August 17, 2021

9 business lessons from top EdTech companies

The COVID-19 pandemic changed the face of many industries, among them education. As classrooms closed to curb the spread of the virus, educators struggled to migrate to online e-learning channels and build a great experience for students and teachers.

This gave rise to many different EdTech companies established to offer a range of digital solutions that would help solve this problem. At the same time, businesses began to increase their use of digital learning solutions like online courses and e-learning platforms to provide their employees with training, support, and career development.

Are you toying with the idea of building an EdTech application? Then you should definitely take some business lessons learned from the most prolific and successful startups in the EdTech scene.

In this article, we zoom in on top EdTech companies to show you why they achieved success and which lessons you can implement in your business to follow the same path.

The potential of EdTech in a snapshot

Last year, we noted a record amount of investments flowing into the EdTech market. According to Forbes, the sector is going to nearly double in value to reach a smashing $325 billion in 2025.

But EdTech was an incredibly fruitful field even before the pandemic. Just consider the story of the New York City-based language learning application Duolingo that reached unicorn status last year after closing a $30 million funding round that set the value of the business at $1.5 billion.

Duolingo was soon followed by Quizlet, an app created in San Francisco to train students using flashcards on various games and tests. We’re bound to see some more EdTech unicorns rising soon.

Top EdTech companies and what we can learn from them

1. Chegg Inc.

This product suite is full of different digital learning solutions that are used by both consumers and businesses. In Q1 2020, Chegg recorded a revenue of $132 million. Out of this, $100 million can be attributed to Chegg Services that runs a direct-to-consumer subscription-based model for e-learning. Students can buy online mentorship, homework aid, and writing tools as part of their subscription.

By the end of Q1 2020, Chegg counted 2.91 million users in its massive subscriber base. And when the company released these numbers in its earnings call, the stock prices shot up by more than 30%.

Chegg is an excellent example of a subscription-based business model for EdTech companies where users pay a membership fee and get access to curated educational materials. As you will see, this model is very popular in the EdTech industry.

2. Esme Learning

This application is a great example of fruitful collaboration between the academic world and EdTech companies. It takes advantage of group collaboration technologies that were developed at the Massachusetts Institute of Technology in the hope of revolutionizing the online learning experience for business executives.

The platform offered by Esme Learning is powered by Riff, a cloud-based video and text chat platform that offers a personal digital coach providing objective data-driven assessments in real time to optimize the learning experience.

The enhanced engagement and retention are critical to successful learning. No wonder that the students of Esme Learning enjoy higher completion and success rates than other EdTech companies.

By taking advantage of this incredibly useful education technology and building upon research findings, Esme Learning delivers a learning experience that just works.

3. Outschool

Another interesting business model is based on providing online lessons that happen live. The idea behind Outschool is to connect students and teachers. The EdTech company bet on users between 3 and 18 years of age. The classes cover a variety of traditional subjects such as math, Spanish, art, and reading.

But here’s what’s makes Outschool stand out among other EdTech companies: it also supports extracurricular classes from Minecraft lessons to weather forecasting!

During the pandemic, which brought homeschooling and online courses into the forefront, Outschool noted a 30X increase in demand as parents started looking for new ways for their children to learn and have fun at the same time. Outschool also received $12 million in series A funding from some major US venture capital firms, including Union Square Ventures and Reach Capital.

4. K-12

K-12 is an education management company that fosters online courses as an alternative to classroom training. The idea is to cover curricula ranging from kindergarten to 12th grade. By implementing their vision early on, K-12 became one of the best learning apps for kids available. During the first three months of 2020, the company generated revenue amounting to $257.2 million.

K-12 runs an incredibly successful online public school program that brought it $228.3 million in Q1 2020. The company is an example of a successful business model that relies on partnerships with educational institutions.

5. 2U

One of the most interesting startups on the EdTech scene today, 2U stands out from the crowd of many other EdTech companies because it creates end-to-end learning channels for nonprofit academic institutions so they can offer online degrees.

This business model is based on Software as a Service delivered to B2B partners. In Q1 2020, the education technology startup earned $175.5 million. This figure is impressive because it notes a 44% spike against its earnings in 2019 in the same period.

2U is made of several businesses, and new acquisitions like Get Smarter for short-term courses and Trilogy Education for boot camps show that it has a clear vision for growth in e-learning. Today, 2U is working with Simmons University to carry out a digital undergraduate program as well.

Moreover, the company launched a video production solution called Studio in the Box that allows teachers to easily record training sessions from home and address the hardships of the COVID-19 pandemic.

6. Coursmos

This startup based in San Francisco offers a microlearning platform that was designed for learning and teaching micro-courses. You might be wondering what a micro-course is. Here’s the answer: A micro-course is a course that lasts no longer than three minutes.

