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NEW YORK — It’s a brutal moment for ed tech companies.
The stock market has been battered over the past few months, and the technology sector has been particularly hard hit. Meanwhile, colleges are experiencing enrollment declines at the same time their coronavirus relief funds are drying up, potentially constraining how much they can spend with vendors.
Still, ed tech CEOs and investors remained bullish about their own sector’s future during a conference in New York on Thursday held by HolonIQ, a market analysis firm. Here are three trends they say are coming down the pike.
Ed tech will overcome tough market conditions
Stocks have been trending downward for most of the year, reaching a new low Friday after the Federal Reserve raised interest rates again in a bid to fight soaring inflation.
Ed tech stocks have been feeling the squeeze. Shares for 2U, which owns MOOC platform edX, closed at $5.78 on Friday, down from about $35 a year ago. Shares of Coursera, a prominent MOOC platform, were also trading around $35 in September of last year. On Friday, they closed at $10.25.
These market trends have important implications for ed tech companies, especially those that had been weighing an initial public offering, according to investors who spoke on a HolonIQ panel Thursday.
“We see an IPO window that’s closed for quite a bit,” said Shoshana Vernick, managing director at Avathon Capital. “If you’re a company that is in need of cash and has to go raise money right now, it’s very difficult.”
Still, speakers listed reasons to expect positive long-term trends. A little over 10 years ago, only about $500 million of venture and growth capital was flowing into the ed tech market, said Michael Cohn, partner at GSV Ventures.
That’s compared to more than $20 billion in 2021. Despite uncertainty about the future, Cohn predicts an “upward trajectory.”
Chip Paucek, CEO and co-founder of 2U, acknowledged the tough market conditions.
“I show up at cocktail parties right now, and people go, ‘How are you?'” he said. “Because, obviously, it’s not been pleasant lately. And we take that very seriously. Our shareholders are a critical community for the company.”
However, Paucek said 2U’s recent moves — which included acquiring edX last year to transform into a company with a consumer-facing platform — are setting it up for the long haul.
“This company is much, much stronger than it was when we were at our peak price,” Paucek said.
Microcredentials are higher ed’s future
Chief executives at two large ed tech companies touted new microcredentials available on their platforms, stressing that these smaller offerings will be a key part of higher education’s future.
In May, Coursera launched Career Academy, a skills training academy where users can earn entry-level certificates from companies like IBM and Meta, Facebook’s parent. Coursera is selling the platform to colleges, which can make it available to their students.
Jeff Maggioncalda, Coursera’s CEO, likened Career Academy to Shopify, an e-commerce platform that enables merchants to quickly set up online stores. Colleges can use Career Academy to launch a skills academy with their own branding.
“When they graduate they have a college degree, and they have a professional certificate from Google,” Maggioncalda said. “That graduate is going to do better than one who just has a college degree, or someone who never went to college and just got a professional certificate.”
2U is also doubling down on microcredentials. The company announced Thursday two new credentials it calls Microbachelorswhich are programs composed of a few classes that can lead to college credit from edX’s partner institutions.
The two new Microbachelors, which are both centered on statistics, will be offered through the London School of Economics and Political Science, part of the University of London. The school also launched an introductory math course on the platform that is free to audit.
Students who complete one of the Microbachelors and are accepted into certain programs at the University of London will be eligible to receive credit for two half courses. The programs are pending recognition for credit by New Jersey’s Thomas Edison State University, according to edX’s website.
“That is a perfectly stacked pathway,” said Paucek, 2U’s CEO. “That is much harder to pull off than most people outside of higher ed would realize.”
Paucek described the offerings as “brilliant for business,” saying it will improve the marketing funnel for University of London’s online bachelor’s degrees offered on edX’s platform.
Companies will continue to offer educational benefits
Ed tech companies and investors expect learning and working to become more intertwined in the future.
Coursera, for instance, sells access to its content libraries to companies, governments and other organizations that are interested in training their employees. In 2022’s second quarter, this segment of Coursera’s business brought in $43.7 million, up 55% from a year ago.
These efforts could help the company reach learners it might not otherwise attract, Maggioncalda said.
“There’s a lot of individuals who don’t know about Coursera. They’re not going to come to Coursera,” he said. “But they might be in a government workforce development program, where an institution can guide them to where the opportunities for jobs are and can guide them to use Coursera in a certain way.”
Cohn, of GSV Ventures, echoed those comments, saying he expects companies will continue to offer certain educational benefits. GSV Ventures has invested in Guild Education, a tuition benefits platform that connects employers to its platform for online colleges.
“If it is, ‘Oh, here’s $100 for MasterClass,’ that’s probably going away — you know, superficial, fluffy learning as a benefit.” Cohn said. “But if it’s learning that drives the future-proofing of an organization — the upleveling, the upskilling of the people in a way that is measurable, demonstrable against business objectives — we think that that’s going to be a long-term trend.”