The boom of education technology in the last decade has failed to make a serious dent in the actual progress of teaching and learning. Covid has created the perfect storm. This series outlines the three areas where innovation is and will come from. It highlights opportunities and tactics for founders to leverage in building the next generation of digital teaching and learning unicorns.
Introduction
The upcoming boom of digital teaching and learning
The university as a buyer has over the last decade supported a series of technology sectors and unicorns that have been essential to its day-to-day business operations and integrity. These have included core tech infrastructure businesses, businesses that have helped increase and diversify revenue, decrease risks of student dropouts and more recently reduce plagiarism and cheating. In doing so, aside from the Learning Management System (LMS) category which many would agree has failed to improve learning, it has neglected the core resources and infrastructure to genuinely deliver better teaching and learning.
James Devaney, Associate Vice Provost at Michigan University, does a great job in highlighting this neglect. In the context of questions universities need to ask themselves when thinking of technology partners, he points out:
Need to move from “what’s your rev share?” to “what value do you create?” And tailored to highered, “what is your contribution to learning?” I care about reach, research & development, reputation, and revenue -but all in the context of learning. That’s the transparency we need.
— James DeVaney (@DeVaneyGoBlue) November 19, 2020
In the absence of a supportive B2B market with universities as customers, a B2C market has slowly emerged driven by the needs of students for better learning support. Today’s most successful higher education edtech businesses in digital learning, Chegg, Coursehero, Quizlet and Top Hat, have each planted their roots more than 15 years ago. Behind the radar, they have reached billions of students and penetrated easily more than 50% of the US market. Yet even at such scale, with the arrival of Covid they have started to grow like early stage startups as demand for their services has rocketed in 2020, further highlighting the gaps in the system.
The current technology-enabled teaching and learning market and its new leaders
The higher education teaching and learning market taxonomies
Informed by interviews with more than 30 leading startups and 50 university leaders, we break down the teaching and learning environment into three interconnected categories based on the problems to be met and the educational assets used across them.
In the absence of a supportive B2B market with universities as customers, a B2C market has slowly emerged driven by the needs of students for better learning support. Today’s most successful higher education edtech businesses in digital learning, Chegg, Coursehero, Quizlet and Top Hat, have each planted their roots more than 15 years ago. Behind the radar, they have reached billions of students and penetrated easily more than 50% of the US market. Yet even at such scale, with the arrival of Covid they have started to grow like early stage startups as demand for their services has rocketed in 2020, further highlighting the gaps in the system.
What you will get from reading this series
Our previous piece outlined the structural challenges to greater adoption of digital learning and teaching solutions in higher education as well as why we believe now is finally the time for this sector to flourish. This is an incredibly exciting, large and untapped space. 10k institutions and 200m students globally have a lot to gain in moving from today’s archaic practices and fundamentally improving how we transfer and acquire knowledge and skills. In a world where old-school publishers ($10bn+) and clunky Learning Management Systems ($2bn+) have created huge businesses, it is easy to imagine numerous other categories with even higher market size potential.
This series provides an in-depth overview of the technology-enabled teaching and learning market landscape, deep insights into how the new incumbents have florished (this current piece 2), an analysis of trends and the current and future categories that will emerge in this space (pieces 2a, 2b and 2c). We provide advice for startup founders building the next generation of unicorns in this space (piece 3). If you think you are one of them, we are excited about making more investments in this space and would love to hear from you.
The current technology-enabled teaching and learning market and its new leaders
The higher education teaching and learning market taxonomies
Informed by interviews with more than 30 leading startups and 50 university leaders, we break down the teaching and learning environment into three interconnected categories based on the problems to be met and the educational assets used across them.
Resources: The materials we use to enable teaching and learning. Resources represent carefully constructed materials that are consumed asynchronously and used as the backbone of the curriculum, including textbooks, supplemental readings, videos, homework and assignments. In most cases they fit around the synchronous lecture, but in some serve as the core self-serve educational experience.
Delivery: The infrastructure we use to facilitate and assess teaching and learning. Delivery represents the active moments when either new or existing content is synchronously presented, discussed or applied through lectures, tutorials and labs or knowledge of previous content and resources are tested through assessments, essays and exams.
