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.
First came a historic amount of money. Now comes a series of daunting challenges. It was the biggest single federal investment ever in primary and secondary education: school districts across the US have been allocated an estimated $190bn in federal COVID-19 relief funding over the past three years. In that time I’ve seen schools make tremendous progress towards hybrid and blended learning: that money has supported an astonishing range of initiatives, including wifi hotspots in schools and on school buses, Chromebooks and other hardware purchases, tutoring, social-emotional learning, and summer programs. But those extra dollars have created long-term financial challenges and soon, school districts must adjust to a new reality: the last of the money needs to be spent, and fast.
Next year, K12 district leaders are facing a funding cliff that will bring an unprecedented shock to the US education industry. Few schools are fully prepared – especially as the need for recovery from pandemic learning loss shows no signs of letting up – and it’s clear that publishers and education technology companies aren’t grasping the full reality of what’s to come either.
It’s a transformed edtech landscape
An estimated 1.6bn students worldwide transitioned to remote learning during the pandemic. Three years on, the emergency pivot may be over but there’s no going back. The rapid adoption of advanced technologies in classrooms has revolutionised the way students learn, and teachers teach. Blended and hybrid learning is here to stay. And since 2020, many school districts have been spending a lot – and spending it fast – to acquire the necessary technology to enable this. In the 2022-23 academic year alone, US school districts used an average of 2,591 different edtech tools (up from just 895 before the pandemic). So, while the money is drying up, the subscriptions will continue. If budgets revert back to the norm, it’s a bleak picture: ordinarily, districts spend about $154.69 per student on digital curriculum.
The most dire predictions go beyond federal funding. For the first time in decades, enrollment in K12 public schools is declining and since the majority of state and federal education funding (about 55% of all K12 funding) is determined by enrollment, shrinking student counts means shrinking budgets. All this coupled with inflationary pressures looks likely to culminate in major budget slashes.
To make matters worse, venture investment in edtech plummeted last year. Long term the market looks steady, but that won’t help edtech companies in the short-to-medium term who risk simply running out of money before they can make a transformative impact on learners. So how can edtech providers prove their value and make a difference in this tricky climate?
Impact is not enough
For a start, vendors should be prepared to make the case for why their product is worth keeping. In a recent survey, 68% of school district leaders said that they would review all products and services purchased with stimulus dollars once the money stops. Having data to hand that shows the value of what you’re doing for students will go some way – but in my experience, at a time when not only budgets but the very structure of education is in flux, extolling the features of your product and better student outcomes just won’t cut it.
There’s no doubt that selling to educational institutions is extremely challenging. Schools in the US exist within an ever-changing kaleidoscope of federal, state, and local policies and requirements. Decision-making is very fragmented, which makes for a complex procurement process, and in my experience, the more people involved in a decision the higher the chance that one will be unwilling to leap into working with a new company or technology. US public schools have a yearly budget cycle, which means companies can spend 12, 18, or even 24 months nailing down one contract without any guarantee the money will still be there at the end.
Education businesses take time to build, so companies need to be able to tap reliable revenue streams while they grow and refine the pedagogy of their products. I call this the intersection of “academics” and “economics”. For many early- to mid-stage education companies, an additional, more efficient path to revenue is adding an international strategy.
Diversifying revenue streams
In my work with edtech companies, I see tremendous opportunities outside the US for hybrid and blended learning approaches. Expanding into international markets while you’re trying to establish your company may sound daunting, but it’s often a simpler and faster way to generate scalable, sustainable recurring revenue growth. Companies looking to pursue an international strategy just need to understand what to do – often, it doesn’t take a lot of heavy lifting.
Exploring international markets doesn’t require a shift in mission, values, or approach. Students globally all face the same challenges – and a high percentage of the challenges of implementing technology in schools internationally can be overcome by implementing in blended/hybrid learning models. All that’s required to succeed in the international market is a strategic channel partner or school operator who knows how local schools work and what they need to maximise your impact, to do your due diligence, and to ensure solutions are presented in a manner that the local market needs.
- Less restricted budgets: International private schools are less price-sensitive than public schools, and parents are focused on providing the best education – and educational tools – regardless of cost.
- Flexible academic calendars: Going international not only provides new places to sell but new times to sell. While some countries follow the same academic calendar as the US and start in August/September, others start school in February or March. Spreading the “selling season” out creates new revenue spikes.
- Streamlined decision-making: In the international space, decision-making is usually led by a small team, which gives edtech providers a better chance to establish a relationship and offer a comprehensive vision of what you can offer.
The opportunities are huge. Historically, the US has been the biggest edtech market, followed by Europe. But in a post-pandemic era, schools around the world are turning to hybrid and blended learning. The Asia Pacific region is growing fastest, at a CAGR of 19% to 2030. China now makes up more than 60% of all edtech investment, while investment in Indian edtech has grown almost 4x since 2018. Edtech investment in Latin America has grown 6x since 2020; the region has just under half a billion people demanding innovation in literacy, numeracy, and functional skills. MENA, meanwhile, stands at $2.2b, growing to $5.5b by 2028.
Pursuing an international strategy in this context doesn’t need to delay domestic goals; instead, it’s an opportunity to bring in significant scalable revenue months or even years earlier than focusing on a domestic strategy alone – and thus to give edtech providers the platform to thrive and make a difference to learners worldwide.