Accelerated adoption of content digitalisation
In April 2020, the World Economic Forum estimated around 1.2 billion students were out of the classroom and learning online remotely.  Additionally, universities were forced to stop lectures and extra-curricular activities, and professionals were encouraged to work – and complete training - from home, following the surge of the global pandemic. As learning in person came to a halt and everyone moved digitally, there was an accelerated adoption of online learning and training.
Across the board we believe that this transition has shifted perceptions for online learning, with many appreciating the convenience of a ‘school or work from home’ framework, particularly given improvements in network connectivity in many areas. In India, for example, companies such as LEAD School, an India-based EdTech company offering integrated curriculum and technology solutions, have taken this opportunity to broaden their offerings in the space – with investment allowing the business to service increasing numbers of students and schools. 
The attraction for investment is not just localised. China-based VIPKid, founded in 2013, has a business model largely dependent on English teachers in the US teaching young students based in China.  Therefore, the learning experience has been completely via online video from the very beginning. It was amongst the earliest of practitioners in China under such model and has experienced exponential growth. The company was valued at $4.5bn by the end of 2019, compared to $3bn in 2018, drawing attractions from leading investors such as Sequoia China, Tencent and YF Capital.  The globalisation of firms with existing online delivery models could form a significant area of opportunity for PEs and strategic players - resulting in higher valuations for firms in this space.
This online learning ‘curve’ is also being driven by widespread redundancies and a pandemic-induced competitive job market. Students and professionals are exploring supplementary learning to upskill via online test prep centres and bolster their CVs. This, we believe, is driving demand for test prep centres, particularly across India and South East Asia where demand for high quality training online is breaking the barriers for students looking to gain an edge, especially those who live in more remote areas – offering considerable M&A opportunities in the online delivery of this service.
Whether through the provision of short-term courses with bespoke learning opportunities, or longer courses in partnership with businesses, we are seeing online education companies diversify their offering to capitalise on the rise of virtual learning. For example, Great Learning, an online platform that links universities and professionals, has doubled its revenue growth in the last twelve months as a result of a hike in demand for upskilling in various digital competencies and it’s high quality delivery model.  Should this trend continue, we believe education platforms could be seen as high value assets, with sustainable delivery models in the face of a future crisis.
Rise of e-Learning Management Systems
A by-product of this move to digital has been the emergence of electronic Learning Management Systems (LMS) - software applications that help to consolidate academic programmes, training materials and subject study guides into one platform.  LMSs are not only used for traditional subject coverage, but companies like CPOMS  are also offering services for areas such as safeguarding, wellbeing and pastoral solutions. As more ‘users’ seek to organise their learning online, the rise in demand for LMS could continue at a fast pace.
More traditional operators are also looking to combine LMS approaches to their existing offering. eLearning Brothers, for example, recently diversified its integrated learning development offering by acquiring Edulence – and Edulence’s LMS, Knowledgelink.  As traditional online learning platforms try to remain competitive, LMS could increasingly drive M&A or investment activity in the Education space.
LMS software is also helping universities expand their student base internationally – with ‘on demand degrees’ through the use of platforms such as Blackboard Learn. 
However, the rise of LMS has risen concerns around the quality of online versus in-person learning.  Some learning management systems, such as Citrix Education, have responded to this by adding face-to-face instructor-led training alongside digital workspaces and testing platforms.  Post-pandemic, it could be that those ‘hybrid’ offerings are increasingly competitive.
Similarly, LMSs have a successful corporate training offering as well – providing the opportunity to continue employee development remotely. For example, companies like MedBridge, an industry-leading provider of online patient engagement and clinical education solutions received an investment from private equity house, LLR Partners , suggesting a high level of interest from PEs and strategic players either already operating in this space or looking to do so.
While the optimum education delivery model continues to be ‘tried and tested’, what is clear is investor interest in the space with a growth trajectory expected to value the global LMS market at $28.1bn by the end of 2025. 
Investor interest is also sparked by an increasing focus from governments around online education. Most government-funded support packages in response to the pandemic included provisions for education. For example, US Congress dedicated some of its $2 trillion March stimulus package, known as the CARES Act, to supporting education, including $13.2 billion for K-12 schools – facilitating the move to online learning.  There are several acts still in progress, which if formalised, will provide greater funding to schools in this space, offering more opportunities for LMS platforms to help optimise schools’ online delivery models.
Governments have also implemented regulatory shifts around online delivery. For example, the Office for Students (OfS) and Department for Education (DfE) in the UK, have relaxed requirements for universities looking to deliver online training during the pandemic. While this initially mitigates lost educational time (and revenue streams for higher education) it could catalyse a long-term ‘hybrid’ education model.
Similarly, although some countries have not actively provided any forms of support, we believe there is a recognition for EdTech being a high value asset for governments globally. For example, we believe that EdTech could soon become a large export for the Indian market, through online delivery in areas such as South East Asia where ground realities are similar and delivery models are transferable. This extension could support global economies, recuperating losses caused by the impact of the pandemic on more traditional sectors such as Consumer, Leisure & Retail.
Outlook for investors
The global EdTech market is set to be worth ~$165 billion this year – a huge increase from ~$58 billion in 2015  and the drivers for this growth continue. The accelerated transition to online learning, the rise of LMS M&A, and a recognition amongst most governments that hybrid education is necessary, could mean new areas of opportunity for investors.
Efficiencies and the low-costs offered through online delivery is expected to sustain the growth trajectory being witnessed within the market. Countries will look to new regions with similar ground realities, where their delivery models are easily transferable, for example, India and Japan could look to South East Asia and the US could look to expansion in Europe.
Investors could therefore:
- Look for opportunities in the South East Asian EdTech space, particularly for supplementary learning and test preparation delivery
- Look for investment opportunities amongst LMS firms, with mature online delivery models
- Capitalise on markets with similar ground realities