Support: The services and tools we provide to aid and enhance learning. While in an ideal world Resources and Delivery coupled with hard work enable each student to achieve their academic potential, in reality they never do. Support resources represent ways in which students remove learning roadblocks, sometimes through university resources, but more likely through external sources like study notes, guides & flashcards, homework solutions, writing support and practice exams.
Scope of this work
This research is closely tied to teaching and learning activities in higher education targeted towards core student audiences. We refer to the category through the interchangeably used terms of ‘technology-enabled teaching and learning’ and ‘digital teaching and learning’. Companies that are innovating against online education for mostly off-campus students (Online Programme Managers), non-core students (MOOCs), that focus on learning in the context of employability or any student administrative and non-academic support are not included here and are covered through our other research. Concepts like project or problem-based learning are not singled out in this analysis as specific subcategories, given they are treated as approaches to learning for which numerous technology solution subcategories could be appropriate for. Lastly the analysis focuses on instutions and startups in the West.
The emergence of the new digital teaching and learning leaders
Below we provide a deep dive analysis into the journeys of the new leaders, starting with their core value propositions and followed by strategic product and acquisition decisions they have made to increase their value-add and market sizes.
TurnItIn ($1.75bn valuation in 2020; PE owned): Started in 1996 as a plagiarism tracker and through acquisitions starting 2014 moved into essay revision (LightSide Labs), standardized STEM grading (GradeScope), LMS compatibility (VeriCite) and general assessment and proctoring (Examsoft). As of 2019 it counted 30m student users, 15k institutional clients and close to $200m in revenue.
Top Hat (Undeclared valuation, private): Started in 2010 as a digital live lecture ‘clicker’ response and polling product and over the years gradually moved into becoming a teaching solution suite including assignment creation and grading, proctoring and more recently live video teaching and interactive textbooks. As of 2020 it counted 2.7m student users across 750 of the top 1,000 North American HE institutions.
Quizlet ($1bn valuation in 2020; private): Started in 2005 as a flashcard creation and sharing platform in 2017 starting to serve publishers as a new content channel and since 2018 eyeing to become an AI-power study plan creation tutor. As of 2018 it counted 50m monthly active users, including a reach of more than 50% of US college students.
Course Hero ($1.1bn valuation in 2020; private): Started in 2005 as a platform for students to share study guides and notes and moved into tutoring support in 2012 followed by teacher material and advice exchange in 2017 and in-house developed step by step exercise answers and guides aligned to popular textbooks in 2019. As of 2020 it counted 1m subscription paying students, a much bigger freemium base and $100m in revenue.
Varsity Tutors ($1.7bn valuation in 2021, pending IPO through SPAC): Started in 2007 by a college student as a online directory for booking face to face tutors. Started introducing online tutoring in 2013 as video chat technology improved, with 60% of business becoming online in 2018 and 100% forced online in 2020. It made its first acquisition in 2017, a UK tutoring marketplace First Tutors, to expand outside of the US and raised capital in 2018 to invest in instant tutoring support. 2020 revenue passed $100m through 4.7m hours of live instruction.
Chegg ($12bn+ valuation at 2020 year-end, public): Started in 2007 as a textbook rental business and since 2010 through acquisitions grew a student study support empire including 24/7 tutor support, writing support, study prep and flashcards and more recently a maths solutions guide. As of 2020 it counted 5.7m paying and 3.9m paying subscribing users and $626m in revenues.
Two honourable digital teaching and learning technology leader mentions go to Kahoot (founded 2013, $1.4bn valuation in 2020, 1.3bn active users) and Grammarly (founded 2009, $1bn+ valuation in 2019, 20m users). While both have sizeable uptakes in higher education, neither have higher education students as their core audience and have thus not been analysed in detail.
Each one of the new leaders in digital teaching and learning have emerged by clearly focusing on and building large traction across a single teaching or learning asset. Only once they have reached critical mass have they further invested in expansion across new complementary learning moments and assets. We hope that this core insight and journey deep dives, followed by our analysis of market gaps will be useful for new founders in this category looking to understand where they fit today and how they can grow.
The blurring lines and the future of the space
As the market has slowly developed over the last 15+ years, many teaching and learning assets have been addressed with various solutions. As the sector has grown and become more competitive, it has become clear that it is heavily interconnected with lines have often being blurred and crossed.
