2023 State of University Edtech Startups 🎓 Transcend Newsletter #66
How startups are helping universities change higher education
Hi there! Alberto here, joining from Madrid this week.
The Transcend Newsletter explores the intersection of the future of education and the future work, and the founders building it around the world.
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We are doing something new – in this newsletter, we cover the state and future of University Edtech startup – simultaneously, we are using this opportunity to build the most comprehensive market map of university edtech startups! If you or someone you know are in the early stages of impacting universities, do make sure to add yourselves here. More on this towards the end of this newsletter. Now let’s dive in!
Earlier this month, I found myself at a conference of university deans, admins and professors. It was a full day dedicated to discussing new learning and technological innovations that can improve the university student experience.
It was interesting! I got to go deep with many of these university folks and understand some of the biggest opportunities in the space. We decided it was a good time to gather all of our learnings from the last years into one series, starting today.
Over the next month, we’ll break down the university edtech market, the categories and trends, the advice for founders in the space, and build the most comprehensive market map along the way!
Welcome to Part I, where we’ll break down the market and the opportunity to build university edtech startups.
A small niche in a trillion-dollar market
Higher education is everything that comes after high school/secondary school, mainly universities and other accredited educational programs for adults.
It is one of the largest industries in the world: the 2020-21 academic year saw US universities spend $671 billion annually, which is larger than the GDP of Sweden! Globally, this number surpasses $1 trillion eaaaasy.
But that market is surprisingly small when it comes to university edtech startups, that is, startups that serve universities as its customers.
Of the top 20 startup unicorns today, only 5 serve universities: Guild Education, Handshake, Eruditus, upGrad, and ApplyBoard.
Even if there are other established players in the space, like textbook publishers (Pearson, McGraw Hill, HMH, Wiley), LMS tools (Instructure, Articulate) or online platforms (2U, Coursera), this begs the question: why isn’t university edtech bigger? Let’s break the numbers to learn why.
The size of the university edtech market
The market size of university edtech is determined by how much universities spend annually.
First, this excludes companies that don’t serve universities directly, like university operators (who run university networks like Strategic Education, Adtalem or Grand Canyon, or Challenger Universities that rethink the university model), bootcamps (that offer unaccredited upskilling experiences) or consumer startups who serve students directly (like Chegg or Sketchy).
Secondly, that $671B spending data point isn’t all allocated to students. It’s a lot more complex that that, so let’s break it down!
One third of total spending goes to professor and instructor salaries, so we can’t include that in a potential market sizing exercise.
Another third goes to student services, student affairs, and admin (admissions, support staff). The remaining parts are hospital services, operations and research.
Marketing is also a huge part of spending by universities. In countries like the US, private universities will pay more than $2,000 to acquire a new student ($470 for public universities), so universities operate multi-million dollar marketing budgets.
Physical buildings and infrastructure, which aren’t accounted for in US spending, is also one of the main spending areas.
This spending distribution is relatively consistent across countries, as represented by this UK university’s spending breakdown.
$600B is an obviously massive market, but when you look closely, we find that most of that money goes to salaries, buildings, student marketing, and services before a single dollar can be spent on improving learning for the student.
So, which of these budgets are open for startups to partner with universities?
University Edtech market map
We will break down the University Edtech market based on the 6 university budgets they can leverage:
Student recruitment & admissions 📈: anything that helps universities reach new students, admit them into a relevant program or school, including their efforts to reach international students.
Examples include Applyboard 🇨🇦, Studyfree 🇺🇸, Cturtle 🇻🇳 or Loper 🇺🇸
Academic content & assessment 📚: all the tools for academic use, from textbooks and learning content, tutoring services, to virtual labs or experiential learning. Assessment includes proctoring, assessments or plagiarism detectors.
Student affairs & experience 🏫: everything outside of the classroom and on campus, like services, financial aid and bursar, libraries, or activities for students (clubs, events).
Mainstay 🇺🇸, CampusLogic 🇺🇸, Differ 🇳🇴
LMS & technology providers 🖥️: pure tech providers like videoconferences, and learning tools providers like Learning Management Systems (LMS).
Career Development 🎓: tools that improve career outcomes and readiness of students, through training, job opportunities or alumni mentoring.
Revenue-generators 🧑💻: helping universities create new revenue streams, like OPMs (which help universities sell online programs to an external audience), continuing education (catering to alumni and other partners), or turning research IP into revenue-generating activities.
Opportunity areas for startups
If you are a founder exploring how to work with universities, what should you focus on? We have mapped the main areas of opportunity for startups to serve universities, based on conversations with industry leaders.
First, let’s find where universities need help: this survey of university leaders identified areas where current products are not satisfying demand and need improvement. This is a great measure of where universities are looking for new startups to partner with, and below are the main categories:
Mental health support → 55% have a service in place but want to improve it
All interviewed administrators agreed this was a priority across universities – universities are actively looking to improve the mental health of its students through a variety of interventions.
