☠️ HYPERGROWTH or SLOWDEATH: Will the Goldmine of EdTech turn into a Graveyard? 🏴☠️
I feel both blessed and lucky that during this past year I spoke with 63 Egyptian EdTech founders in my quest to build an investment portfolio of EdTech startups.
So what did I learn about the future of EdTech in Egypt & how the hell did I meet 63 startups?!
I’m sure you can hardly count 10 EdTechs on the top of your mind!
Well, there’s a reason that in the Egyptian Startup Ecosystem report by ITIDA, Global Ventures & Disrupt Africa it’s said that there are only 42 Edtechs in Egypt. It’s because a lot of those I met don’t even qualify to be called startups, regardless of how interesting and promising they were to say the least!
The same report tells us that Edtech is Egypt’s fourth most-populated tech sub-sector with 1.5K talents working in its wide spectrum of online learning platforms, course providers, learning management systems, and upskilling platforms.
So the question is, with the rise of the number of players in Edtech in Egypt and the recent funding rounds they’ve been getting, where is this sector going to?
Well, even though I’ve been in this field since late 2017, I can’t claim to know the answer. I just have a few interesting insights from dealing very closely with many of the talents of these startups.
So here goes!
Are EdTech startups in Egypt on a trajectory for Hypergrowth or Slow death?
Lots of EdTechs have been on a hiring frenzy recently, offering decent and competitive salaries too; but how?
Pre-Covid, most companies or individuals in Egypt that were providing courses, workshops, trainings, tutoring etc… most probably did it offline (except a handful who were fully dependent on online learning). This offline business model meant for them the following:
- They needed to rent a venue or build one
- They needed to hire, train and qualify instructors’ year long and coordinating their training hours was a massive, painful & endless scheduling pain!
- They had to spend a lot on marketing channels just to get a 15–20 learners (average maximum for many offline courses except in K-12 where it reaches 1000 in some cases)
- There was always a logistical & operational hassle + costs associated with materials and general coordination of the training day
- There was always a geographical limitation to reach and sell to customers far from the location of the venue and expanding to a new city or country was a major decision
- Word of mouth and referrals were the main engine to acquire new customers
Covid introduced another business model though to these founders….
Founders of offline education companies or entrepreneurs who were interested to join the Edtech scene suddenly saw the following unfold infront of them:
- Customers/learners became more accepting of receiving online content
- This meant more geographical access to customers beyond the usual radius
- Suddenly venues, logistics, materials etc..were not an issue any more
- Instead of hiring and scheduling instructors all year long, you could pay the best in the market a one-time fixed fee for a recorded course that you can sell year long at a rate much cheaper than the cheapest offline course!
- You could monetize from offering live sessions with these instructors and you had leverage on the profit margins
In a nutshell, Covid helped EdTech become this asset-light model that is much less capital intensive & made it lucrative for many players to take on this market as it simply had a much lower entry barrier and higher potential ROI.
Literally anyone could create their own online learning platform.
THE PLOT TWIST
Unfortunately, many of these Edtechs were targeting the same audience and this is where the downfall usually starts.
The CAC (Customer Acquisition Cost) associated with getting learners suddenly started increasing as lots of players were bidding on the same audience. (and same instructors too)
This happened at a time when many of these startups that started as bootstrapped startups became VC backed and started embracing burning the money in the bank to offer insane discounts, provide freemiums, hire insanely & abuse their ads machine!
EdTech founders started taking pages out of the growth handbook of Uber & Careem without realizing that what once worked for these startups might not necessarily work in an EdTech landscape and with a service like Education.
This is without even mentioning that the “growth at any cost” mentality that once worked between 2015–2019 in specific industries cannot be adopted today, AT ALL!
Suddenly the market became crowded with many EdTechs offering the same value proposition more or less and this is where the goldmine turns into a graveyard!
This might lead us to a point where the market readjusts and less than a handful of these EdTechs survive…the rest will resort to things such as layoffs (check out what’s happening at BYJUs & Unacademy globally and at MANY startups locally recently)
I believe those who will survive are not necessarily the most funded, nor the most backed up OR even those focusing only on B2G & B2B2C; but rather those who:
- Were able to become top of mind for their audience (i.e. spent their money wisely)
- Those who have a niche market instead of the generic platforms targeting generic audiences
- BUT MOST IMPORTANTLY, those who use the TEACH TO SELL strategy and have a 2nd to none content machine that helps them grow their audiences organically and become the first option always for their users
EdTech shouldn’t be about getting instructors and selling content or courses. It’s all about building a community of social learning that can be monetized down the road.
EdTech platforms should enable their instructors to become community managers and low-key influencers helping them offer value first.
It’s not an easy long-term game, but for people like myself who are very passionate about education, learning & development; it’s worth it!
So which startups will join the 2022 graveyard of tech startups? Let’s wait and see in the next few months…