The above described ‘new leaders’ have crossed paths in key subcategories like:
- Tutoring support: Chegg Expert Q&A with acquisition of Student of Fortune, Cramster and InstaEDU and Course Hero’s tutoring platform and acquisition of Cardinal Scholars
- Assessment: Top Hat’s assessment solutions and TurnItIn’s acquisition of Gradscope and Examsoft, and more recently
- Textbooks: as both potential disruptors with Top Hat’s textbook marketplace, own textbooks and publisher acquisition and distribution and solution providers with Course Hero’s Textbook Solutions & Explanations, Quizlet’s Vertified Creator Programme and Chegg Textbook Solutions
The ‘incumbents’ have and are also lead battles of their own across teaching and learning categories. Michael Feldstein’s analysis of this space, covering publishers, LMSs, MOOCs and Big Tech over the years shows how each have dipped their toes in supplementary but competitive territories. This includes collisions between:
- LMSs and publishers, where content-focused publishers have always failed to displace LMSs, failing to appreciate the vast features sets and use cases of LMS
- MOOCs and publishers, with leading MOOC Coursera recently launching Coursera for Campus and becoming an end to end courseware authoring platform
- LMS and Big Tech, with Microsoft teams recently introducing rich features that directly step into LMS territory
The first conclusion here is that unlike many other sectors in education where it is hard to make the leap from one to another use case and subcategory, it is far from impossible to do this in digital teaching and learning. The potential market size of companies currently focused on one category could be much bigger when taking into account the potential ease of moving into supplementary spaces, especially if the companies have great products with high traction.
The second conclusion is that despite the many movements and expansions from the ‘incumbents’, we believe there is still ample space for innovation and growth in this huge sector from ‘next gen’ companies as shown through the first generation of ‘new leaders’. While incumbents might be best placed to continue business-as-usual and serve certain new areas of demand through product development or acquisitions, new entrants unhindered by bureaucracy can focus on building superior products and leverage their agility to capitalise on new opportunities and trends.
As the market heats up and as Covid creates a unique window of opportunity, newcomers will need to act smart and fast, focusing on niche beachheads which must either in and off themselves create massive value to users or act as great stepping stones in further product ecosystem expansion. We cover much more founder advice in later stages of this analysis.
The full digital teaching and learning market landscape
After hours and hours of research, exciting conversations, references and long debates, we are excited to share our full market map of key companies in the digital teaching and learning higher education landscape.
We have split companies in each of our core 3 categories of Resources, Delivery and Support, into 3 types based on company maturity and size:
- (A) the dominant ‘incumbents’ representing category leaders with mostly $100m+ revenues, deep end user market penetration and/or unicorn statuses. The nature of their offers has defined the conventional subcategory names, listed on top of the market map. As previously covered, most B2B companies are considered by many to be dinosaurs in the space like publishers and LMSs, whereas more exciting newcomers represent companies with a B2B2C or B2C approach the likes of Kahoot or Coursehero
- (B) the emerging ‘mid-market’ players representing reputable businesses that have either achieved leading positions in more narrow markets, have platoed with rapid growth, become acquisitions given challenges to scaling or in some situations are en route to incumbent status. Note that some unicorns like Coursera are captured here given their still limited penetration of core student learning markets with their Coursera for Campus offer, against their main focus on non-core students as a MOOC provider which is outside the scope of this research
- (C) the up and coming ‘next gen’ entrants represent emerging leaders in the 12 new subcategory opportunities areas listed on the bottom of the market map. They include high-growth proven businesses like Labster, companies likely to or already starting to experience expedited Covid-driven growth and companies like Studystream uncovering the explosive potential of new frontiers with 100m+ users impressions
Alongside company classification across maturity levels, within our 3 categories, we have also positioned each company across 4 subcategories. For the incumbents, at the top of the table, we have used common subcategory naming conventions like ‘video’, ‘instruction’ and ‘homework’. For ‘next gen’ companies, at the bottom of the market map, we have used our own new subcategory naming conventions which we believe align closely with the types of problems and areas of opportunity these companies are focused on. They include categories like ‘immersive video content’, ‘live interactive instruction’ and ‘learning hubs & pathways’, with all 12 subcategories summarised in the image below.
