Vietnam's Edtech goes against the global trend

Vuihoc raised $6 million in funding, making it the sixth Edtech deal launched in the first eight months of 2023 to successfully raise finance. Since the beginning of the year, Edtech has been the third greatest capital attraction and the number one deal in Vietnam, trailing only Medtech and Fintech.

Three major EdTech motivations

The overall investment capital in Edtech in the first half of 2023 has surpassed $30 million in the entire year of 2022, according to the study "Technology and Innovation Investment in Vietnam 2023." In terms of global Edtech investment capital, it can be claimed that Edtech Vietnam is moving in the opposite direction and is no longer a magnet for investors.

According to HolonIQ research, there was slightly over $700 million invested in worldwide Edtech firms as of the second quarter of 2023, down from more than $1 billion in the same period last year. According to the corporation, there will be a maximum of $3.5 billion in Edtech globally in 2023, down 67% from 2021 and more than 83% from the peak of capital mobilization in 2021.

With dismal fundraising outcomes, 2023 is likely to be the year when the market does not see mega-rounds (financing rounds of more than $100 million) into Edtech businesses. Without a huge investment, there will be few unicorns (unlisted businesses valued at $1 billion or more) in Edtech this year.

So, what keeps Vietnam's Edtech going? Ms. Tran Nguyen Thuy My, Vice President of Jungle Ventures, who led the $14 million funding round at Edtech Edupia in 2022, explained three reasons.

First, Edtech is one of the few sectors unaffected by the recession since Vietnamese parents prioritize education for their children. Compared to other occupations, willingness to pay is not slowing. Second, following the epidemic, online learning declined drastically in other countries, but only for a few students in large cities in Vietnam. The demand is still high since online learning is the only way to close the education gap, especially in English, between big cities and metropolitan regions.

Besides the above two market factors, the intrinsic strength of Edtech companies in Vietnam is also one of the outstanding factors compared to other technology startups in the region thanks to its efficient operation and cost. low service costs for growth. Even in the current context, there are many Edtech startups that still achieve positive cash flow along with growth in users and revenue," Ms. My said.

Two paths

Byju's, the world's largest Edtech valued at $22 billion (October 2022) in India, is currently valued at only $5.1 billion and is losing heavily. This Edtech is known as a pioneer in the field of e-learning. Industry insiders are questioning whether Byju's story will "haunt" the following Edtechs.

According to Tracxn, Edtech capital inflows into India in the first quarter of 2023 were $2.8 billion, down 75% year-over-year. Ms. Nguyen Ngoc Huong Thao, AVV Fund Senior Investment Manager, said the tale of Indian Edtechs impacts the growth of new startups, not the sector.

With startups at this stage, investors will require investors to see indicators of profitability and optimize operations. However, quite a lot of companies in the hot growth phase are not interested in optimization and profit, making it difficult to raise large amounts of capital from investors in the later stage. Another reason is that in the past years when capital was abundant, there were many startups that raised large amounts of money at unreasonably high valuations, leading to this period when the market corrected, companies were revalued at a much lower rate than before. "These are the difficulties that these startups face, not only in the Edtech industry but in many different industries," Thao said.

In Vietnam, although the capital inflow into Edtech is a bright spot, the scale is still quite modest, and it has not experienced hot growth during the period of easy capital flow, so it can be considered temporarily immune to Byju's shadow. However, there are still points to note in this successful fundraising effort by Edtech. The first is the lack of new faces. Out of a total of six successful Edtech deals, only Stag is a new face; the rest have raised capital from previous years.

Second, before 2021, Edtechs that raise $ 10 million or more concentrated on the online segment, although MindX and Teky have expanded online branches. Because offline Edtech enterprises or those who follow the O2O or OMO model always need more cash to start, the size of the physical shop also affects the amount of capital raised. invest in fixed assets, and open offline.

The question is, will Edtechs in Vietnam in the near future go purely online or in combination with O2O? Ms. Thao of AVV said that the pure online model has the advantage that it requires less capital to start, and has fewer geographical barriers, so it can scale up faster, including expanding into foreign markets.

The trend of OMO is often chosen by startups with a tutoring/tutoring model (tutoring / after-class) to help increase interaction for students (between students and teachers, between students). as well as many subjects (such as STEAM) and skills (such as presentations) that require a real-world environment.

Vietnam is still an importer of educational programs, so the possibility of Vietnamese Edtech going international is very difficult. Therefore, the domestic market is the top target for companies in this playground. Second, most of the customers in these two groups are students, so they need the supervision of the educational institution. Combining the above two factors, it is likely that Edtechs going in the direction of O2O will develop stronger in the near future.