5 Reasons Why EdTech Companies Are Struggling To Grow

It is common for all startups to face challenges, which is valid even for edtech startups. Technology has proven to be highly useful in the educational sector in giving the push it requires. The blend of education and technology was visible during the pandemic. It may be why edtech companies across the globe managed to raise massive funds. However, now news of edtech startups failing has become increasingly common. Here is a list of five reasons why edtech companies fail to survive or grow.

1. Offline Push
With the schools reopening, the focus of the education sector is back offline. Even with improved internet penetration and high internet speed, the offline push is more significant than before. You can use Speed Test or Globe to check the internet speed to verify whether it is optimal for online education. Parents are again skeptical about online exams. It is why many big edtech startups across the globe are now seen acquiring brick-and-mortar educational centers. Also, edtech startups are less prevalent in tier two and three cities where offline education is still prevalent.

Therefore, edtech startups are now adapting to offline education and looking for ways to integrate technology and education offline. However, it is still an ongoing process for many edtech startups just starting with it.

2. High Acquisition Cost
Previously, the customer acquisition cost or CAC for the edtech platforms was at most 25%. However, in the last two years, the CAC has increased up to 80%. In addition, many edtech startups have hired experienced costly sales executives assigned to generate leads and convert them. As a result, the entire acquisition cycle has become extremely expensive.

Furthermore, investing in marketing for edtech and generating leads do not guarantee customer acquisition. Also, the existing business models of different edtech startups still need to be prepared for such high CAC. As a result, many edtech startups need help growing.

3. Faulty Business Models
Edtech startups often measure the success of their growth by counting the number of paid enrollments. In other words, it is just a measure of the lead conversion by the salespeople. But unfortunately, the business models need to focus more on the outcomes of the students. Without tracking the learning outcome, it is difficult to analyze whether the students truly benefit from online education.

Furthermore, even though this business model manages to bring in students, they fail to earn customer loyalty. Many entrepreneurs often state that the USP of online learning is personalization through AI. However, the outcome of everything is such that the teachers of the offline classes know the students better and are, therefore, able to deliver more personalized interaction. As a result, it is decreasing the popularity of edtech startups.

4. Unrealistic Pricing Model
The high CAC is pushing the edtech companies to increase their subscription fee. It has now reached a stage where the pricing models of edtech companies are far higher than that of schools. Parents have a limited budget to support the education of their children. With high subscription fees and no remarkable results, edtech startups are now forcing parents to take a step back and engage their children in offline tuition again.

5. Confusion Regarding Real Customers
Firstly, it is becoming hard for edtech companies to know who their real customer is. Are they the students who will be using the platform or the parents who will be paying for the services the students will be utilizing? Furthermore, what is the role of teachers in the entire cycle? Teachers are the gatekeepers of the educational sector, and the parents value their opinion. So, should the teachers also be treated as customers?

Thus, there needs to be more clarity on who is the right end user of the edtech startups. This challenge mainly gives edtech startups a hard time creating sustainable businesses.

Edtech startups need to dive deeper into the educational sector to understand the basics, which will help them to lay a new foundation for their businesses. Edtech must make headlines with the remarkable result of the students enrolled in their courses to regain the parents’ attention. Furthermore, tech startups should consider taking the teachers in the loop to create a sustainable business model. This entire cycle will need a lot of patience. The primary objective should be survival, followed by creating a business model to help them grow.