.
D

espite the limited outcomes we’ve seen with impact investing in recent years, there is a growing trend of impact investors who have begun focusing more attention on investment strategies that are able to deliver financial goals while also benefiting the UN’s Sustainable Development Goals—especially in the sector of EdTech funding. However, with a need for new overlapping ecosystems that can foster collaboration and partnership, new business models that can fit into a more modular education management system, and the need for entrepreneurs to have access to not just capital, but ecosystems capable of providing contributors with key skills and competencies to foster sustainable growth and accelerate innovation, our current systems may prove too calcified and disconnected to provide the necessary foundation for innovation and growth within EdTech. Therefore, it is imperative that new avenues of investment in EdTech continue to be explored, and that adaptive ecosystems be put into place that can foster growth and innovation for entrepreneurs around the globe.

We are in the midst of an education crisis.

With as low as 30% of 10-year-olds able to read a simple sentence in some low-income countries, the world is currently facing a learning poverty crisis. Indeed, statistics show that by age 18, the average student in a low-income country will have only attended school for eight years, compared to the average student in high-income countries who attends school for 13 years—and that low-income countries will have only invested an average of $1,300 on a child’s education, compared to the $110,000 high-income countries spend on average on their students. With COVID-19 having accelerated this crisis and traditional funding for education from governments, households and development partners unable to fill the gaps, there is a dire need for the education sector and investors to come together to create new modular systems capable of delivering access to education for all students, regardless of region or income level.

There is a large technology divide between countries.

One challenge that the COVID-19 pandemic brought to light was the large gap in access to technology between high-income and low-income countries, especially in terms of access to the Internet, mobile devices and even basic electricity. As seen with schooling during the pandemic, many high-income countries were able to leverage technologies such as television, the internet, radio and mobile technologies to provide more interactivity for students who couldn’t attend school in person. However, in areas with a lack of access to such technologies, it became apparent that different forms of connectivity would be needed.

Similarly, as the COVID-19 pandemic demonstrated to governments that there is a need to digitalize their state schools at a faster rate, there still exist many low-income countries where despite limited access to computers and the internet, teachers are often computer illiterate themselves. This gap in access to technology and lack of teacher training capabilities highlights the need for more teacher training curriculum, as well as a strengthening of the basic landscape of EdTech in low-income countries so that future innovations applied in high-income countries can benefit low-income countries as well.

There are gaps in the education system in low-income countries that need to be filled.

While many high-income countries were able to switch to remote learning and working when the COVID-19 pandemic hit, In Africa, numerous people did not—and still do not—have the luxury of learning and working from home. It is crucial, therefore, that before new innovations and technology solutions be built, both stakeholders within Africa and internationally need to work together to plug in the infrastructure gaps in low-income countries, and to create an environment where young people can access dignified and fulfilling work. This will ultimately require finding local solutions that may already exist and working to find how to support and catalyze these solutions in order to solve for each location’s unique challenges.

Technology is key to transforming education systems.

Investing in EdTech provides a unique opportunity for education systems and stakeholders to think differently about how education services can be delivered. According to the World Bank, there are five key principles to designing and implementing technology that can transform our education systems:

• Ask why. Ask about everything, from the changes that need to be made in the classroom to the resources and funding that governments can provide, as well as how to think differently about resources currently in place.

• Design for scale. As with most any investment, focusing on those most marginalized first will lead to more scalable solutions. Additionally, it is important to focus on human-centered design that hones in on the needs of teachers, students and administrations, and that can empower schools to make good budget decisions and effective use of resources.

• Empower teachers. Education is a social endeavor, and teachers are at the center of any effective educational process. Therefore, it is important that technology be put into place that can empower teachers to be innovative, find solutions and network with other teachers while also easing certain administrative burdens on teachers.

• Engage the ecosystem. As any use of EdTech innovations cannot be implemented by education administrations alone, it is crucial that administrations partner with other stakeholders at the local, regional and international levels.

• Be data-driven. In order to implement EdTech effectively, there is a need to build off of global knowledge and existing evidence to help schools come up with new innovations and create a more effective culture of learning. More importantly, it is important to not only focus solely on data-collection systems and learning systems, but to have all systems—stemming from human resources to content management systems and teacher training systems—communicate and collaborate more effectively in order to foster systems that are modular and interoperable, and therefore more agile.

Ecosystems of support are essential.

• Entrepreneurs need ecosystems of support in order to thrive. More than just financing, entrepreneurs are in need of connections to partners with relevant skillsets and resources and are able to provide business development support. Therefore, it is essential that ecosystems be put into place that can support in co-creating, collaborating and connecting entrepreneurs to relevant stakeholders, in order to create an environment that reduces the risk of failure and provides a system where they can feel supported and thrive long-term.

