No matter who wins the election, things are looking bleak for the UK edtech sector.
TechCrunch recently reported that Edtech Funding Has Not Hit Bottom and then there’s the sector’s biggest supernova (a star that burns itself out) – India’s Byjus was valued at US $22bn just two years ago, a staggering sum that had fallen by 99%.
When I sent TechCrunch’s story out to my edtech network the replies could be summarised as, “Tell us something we didn’t know?”
I have already written that I think if Labour gets in, their private school VAT bill will end up costing money and placing even more financial and operational pressure on state schools, something no-one of any political persuasion wants.
And now there’s confirmation of another hurdle for edtech; the exodus of wealthy UK citizens (including non doms). These people are key investors in early and mid-stage edtech, investing directly via EIS and VCT syndicates, private equity funds and private family offices (an important and underrated sector). How many of these High Net Worth (HNW) individuals are leaving the UK? 9,500 according to a study done by Henley & Partners, ‘the global leader in residence and citizenship by investment’.
Henley define the departing HNWs in their report as having a minimum ‘liquid investable wealth of US $1m’, i.e. excluding property and similarly illiquid assets such as shares in unlisted companies, exactly what 99% of the UK edtech sector is.
That’s more than double the 4,300 who left the UK in 2023. The only country with a bigger outflow of HNWs was China (15,200) whose population is 20 times that of the UK.
As mentioned, I asked my network of founders and investors about this issue. 15 replied, with three (20%) saying they are already planning to relocate either their business, their family or both within the next 12 months and 14 (93%) said they thought the migration of HNWs was already having an impact on their fundraising within the UK.
I agree with TechCrunch that the problem isn’t the size of the market but getting to ROI, something that has for years been a key part of my POPEYE investing model.
This £7.5bn exodus is a big thing for edtech and the record numbers will probably post election given both the Labour and Conservative manifestos failed to even mention startups. Now compare the impact of this quantifiable number (and the associated brain drain) with the nebulous figures BESA claim the government’s funding of Oak National Academy has driven out of the UK edtech sector. It’s less than a flea bite on the arse of an elephant, yet BESA is squandering £1m of their members’ money “attacking imaginary enemies” as Cervantes wrote in Don Quixote.
UK plc can’t afford to haemorrhage HNWs to business-friendly countries at this rate. Yes, of course there will always be entrepreneurs who build successful businesses in the UK, but how many of those will even get the chance in edtech? The simple answer is fewer and that’s not a good thing for a tech ecosystem already dominated by enormous transnational companies.
