What can help new businesses take their first steps in the investment arena?
Earlier this year Nesta held a workshop on how to raise investments in EdTech with guest speakers Lisa Barclay, Investment Director at Nesta Impact Investments and Fergus Davidson, Associate at IBIS, a leading EdTech investment advisory firm. As someone new to the investment world, it was eye-opening. I have summarised a brief overview of trends in post-COVID investing from the event as well as seven practical tips for raising investments in the EdTech arena.
It is not uncommon in the education sector to hear how education hasn’t really changed in the last 100 years and promises about the transformative potential of technology are always just around the corner. Whatever the merits of those claims, we cannot deny the important role that technology has played in helping education systems to adapt during the COVID-19 pandemic. With over 190 country-wide school closures globally in April 2020, Edtech has been propelled to the forefront of the education scene.
“Raising investments can take time, especially if it is your first time. Start thinking about it at least 6-12 months in advance of when you’ll need the investment.”
During the pandemic, education systems around the world had to find creative solutions to face the challenges of remote learning. From using national television to deliver school classes in Portugal to South Korea’s high schools using social media such as TikTok to promote microlearning among students, EdTech organisations have experienced huge surges in demand for their technologies (research by Nesta/SchoolDash found a seven-fold rise from pre-COVID levels in usage of online maths learning platforms) and some organisations have benefited from increased investment (global investment in 2020 was $16.1 billion compared to $7 billion in 2019). As Fergus Davidson described it, “for some companies, five to 10 years of growth has been condensed into the space of 10 months”.
However, this acceleration has not been uniform across the sector. This variation is reflected in the nature of the investments made last year. Despite the fact that the total value of investments in the EdTech sector in 2020 doubled since 2019, the number of deals has actually decreased. In essence, this means that more money has gone to fewer businesses.
Fergus Davidson said this could be explained by increased risk-aversion among investors, who, in times of high uncertainty, are more willing to invest in businesses that are already successful, rather than new businesses which may be promising but come with higher levels of risk. Consequently, the Edtech sector is now seeing some “unicorns” – privately held startup companies with a value of over $1 billion – appear.
Finally,although it might be reasonably easy at the earliest stages of the investment lifecycle to raise a small amount of money, fewer EdTech businesses manage to attract greater backing at later stages as investors turn their focus on finding the long-term potential “winners”. This is especially true in times of market uncertainty, when it is even more difficult for investors to predict how the market will develop and who those winners might be.
In this context and in a post-COVID world, what can help new businesses take their first steps in the investment arena? Here are some useful ideas from the investment experts.
Originally posted here