Y Combinator expands its stake in edtech in the last batch

Y Combinator is slow increasing their participation in education companies, as the sector explodes with new demand for remote learners. In its latest batch, the famous accelerator had its largest number of educational technology startups yet: 14 companies from around the world, working on everything from teacher monetization to homework applications and ways to train engineers from software affordably.

While Y Combinator is not the definitive source on what success looks like in early stage startups – it literally has a post-mortem dinner after Demo Day to celebrate failure – it does serve to provide an illustrative look at how entrepreneurs are doing. thinking about certain sectors at a certain time. Managing Director Michael Seibel said the number of startups in each sector is not a Y Combinator option, but is in line with the concentration of applicants in each sector. In other words, YC is supporting more educational technology companies because more educational technology companies are requesting acceleration.

One dynamic worth noting here is that of the 14 educational technology startups in this batch, only two have a founder, UPchieve and Degrees of Freedom. Y Combinator provided aggregate batch diversity, indicating that 19% of the companies in W21 include a female founder, and 10% of the founders across the batch are women. It is a slight rally from the last batch, but not a huge jump.

In this context, I will use the current educational technology cohort within the lot to sketch a version of the future of education in the eyes of this specific demographic of early stage founders.

The story continues

Internationalization is a factor

YC’s current batch has 50% of its startups based outside of the United States, a first for the accelerator. The increasing internationalization of Y Combinator could help partially explain the rebound in educational technology companies. The growth of companies like India’s Byju, one of the world’s most valuable educational technology companies, shows how consumer spending on education companies internationally is impressive, and it is clear that educational technology startups in initial stage are taking notice.

Only two of Y Combinator’s 14 educational technology investments are from the United States, with the highest concentrations in South America and India.

• Manara: A marketplace to connect Middle Eastern talent with tech jobs.

• I take: Peru-based startup offering live and online after-school classes for Spanish-speaking children.

• Avion School: The educational startup teaches Filipino students to be remote software engineers around the world.

• Polyglot: A language school for Latin America.

The future is consumer over B2B

The vast majority of startups in today’s educational technology batch charge consumers, rather than institutions or businesses, for services. In some ways, educational technology startups seeking consumers rather than institutions are not new – it has always been easier to convince a parent rather than a public school to pay for a service simply because of red tape. Consumers are an easier way to reach scale demanded by businesses, and that has always been a truth of educational technology.

• Form: Aimed at Africa’s middle class, Kidato is an online school for K-12 students. The startup focuses on quality and affordability.

• Coding: An after school program for Indian children to learn to code.

Still, it is noteworthy that we are not seeing too much experimentation in the business model here, despite the pandemic and that some schools have started to invest more in educational technology services.

One potential obstacle these companies could face is access. If your service is costly to use, you can only educate a limited number of people in specific income groups. As a result, income sharing agreements, or ISAs, were especially present in this lot, a setup that allows a student to postpone paying for an education until they get a job. At the time of employment, said student has to give a percentage of his income to the company until his debt is paid. While the model is controversial, it was popularized by the YC Lambda School graduate and is still a way to make the initial cost of the school more popular.

• Pragmatic leaders: The startup wants to build a more profitable MBA, which is free until the student is hired after graduation.

• Awari: The São Paulo-based startup uses revenue sharing agreements to help students in Brazil pay for a tech education. Courses range from data analytics to product UX and growth marketing.

Acadpal, mentioned later, is an outlier that is sold to schools in India. Before moving on to the next section, I want to mention two startups that I think embody the most ambitious bets in the business model:

Zoom University is still alive

Despite the struggles of “Zoom University,” this group of educational technology founders clearly believes that the future of instruction lies in online courses. This was perhaps the most overwhelming thread that united all the companies in the sector: a bet on one of these companies is a bet that distance education will become a status quo.

As the previous sections show, several startups offer online coding platforms for specific demographics. Now, I always have my inbox full of different “Lambda School for X” startups, so seeing a variety of these startups once again isn’t exactly exciting. However, the pandemic showed how much the community and the network enhance a school experience. If these online schools can build strong partnerships with employers and alumni, I think there is a great opportunity here.

• Turing University: Lithuania-based online data science school uses revenue sharing agreements to bring affordability to education.

• Coderhouse: A startup based in Argentina that wants to build a live and online technology education for the Spanish-speaking populations of the world.

That said, where there is a great opportunity, there is always a lot of competition. These startups will have to find a way to differentiate themselves, like the one shown below:

• No school: The startup wants to link higher education to employment outcomes, so it is building a platform to increase completion rates in India with an internship guarantee.

There were bets on the infrastructure of how online courses are conducted, from course creation to completion.

• Pencil: A platform that helps YouTube teachers in India to monetize their courses.

• Acadpal: A learning app for Indian teachers to create and share assignments and for students to complete and discuss assignments.

• CreatorOS – Quest Book: This company wants to make it easier for teachers to teach online courses. It gives professionals the tools they need to launch a course in minutes, with a focus on a small end product.

In conclusion

Finally, the educational technology startups in the current batch of YC are more complementary to each other than competitive. For a homework platform like Acadpal to be successful, it would be good news if a company like Codingal, which helps bring after-school learning online, also gets funding. For Unschool, which links higher education to employment, a company like Degrees of Freedom could be a key partner or integration for low-income students.

Edtech is growing, and rapidly, so fragmentation of different games is expected. And while the hard work on this batch begins now, it’s enlightening to understand where early entrepreneurs are seeing promise.