The idea is to offer short and bite-sized e-learning lessons in anything from business and personal development to technology, startups, beauty, and more. This unique offering is what makes Coursmos an original offering among other EdTech companies.

7. Clever

Another San Francisco-based startup, Clever offers a single sign-on platform for K-12 education. The company developed a portal that enables a single cloud-based data storage medium for third-party learning systems and schools.

The goal of Clever is to bridge the gap between the student information systems available in schools and online learning applications. That’s how the platform allows districts and schools to get access and deliver data to third-party applications securely, including many other EdTech companies.

8. Open Sesame

Another interesting find among US-based EdTech companies, this exciting startup is based in Portland, Oregon. It offers online courses for businesses and helps companies to find courses, map them to their core competencies and even synchronize them in their own learning management systems. Companies can choose from courses on subjects that range from healthcare to manufacturing.

Open Sesame opens the doors for organizations looking to invest in the best e-learning content for their employees.

9. RevWork

This women-founded startup based in San Diego takes advantage of AI and behavior change science to boost workplace development. The SaaS platform is powered by technologies like machine learning to enable people to learn and grow in fast-paced business landscapes.

What’s unique about this startup is that it helps to optimize the learning experience by adapting to students’ unique learning styles, progress, and preferences. This kind of personalization is essential to becoming successful in the EdTech scene.

How to create a successful EdTech business

Know your market well

Founders of EdTech companies need to know whether or not EdTech is actually a profitable niche and where it’s going. Checking the data is just one part of the job. Sure, we all know that EdTech is growing – but is it growing equally in all niches.

For example, B2B startups have a bright future in front of them because major businesses are now investing towards employee education – for example, consulting firm PricewaterhouseCoopers invested $3 billion, Amazon – $700 million, and JP Morgan Chase – $600 million.

You need to know the data down to your niche – which means that your first step is to actually define that niche and narrow down your business idea.

Narrow down your niche

As an EdTech founder, you need to do your fair share of market research before getting started with developing your idea. That’s because EdTech is simply too large of a playing field for one company, even if it’s a powerful EdTech company from a place like New York City or San Francisco.

You need to narrow your idea down and find your niche. Look at the current EdTech landscape to understand how unique your idea is and whether there will be enough people willing to pay for your product. Examine the trends in your niche, identify your competitive advantages, take a close look at potential competitors, and predict market shifts.

Pick the right business model

As you can tell from the selection of top EdTech companies above, such businesses can take on many different models – from subscription- based to partnerships with educational insinuations. Some of them focus on rapid growth and capturing the largest market share; others are more interested in selling products to organizations and monetizing them from the beginning based on innovative education technology.

Here are a few business models for EdTech companies with tips to help you understand which one could be the right fit for your business.

Freemium subscription

This model helps to quickly acquire new users and create a source of recurring revenue/ However, most of these users might never convert. And at the end of the day, you might end up with a huge user acquisition bill.

Free trial subscription

This model will bring you more paying users in comparison to freemium, and you won’t have to cut features from the free offering. However, you might be dealing with students repeatedly creating free accounts and converting people who are used to free content; it might be hard. You will also have to show the value of your product before the trial ends.

EdTech marketplace

This works like any other marketplace – but this time, it’s for those looking for top content from EdTech companies and individual creators. You don’t have to spend any resources on creating content. But users might not always be ready to pay for creators’ e-learning content, so thoughtful curation is key.

Ad-based revenue applications

This model is relatively easy to implement and a great pick for mobile apps. But it might easily annoy students if you implement it in the wrong way, so be sure to hire a professional team of designers and software developers for your project.

Institutional and B2B sales

This model might get some pretty big deals. You might also enter into partnerships and get a good value from them. However, it will make you more dependent on educational institutions.

Business based on grants and sponsorships

These are both great additional revenue streams and may lead to valuable partnerships. However, incentivizing sponsors is going to be hard, and it might be insufficient as your only business model.

Understand your user base

You need to know the audience really well before building a product for it. Talk to your potential users – ask them what’s missing in the current systems from top EdTech companies and what features do they think could help them get a better learning experience.

And before launching a full-fledged application, always build a Minimum Viable Product (MVP). This is the best way to test out your idea on the market and gain lots of valuable feedback from prospective users.

Wrap up

The EdTech market is full of exciting EdTech companies and is only going to grow, especially among businesses looking to train their workforce and help employees gain new skills.

If you’re thinking about creating an EdTech product, get in touch with us. We have years of experience in supporting EdTech companies, helping them to select the best technologies, and leading them to success with our expertise.

August 17, 2021