• An ecosystem of stakeholders in EdTech needs to be created in order to bring in new models of learning. In order to accelerate innovation in the EdTech space, it is important to create networks between individual schools and the larger school system. In order to accomplish this at the system level, it is important to encourage ministries of education to identify what are the types of capacities they have, and to connect them with stakeholders who have the capacity to provide innovative content and better access and connectivity in areas they are lacking. Similarly at the school level, there is a need for principals to think about how to support teachers and engage with students and parents, as well as foster peer learning. It is also important that networks and support systems for teachers be created to help them connect with other teachers and bring in additional expertise when needed.

Impact investing is key to EdTech.

In order to help entrepreneurs grow, it is important that impact investors focus on three things: quality, access, and equity—and perhaps most importantly, good outcomes.

In order to invest well, you need to listen first. In the space of EdTech, it is important to talk to teachers, schools and principals to discover what their biggest priorities are as well as what challenges they may face that are being overlooked—and to then invest in companies that can provide solutions to these challenges. For example, after Lumos Capital Group invested in a company Elevation Education that served the growing body of English language learning (ELL) students in classrooms in the U.S., they were able to begin providing tools to administrations and teachers who were previously unable to differentiate things in the classroom for traditional learners and ELL students, and therefore begin to serve the needs of ELL students more effectively.

There are alternative models of financing that can be used in education and EdTech. In addition to traditional forms of investing, alternative models of financing, such as income share agreements being used with universities, can help realign capital with the right incentives. For example, by changing the traditional tuition model to one where a student is charged a portion of their income post-completion of their degree, schools are then incentivized to help students get jobs after graduation—benefitting both students and future employers.

There is a plethora of potential financial streams for start-ups. From non-dilutive capital such as grants, competitions to support entrepreneurs and foundation and government funding, to cohort programs such as accelerator or incubator programs, to dilutive capital such as more traditional forms of investment capital, both start-ups and growing companies have several different financial streams to explore when looking to grow their business.

Editor's Note: This excerpt is part of a larger report published in collaboration with the Qatar Foundation and the World Innovation Summit on Education (WISE), chronicling key takeaways from four special UNGA 76 forums in September of 2021.
About
Winona Roylance
:
Winona Roylance is Diplomatic Courier's Managing Editor and Special Series Editor.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.

a global affairs media network

www.diplomaticourier.com

New Models of Impact Investment in EdTech

Photo by Jess Bailey via Unsplash.

October 24, 2021

Despite the limited outcomes we’ve seen with impact investing in recent years, there is a growing trend of impact investors who have begun focusing more attention on investment strategies that are able to deliver financial goals while also benefiting the UN’s SDGs—especially in EdTech funding.

D

espite the limited outcomes we’ve seen with impact investing in recent years, there is a growing trend of impact investors who have begun focusing more attention on investment strategies that are able to deliver financial goals while also benefiting the UN’s Sustainable Development Goals—especially in the sector of EdTech funding. However, with a need for new overlapping ecosystems that can foster collaboration and partnership, new business models that can fit into a more modular education management system, and the need for entrepreneurs to have access to not just capital, but ecosystems capable of providing contributors with key skills and competencies to foster sustainable growth and accelerate innovation, our current systems may prove too calcified and disconnected to provide the necessary foundation for innovation and growth within EdTech. Therefore, it is imperative that new avenues of investment in EdTech continue to be explored, and that adaptive ecosystems be put into place that can foster growth and innovation for entrepreneurs around the globe.

We are in the midst of an education crisis.

With as low as 30% of 10-year-olds able to read a simple sentence in some low-income countries, the world is currently facing a learning poverty crisis. Indeed, statistics show that by age 18, the average student in a low-income country will have only attended school for eight years, compared to the average student in high-income countries who attends school for 13 years—and that low-income countries will have only invested an average of $1,300 on a child’s education, compared to the $110,000 high-income countries spend on average on their students. With COVID-19 having accelerated this crisis and traditional funding for education from governments, households and development partners unable to fill the gaps, there is a dire need for the education sector and investors to come together to create new modular systems capable of delivering access to education for all students, regardless of region or income level.

There is a large technology divide between countries.

One challenge that the COVID-19 pandemic brought to light was the large gap in access to technology between high-income and low-income countries, especially in terms of access to the Internet, mobile devices and even basic electricity. As seen with schooling during the pandemic, many high-income countries were able to leverage technologies such as television, the internet, radio and mobile technologies to provide more interactivity for students who couldn’t attend school in person. However, in areas with a lack of access to such technologies, it became apparent that different forms of connectivity would be needed.

Similarly, as the COVID-19 pandemic demonstrated to governments that there is a need to digitalize their state schools at a faster rate, there still exist many low-income countries where despite limited access to computers and the internet, teachers are often computer illiterate themselves. This gap in access to technology and lack of teacher training capabilities highlights the need for more teacher training curriculum, as well as a strengthening of the basic landscape of EdTech in low-income countries so that future innovations applied in high-income countries can benefit low-income countries as well.

