The Uphill Battles Facing Asia’s Education Technology Startups


The Uphill Battles Facing Asia’s Education Technology Startups

By Tony Wan     Nov 6, 2018

The Uphill Battles Facing Asia’s Education Technology Startups

Japan has earned a reputation for exporting successful products and services from different industries. In technology, Sony and Nintendo are among the most internationally recognized brands. In education, the tutoring center Kumon has franchises across the world.

But when it comes to the education technology industry, few people outside the country can name Japanese companies off the top of their heads. And for Norihisa Wada, an education investor who treks the globe in search of promising edtech startups, that lack of exposure is one of the biggest challenges currently facing Japan’s education technology industry.

The country isn’t lacking for education startups. At the Edvation x Summit in Tokyo this week, entrepreneurs gathered to show off products that range from coding kits to language-learning applications. But the reality is that “few investors outside of Japan know these companies,” said Wada at the event.

Bridging Japanese companies to education technology investors and markets across the globe is one of the goals for EduLab Capital Partners, an investment fund where Wada is a general partner. Launched this March, the Boston-based firm traces its roots to a Japanese educational research and assessment company, JIEM. EduLab has already invested in seven edtech startups and is a limited partner in three U.S.-based education-focused venture capital firms: Fresco Capital, GSV Acceleration and LearnLaunch.

Japanese investors’ interest in early-stage education companies have waned in the last five years, according to Wada. That’s in part because the domestic market is small—and getting even smaller, given the country’s well-documented population decline and low birth rate. That means entrepreneurs need to seek overseas markets in order to attract financial backers.

A handful of Japanese edtech companies have managed to do that. Cerego, founded in Tokyo as an adaptive study tool, now operates in San Francisco and is building a predictive learning platform. Quipper, a video-based instructional and learning management platform, has grown its footprint in Indonesia, Mexico and the Philippines.

Wada offered several reasons for optimism that the funding climate will change for local education entrepreneurs. Last year, Tokyo-based Arcterus won the Global Edtech Startup Awards, an annual international competition that began in 2014. And there is a concerted push by the Japanese Ministry of Economy, Trade and Industry to align the country’s educational system with the country’s shifting workforce needs. (The event included a 3-hour, closed-door session where government ministry officials discussed plans for transforming the educational system.)

Edvation x Summit Asia Investment Panel
From left: Vince Chan, John Tan, Norihisa Wada, Vu Van.

Other Asia-based investment firms are aiming to connect edtech companies to new markets as well. The newest fund is Hong Kong-based Creta Ventures, which seeks to invest in early-stage, revenue-generating education companies across the globe that have the potential to establish a footprint in the Chinese market. The firm is still finishing the fundraising process, but has already invested in Make School, a San Francisco-based alternative school focused on computer science skills and degrees.

Vince Chan, a co-founder of Creta Ventures, noted another challenge facing education entrepreneurs: the contrast between the skills that companies and parents value. Despite the fact that businesses and employers say they emphasize communication, collaboration and creativity as the most important skills, at the end of the day, many parents still want to see quantifiable results, in the form of grades, test scores and admission into elite schools.

For education entrepreneurs driven to help prepare today’s students for tomorrow’s workforce, reconciling this discrepancy poses a daunting challenge.

John Tan, CEO and co-founder of Saturday Kids, which operates educational camps for kids age 5 to 16, says he’s found a successful workaround. Through these workshops, students learn about digital creation tools that they then use to create animations, games and apps. The curriculum involves programming tools like Scratch, but the “goal is not to churn out engineers,” Tan said on a panel. “We are not a coding school. We are a creativity school.”

When it comes to marketing, however, the Singapore-based company positions itself differently. “When we run ads on Facebook, we pitch ourselves as a coding class,” Tan said. “Parents simply will not pay for a curiosity class. But they will for coding.”

With his company, Tan has discovered that parents are often more receptive to the idea of an in-person technology camp than any online offerings, even though most tech tools can be taught online. For him, the phenomenon raises the question: Why is it that parents are willing to pay $500 for a physical camp, but hesitant to fork out $10 for online content? His conjecture: “Most consumers are spoiled and used to online content being available for free.”

Changing mindsets and habits around educational values requires patience, and as a market, “education indeed takes a longer timeframe for investors to yield and see returns,” said Wada. Like any industry, education is susceptible to hype and fads, and investors need time to learn which trends are real—and which ones fizzle.

“No one can predict what the future of education is going to look like,” Wada added. Today, he noted, pitch decks for education startups are littered with references to artificial intelligence and blockchain. Tomorrow, who knows what will be next?

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