Tutoring company valued at three billion euros

In the midst of a state of emergency, bets are made here on the future: that interest in digital education will remain after the pandemic. Market researchers estimate that the global online education market will grow to around 330 billion euros by 2026. According to the company, Gostudent has grown by 700 percent in the past twelve months.

In addition to the German-speaking countries, it offers tuition in France, Italy, Spain, Great Britain, Turkey, Poland and Russia, among others. “Customer acquisition is already profitable within the first year,” says Ohswald. “We have proven that we are scalable in our core business.”

But the company is not yet profitable. Rather, it focuses on growth: Ohswald now wants to expand the business to the USA, the Asia-Pacific region and the Middle East.

Gostudent plans global expansion

Gostudent is getting the money for this in the current financing round from the holding company Prosus and the Telekom Innovation Pool, along with the existing investors Softbank Vision Fund II and Tencent. “We are interested in investors who plan with us for the long term and do not sell again at the first opportunity,” said Ohswald, explaining the choice of investors. Since it was founded in 2016, Europe’s most valuable edtech from Austria has raised a total of more than 590 million euros from investors.

The entire industry has received a boost, financially especially since the beginning of 2021: “In the spring it became clear that educational start-ups are not only on the upswing because of the pandemic, but that the trend is continuing as a result of systematic change in society”, says Bao-Y van Cong. She is Investment Director at the venture capital firm Target Global, which recently added two Edtechs to its portfolio: Lepaya from the Netherlands and Edukoya from Nigeria.

The industry is also growing in Germany: According to the Crunchbase database, the largest financing round to date for German Edtechs was booked by the Coach-Hub training platform from Berlin, which raised 97.1 million euros in its second institutional round. In second place is the Berlin online language school Lingoda, which received 60 million euros in private equity in April. Behind this is the medical training platform Lecturio from Leipzig with 27.4 million euros.

The willingness to pay for education has increased in the corona crisis

The numbers are remarkable because German educational start-ups in particular have long been spurned by venture capitalists. Felix Klühr is responsible for investments in the school app Sdui and the learning video platform Simpleclub at the venture capitalist HV Capital from Munich. He observed that in the pandemic there was suddenly a higher demand for online education, but also a new awareness.

The reason is the parents’ fear that their children will no longer enjoy a sufficient education. The HV-Capital-Partner justifies the financing rounds with a professionalization of the branch. According to market researchers from Global Industry Analysts, the German education market is expected to grow by 14 percent by 2026.

The starting position on the German market was and is difficult in an international comparison, says Bao-Y van Cong from Target Global: “The German education system is more efficient and better than almost all other education systems in the world.” Therefore, there is also less private catching up to do.

In addition, Germans are skeptical about digitization. “In the Netherlands and Great Britain, online educational opportunities and digital payment systems have been part of everyday life for years,” says van Cong. And then the German-speaking area is also a much smaller market than, say, the Indian, Chinese or American markets.

The world’s highest rated education start-up is ByJu’s from India. The explanatory video platform is the biggest competitor for Gostudent in the tutoring area. According to HolonIQ, it is valued at 18.6 billion euros.

China stops its education champions

It is followed by two Chinese Edtechs, whose valuation many observers now have doubts: Yuanfudao was valued at the equivalent of 13.7 billion euros in October, and Zuoyebang in September at 8.8 billion euros. And this despite the fact that the Chinese government has shaken the private education sector: Ruler Xi Jinping has banned all tutoring providers for subjects in China’s national curriculum from making a profit.

Children of richer parents should not be able to buy better chances of getting good grades in the final exams and thus of getting a place at the elite universities, it is said. The measures come at a time when China is taking massive action against overpowering tech companies in many areas.

China has also banned companies from going public and raising capital there. Chinese tutoring giant New Oriental Education announced at the weekend that it would have to lay off 60,000 of its 110,000 employees. Like the Chinese education providers Tal Education and Gaotu Techedu, the company, which is listed on the New York Stock Exchange, has lost practically all of its stock market value.

Yuanfudao and Zuoyebang are affected by the regulations, but are still trying to bypass the new regulatory measures.

Despite these interventions by the Chinese government, the market research company Global Industry Analysts assumes that the Chinese edtech market will reach 38.4 billion euros in 2026. It is noticeable that the successful edtech companies are aimed at private customers and, above all, address parents as a wealthy target group.

It remains to be seen whether Corona will also bring the breakthrough for edtechs aimed at the institutional sector. These companies try to sell their software and content directly to schools and universities.

Felix Klühr from HV Capital is currently counting on this: “All areas have benefited from the pandemic, but digital solutions for school institutions in particular still have enormous potential for growth.”

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