There are gaps in the education system in low-income countries that need to be filled.

While many high-income countries were able to switch to remote learning and working when the COVID-19 pandemic hit, In Africa, numerous people did not—and still do not—have the luxury of learning and working from home. It is crucial, therefore, that before new innovations and technology solutions be built, both stakeholders within Africa and internationally need to work together to plug in the infrastructure gaps in low-income countries, and to create an environment where young people can access dignified and fulfilling work. This will ultimately require finding local solutions that may already exist and working to find how to support and catalyze these solutions in order to solve for each location’s unique challenges.

Technology is key to transforming education systems.

Investing in EdTech provides a unique opportunity for education systems and stakeholders to think differently about how education services can be delivered. According to the World Bank, there are five key principles to designing and implementing technology that can transform our education systems:

• Ask why. Ask about everything, from the changes that need to be made in the classroom to the resources and funding that governments can provide, as well as how to think differently about resources currently in place.

• Design for scale. As with most any investment, focusing on those most marginalized first will lead to more scalable solutions. Additionally, it is important to focus on human-centered design that hones in on the needs of teachers, students and administrations, and that can empower schools to make good budget decisions and effective use of resources.

• Empower teachers. Education is a social endeavor, and teachers are at the center of any effective educational process. Therefore, it is important that technology be put into place that can empower teachers to be innovative, find solutions and network with other teachers while also easing certain administrative burdens on teachers.

• Engage the ecosystem. As any use of EdTech innovations cannot be implemented by education administrations alone, it is crucial that administrations partner with other stakeholders at the local, regional and international levels.

• Be data-driven. In order to implement EdTech effectively, there is a need to build off of global knowledge and existing evidence to help schools come up with new innovations and create a more effective culture of learning. More importantly, it is important to not only focus solely on data-collection systems and learning systems, but to have all systems—stemming from human resources to content management systems and teacher training systems—communicate and collaborate more effectively in order to foster systems that are modular and interoperable, and therefore more agile.

Ecosystems of support are essential.

• Entrepreneurs need ecosystems of support in order to thrive. More than just financing, entrepreneurs are in need of connections to partners with relevant skillsets and resources and are able to provide business development support. Therefore, it is essential that ecosystems be put into place that can support in co-creating, collaborating and connecting entrepreneurs to relevant stakeholders, in order to create an environment that reduces the risk of failure and provides a system where they can feel supported and thrive long-term.

• An ecosystem of stakeholders in EdTech needs to be created in order to bring in new models of learning. In order to accelerate innovation in the EdTech space, it is important to create networks between individual schools and the larger school system. In order to accomplish this at the system level, it is important to encourage ministries of education to identify what are the types of capacities they have, and to connect them with stakeholders who have the capacity to provide innovative content and better access and connectivity in areas they are lacking. Similarly at the school level, there is a need for principals to think about how to support teachers and engage with students and parents, as well as foster peer learning. It is also important that networks and support systems for teachers be created to help them connect with other teachers and bring in additional expertise when needed.

Impact investing is key to EdTech.

In order to help entrepreneurs grow, it is important that impact investors focus on three things: quality, access, and equity—and perhaps most importantly, good outcomes.

In order to invest well, you need to listen first. In the space of EdTech, it is important to talk to teachers, schools and principals to discover what their biggest priorities are as well as what challenges they may face that are being overlooked—and to then invest in companies that can provide solutions to these challenges. For example, after Lumos Capital Group invested in a company Elevation Education that served the growing body of English language learning (ELL) students in classrooms in the U.S., they were able to begin providing tools to administrations and teachers who were previously unable to differentiate things in the classroom for traditional learners and ELL students, and therefore begin to serve the needs of ELL students more effectively.

There are alternative models of financing that can be used in education and EdTech. In addition to traditional forms of investing, alternative models of financing, such as income share agreements being used with universities, can help realign capital with the right incentives. For example, by changing the traditional tuition model to one where a student is charged a portion of their income post-completion of their degree, schools are then incentivized to help students get jobs after graduation—benefitting both students and future employers.

There is a plethora of potential financial streams for start-ups. From non-dilutive capital such as grants, competitions to support entrepreneurs and foundation and government funding, to cohort programs such as accelerator or incubator programs, to dilutive capital such as more traditional forms of investment capital, both start-ups and growing companies have several different financial streams to explore when looking to grow their business.

Editor's Note: This excerpt is part of a larger report published in collaboration with the Qatar Foundation and the World Innovation Summit on Education (WISE), chronicling key takeaways from four special UNGA 76 forums in September of 2021.
About
Winona Roylance
:
Winona Roylance is Diplomatic Courier's Managing Editor and Special Series Editor.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.