Accessibility support & disability services → 52% have service in place but want to improve it
This was another consensus area, particularly when it comes to making the university experience more accessible to all types of students (and especially those that have experienced great hurdles to do so historically).
Assessment integrity → 47% have service in place but want to improve it
A space usually associated with proctoring and plagiarism detectors, professors are looking for better ways to measure the integrity of the assessment process. Who’s building a better version of TurnitIn?
Skills → 44% have service in place but want to improve it
This is still a big area of focus, and one that qualitatively has been brought up in conversations a lot. Universities are looking to include stronger skills offerings in their learning experiences and career support, with 44% of universities wanting better work placement tools.
It’s also worth noting the technological shifts that will drive these changes: what are the technologies that have seen the greatest adoption in recent years?
Since the pandemic, new areas like video conference or assessment integrity have grown massively. Their adoption have grown to almost every university surveyed since 2020 (see chart below).
But other categories have emerged in the last two years, like student support (6% increase in adoption since 2021), textbook & materials (5%) or Open Educational Resources (7%).
Advice for University edtech founders
The toughest part about the University edtech space is that working with universities is a very complex process.
Unlike other industries, where there is a clear buyer for each product or service within the organization, universities have a different decision-maker for every institution: sometimes, it’s a dean, sometimes professors, but also administrators or leaders. This makes the sales process long, and very difficult to navigate.
We spoke with university leaders and founders and asked them for advice for startup founders in this space. Here’s what they recommended:
Understand the differences between institutions WITHIN Higher education 👩🎓
Higher education has very different institutions within it, and each has their own set of needs: public vs private, 4-year vs 2-year, serving 18-23 year-old students vs adult students… Understanding their strategic goals will help you align your product with their priorities.
Engage with faculty and admin early on – and rely on referrals 🤝
Founders should get stakeholders on board and providing feedback early, and contribute to building the first MVP. Founders can get started building an online community for your customer persona within the university, organizing in-person events, or even building an advisory boards with early customers and champions.
Once you get some early customers, leverage their support to get introductions to similar personas at other universities. In-person conferences are a great place to do so!
Understand the university sales cycle 💼
Founders in the space need to understand the sales cycles can be as long as 12-18 months. This has implications for cashflow management, how traction is measured, and growth. There are two windows that open for most startups (in October and March), but you want faculty and administrators to be familiar with your product beforehand!
The size of the contract also matters – for the most part, any pilot or contract under $10,000 in annual value in US universities can be purchased within a single department, but greater contracts will require approval from a central administrator or leader.
Most universities set up pilots to test the relationship with startups (paid or unpaid) before committing to an actual contract. Be aware that a pilot is just that – not an actual customer just yet!
Work with university insiders 👋
The one thing university edtech founders told me they wished they had when they started… was a cofounder with extensive university background (as faculty or administrator). If possible, hire people from the inside who can empathize with the customers, and speak the same language when it comes to their priorities!
Most university administrators I spoke with feel like the majority of inbound messages they get from startups is both overwhelming, but also not relevant to the problems they face. Working with insiders helps understand those pain points more deeply!
“Speak the same language” as university administrators 🗣️
Joe Testani, from the University of Rochester, shares that startups and universities speak fundamentally different languages, which explains why it’s so hard to build deeper relationships.
When you as a founder say “AI”, many university folks may hear “bias”. When you say you venture-backed or for-profit, they may feel skepticism. When you say your are disrupting the way in which university operates, they feel alienated.
In the words of Joe, higher ed requires a “balance between disruption and honoring the tradition”, even if the tradition needs to evolve!
Are you building in University edtech?
We want to build the most comprehensive market map of higher ed startups and wish to connect with those who are in the early stages of impacting higher ed.
If you or someone you know is building a startup in the space, add their name to our market map below
My thanks to Joe Testani (University of Rochester), Jen Dewar (Duolingo English Test), Gonzalo Tudela (Examind) and Abi Waterer (Verifyed) for the interviews, and all the individuals who gave extensive input to build this piece!
The Roundup ☀️
Meet the latest cohort of Transcend Fellows (TF11)! Cohort announcement here.
EducUp Studio (founded by Carlos Raul - TF8) was recently launched on Product Hunt - ranking #1 in Education! Check it out here.
NewCampus (founded by Will Fan - TF5) announced a strategic partnership with Open Campus - a community-led education protocol to build a decentralized campus. Learn more.
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Great blog. I love all the data. I am not convinced assessment integrity is going to remain high on the list. It’s a carryover of an old system. I do think anything that supports: 1) closing the attainment gap and onboarding students from lower socioeconomic backgrounds, 2) increasing university funding options (what does MOOC 5.0 look like?) and 3) making professors master of the content, enabling them to modernise currlculum and disintermediate legacy publishers will succeed.
Shout out to Perlego who has done a fantastic job with the textbook market.