Q&A: Benjamin Vedrenne-Cloquet, EdtechX Holdings
Benjamin Vedrenne-Cloquet, CEO of EdTechX Holdings, an investment company created to buy businesses in the education, training and education technology (edtech) sectors, explains more about the opportunities within the sector.
AW: Benjamin - what are the attractions of the education and training sectors from an investment point of view?
BVC: We see this market as a rising tide for investors, with predictable digital transformation expected over a long period of time. We estimate that the global education and training market is growing at 8.5% a year and will be worth $10tn in 2030.
Within this, education technology (edtech) will grow even faster. The market is growing at 14% a year and will reach $1.1tn in 2030, we think.
For context, these rates far exceed those expected for global economic growth. For example, the World Bank expects a global economic growth rate of 4.7% for 2019.
Furthermore, the fragmented nature of education and training markets, and the potential for technology and consolidation within them, make for a very appealing investment landscape.
In particular, the use of education in training and technology has lagged developments in other sectors, such as e-commerce, media, health and finance. This is changing fast, creating real opportunities for well-placed businesses, and the investors that back them.
AW: It’s said that edtech is to the knowledge economy what oil and electricity were to the industrial age. Are there attractive companies within these sectors?
BVC: Unequivocally, yes. This is a key reason why we launched our investment vehicle, EdTech X Holdings, to buy businesses in these sectors. There are now growing and profitable targets with established brands, price power and predictable earnings.
However, there are opportunities in Europe and Asia Pacific, in particular, that investors may not be aware of. Related to this, we think education businesses are under-represented in public markets.
AW: Your company, EdtechX Holdings, is the world's first education and education technology special purpose acquisition company (SPAC). What is it, and what is a SPAC?
BVC: EdtechX Holdings is an acquisition company that we listed on the Nasdaq stock exchange in the US in October 2018. Essentially, it’s a cash shell that we plan to use to buy companies in the education and training sectors.
For us and our investors, the company helps give us the opportunity to buy attractive private companies in the sectors we are focused on. For the companies we invest in, it provides an efficient route to stock-market listing, and a platform for further growth.
AW: What are the big trends in the education and training sectors, globally?
BVC: In our view, five drivers will transform education. It is vital that investors understand them.
Digitisation and the shift to using digital content and services are allowing education and training to be disseminated quickly and cheaply.
Personalisation, meaning education and training tailored to individuals, increasingly using artificial intelligence and data, is enabling cost-effective delivery of bespoke learning.
Privatisation, the growing private supply of education and training, is another driver. State education and training will be unable to cope with the one billion net new entrants to the global education system expected by 2030, or the more than two billion workers who will need to retrain. Private provision, including low-fee private schools, next-generation vocational training institutions and alternative higher education platforms, will be required, sometimes in partnership with state services.
Automation, the use of software including artificial intelligence to enhance education and to solve the rising challenge of teacher shortage globally, is the fourth driver.
Lastly, there is globalisation, with technology accelerating the adoption of common global education standards, curricula and certifications. Interestingly, directions of travel are changing. Until about five years ago, globalisation was mostly driven by western school and university brands travelling east. Now, however, brands from Singapore, China and Japan are travelling west and south.
AW: How did you come to be involved in this area?
BVC: In a nutshell, I saw the potential for the growth of the education sector.
I had spent most of my career in in the media sector and digital media, most recently as Time Warner’s EMEA Head of Strategy, Business Development and New Ventures. But in 2013 I joined IBIS Capital, an investment bank, founded by Charles McIntyre, focused on the media and education sectors, where I remain a Partner. I quickly saw how technology and globalisation were affecting these sectors, and opportunities in education in particular.
Charles and I also wanted to build a platform to attract more capital to the edtech ecosystem, and so we co-founded EdTech Global, which runs international edtech conferences attended by investors, innovators, and CEOs. This provides a global network of relationships and insights which, combined with the investment bank capabilities of IBIS Capital, underpins the launch of EdtechX Holdings and gives us today a unique competitive advantage as an investor.
AW: What kind of businesses will you be targeting for acquisition?
We are looking for private education and training companies worth between $100m and $1bn that have an ambitious growth strategy and are well positioned strategically to make the most of the consolidation and digitisation opportunities available in the sector. They must have price power, attractive brands, strong and diverse management teams, a track record of growth and the potential to scale.
Also, they must be ready to operate as publicly listed companies, with corresponding corporate governance and reporting policies.
Market segments we are focused on typically share five common characteristics: underlying and stable growth, significant size, currently fragmented, profitable, and early-adopters of technology. These include the international school market, alternative education, vocational training, corporate training and upskilling.
Our ambition is to create an industry-leading platform to consolidate next generation education and training businesses. To achieve this, access to the US capital market via our listing on Nasdaq was critical.
Benjamin Vedrenne-Cloquet is CEO of EdTechX Holdings
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