startups might be tempted to respond to the federal funding cliff by doubling down on B2B and B2C if they hope to top the investment charts. But both are fundamentally flawed routes to scale and impact for K-12. Direct-to-consumer business models demand substantial resources for marketing and are hard to monetize right now as people seek to save money in a recession. Many edtech companies that initially focused on B2C – including Multiverse, Eruditus, Simplilearn, PhysicsWallah, and upGrad – are now increasingly engaging in enterprise partnerships and allocating more time, money, and resources toward institutional customers such as schools and colleges. But these are all established companies with decent runways. B2B sales to educational institutions offer a more stable revenue stream but present formidable barriers to entry, not least achingly slow sales cycles, fragmented decision-making, and regulatory rabbit warrens.
The window to be the sole provider of a tech solution in K-12 education is small. The pace of change is fast and the scale of the problems is wicked. There comes a point where academics meets economics. If a startup doesn’t secure scalable and recurring revenue to fund its growth, product roadmap, or ongoing operations, even the most effective classroom tool won’t keep the business afloat.
This means building a resilient business model that can withstand market fluctuations – unlike B2B or B2C. For many early- to mid-stage edtech companies, a more efficient path to strategic growth is adding an international B2B strategy – using strategic channel partners or school operators to facilitate sales into large international school networks, a model that I call B2O.
According to a recent report by Google for Education, 80% of the world’s demand for education over the next 30 years will be concentrated in Asia and Africa. Selling to international schools in this context doesn’t require a completely new product or approach; students and educators experience the same fundamental needs and challenges around the world. However international schools move faster, have more streamlined procurement processes, and are less price sensitive, which makes B2O a better route to scalable, stable, and diversified revenue.
The challenge for companies eyeing entry into these markets is understanding local education needs and leveraging local expertise to make connections. At Global Expansion Strategies, we see companies supporting more than 15m students and 1.5m educators at 30,000 schools worldwide, with multiple large-scale pilots and school implementations throughout LATAM, SE Asia, the Middle East, and the US. One company specializing in social-emotional learning, which generated around $500,000 in first-year revenue using a US-focused B2B strategy, saw a 5x increase in year 2 from adopting a B2O strategy to $2.5m – and they’re on track to double that this year.
The long-term picture in edtech looks bright. The COVID-19 pandemic turbocharged innovation and adoption, and the venture funding market remains bigger than it was before 2020. The difference is that VCs are not throwing money at ideas; they need proof of concept – proof of revenue generation and traction. Product-market fit matters more than ever. Pursuing an international B2O sales strategy doesn’t need to delay domestic goals. It’s an opportunity to get to PMF faster, validate your market, and grow by bringing in significant scalable revenue months or even years earlier than focusing on a domestic strategy alone.