The education technology (edtech) space in Asia is booming, supported by higher penetration of social media, better internet connectivity and a growing pool of emerging middle class that is willing to pay more for a good education, Mike Michalec, co-founder and managing director of the education technology accelerator EdTech Asia, said in an interaction. According to a report by CBInsights , funding for venture capital-backed edtech startups soared 96 per cent year-on-year, during the second quarter 2015. Michalec is positive about the future growth of edtech throughout Asia, particularly Vietnam, and said this region has been witnessing a noticeably higher year-on-year growth in both the number and the quality of education-focused events. Edited excerpts.
How is the edtech scene around Asia?
I would say it is still quite nascent compared to Europe and the US. There is a very strong robust ecosystem in those two regions. Country by country, if you break it down, it is probably somewhere between 10-20 edtech startups within each of ASEAN countries. Singapore probably has a little bit more. They (edtech startups in Singapore) have more access to capital.Moving forward, the rest of the world realizes that there is a lot of market potential here, either in localised products or in growth. So if you look at ASEAN as a region with roughly 600 million people, all kind of emerging into the middle class, and there is huge potential. If you take Asia in general, you are looking at roughly two-thirds of the world’s population, and most of them young and educated – there is a lot of potential here. Companies that are not based in Asia, or don’t have products in Asia, should be here very very soon, because this is where most of the growth is.
Why are VCs and other funds becoming more interested in edtech ?
There are a couple of reasons. One, education in general as an investment tends to be recession-proof. It is one of the things people are always going to spend their money on. Regardless of what is happening in the economy, it is something that is a bit more stable. The return, traditionally, has not been so high. It takes a lot longer to get your money back. But given the right type of educational products or services, it is a less risky investment. A lot has to be do with risk, a lot of it has to do with where I guess the society is going in terms of how they use technology in education, so there is still that can be done.
What potential does edtech hold for Vietnam ?
That is more adequately answered just looking at the general startup ecosystem. How conducive is the entrepreneurial environment in Vietnam to support young people with good ideas? What are the policies, what are the regulations, what is the access to capital and finance, and what is the access to mentors? What success stories are coming out of Vietnam, so other people can aspire and try to be like (them) ? So Topica (EdtechLab) is a very good thing, because younger people can have an example. There is a saying, ‘you can’t be what you can’t see’. So people see success, they can aspire to success. Those kinds of things have to be in place for edtech to move forward, and actually a lot of things are happening already.
What are the verticals of edtech that startups can participate in?
Education is kind of confusing, because there are so many different aspects of education. You’ve got pre-kindergarten, kindergarten, primary, secondary, higher education, you’ve got professional developmen, you’ve got corporate, you’ve got life long learning, you’ve got on demand learning for anything. Malaysia and Singapore have online marketplaces where you can meet people that can give you instruction, either tutoring subjects, or piano or swimming lessons. Marketplaces are big; marketplaces within the individual sectors might be interesting. For people that are looking at doing a startup in education technology, they really need to understand the different markets within education first, and really have a good understanding on the consumer behavior before they develop anything.
It now might be easier for overseas companies to understand a local country. So the advantage of being local might not be as strong as before. How do you see the competition?
That is interesting. I may disagree a little. I still think that they are advantages to coming up with something that is local. It is not just the language, you need to understand the culture and behaviour. Take the example of Thailand, where even though they have very good payment gateways for online payment, a lot of them are not used, and people still prefer to get a bank account of somebody’s Instagram and deposit directly into some stranger’s account, and get their product delivered. Behaviour is very unique to each individual country and their culture. So if a foreign company comes in, and tries to enter the market without that knowledge, they are not going to do as well as a local company.
Can an edtech startup be a potential unicorn?
I think ‘unicorn’ is an overused term. There are a lot of companies that may be worth only $500 million, but they still have a lot of value, especially educational value. Unicorns for investors is a really good term, as they want to make as much money as possible. But how much is enough? $500 million or $1 billion, it is all relative.I am not such a big fan of the unicorn. I think there is a lot of potential to have a $1 billion valuation company. Lynda.com, that was sold to LinkedIn a couple of months ago [for $1.5 billion], is a perfect example. And I think the next one will probably be Udemy.
What does Edtech Asia do to support edtech startups?
We do a lot. We are just in the first phase. We just launched a website about a month ago. We’ve had a landing page since January. I’ve been doing edtech meetups for a couple of years, but only in Bangkok, and we have been doing them regionally only over the last six months. What we are doing to support the regional ecosystem is these meetups. In meetups, we highlight local success stories and feature local leaders to maybe help people understand what is going on locally.We are also bringing in people from outside the region from big companies like Youtube, Microsoft and Udemy to come and speak at our events. We have done some workshops as well. We have done predictive analytics for education. We are looking to do our first event in Q4 this year, which will be anEdtech Asia summit for the region. We are also doing some research, so we have some people acquiring data on things like the different sectors within education and edtech regionally, and what are the gaps in a specific countries. Besides, we do advisory to help edtech startups build their companies.