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Edtech & ethics

People may make many incorrect assumptions – the existence of Big Foot, the infallibility of their lottery ‘system’, and always trust officials like police, politicians and priests.

In my world you have to be a skeptical optimist, meaning that you should never assume that the words ethics and edtech should appear in the same sentence. To my real financial and personal cost I have been lied to, threatened and had large, reputable investors and funds try to do deals deliberately structured to take money away from early stage investors. So don’t assume that because it’s education (or ‘edtech’) everyone is honest, ethical and nice – they aren’t and it’s a growing problem.

My current ethical dilemma is China. Just about every edtech company I have looked at think that China is the place they have to be to get that injection of ‘unicorn’ DNA. A billion dollar valuation isn’t impossible in edtech, although I’d argue that few of the companies who are rated as such actually deserve it. For this elite group, most are going to be successful in India, China and eventually Africa. Why? Because I think the best correlation to a billion-dollar-plus valuation is focusing on a market with a similarly-sized population. Today they might be:

  • China – VIPKids, Yuanfudao, Luojislwei, iTutor Group, Hujiang, 17zuoye
  • India – Byjus
  • Africa – none on the horizon yet

Of course there are some in the US:

  • Plurasight
  • Age of Learning
  • Udemy
  • Udacity

But in my opinion, only Plurasight, a professional training company, is really worth anywhere near its valuation (currently over US$3bn). The 2Us may be in HE but if you think they are really worth a billion $ then I have some magic beans that you might like to buy.

As for the Age of Learning, the only correlation I see to a unicorn is that their mysterious investor Divesh Makan’s ICONIQ Capital is also an investor in Plurasight. He may have invested $150m on a $1bn valuation in a $183m Series A back in 2016, but that’s a dog age in any tech (edu or not). Age of Learning may indeed have 4bn+ ABCmouse ‘learning activities completed’ but to put that in context, 3P Learning’s now defunct competition, World Maths Day, had 480m questions answered in just 48 hours back in 2010. 3P probably have 20bn+ correct answers from Mathletics but their market cap (publicly listed on the Australian Stock Exchange ASX) is today around US$120m (2018 rev ~US$20m).

Age of Learning will benefit from a recent deal with Tencent to distribute its products in China but if it works it will be because of Tencent’s WeChat and QQ systems, which means most of the value and money will end up in the pockets of Tencent’s shareholders like the LIPPO group and Naspers.

So to my main ethical issue with edtech in China; their Social Credit System (社会信用体系). Unless you have been living under a rock you should know just how Orwellian this mass surveillance system is. Most people I’ve spoke to in edtech think this doesn’t apply in Chinese schools but sadly it does. So if you want to sell your edtech product or service in China, the data about your users will have to be handed over to the Chinese state, like it or not, and will therefore have an impact (albeit probably minor) on their Social Credit System score. That might not seem significant, but I believe it’s the same ethical slippery slope that saw Google ditch its ‘do no evil’ strapline when it decided it wanted to do serious business in China.

Now I doubt many EIS or SEIS investors in edtech care too much about China’s Social Credit Score system but bigger funds, especially those listed or with strong ethical investors, might find this a tricky circle to square.

Ethics matter across edtech, education and investment. I think they relate directly to the little-discussed issue of company culture, something I personally think is more important than most of the strategic ‘puffery’ I am swamped with.

In the end, an ethical edtech unicorn may be the same as a unicorn, just a myth. I hope not.

Mar 6, 2019Richard Taylor
4 years ago Education17zuoye, ABCmouse, Age of Learning, China, ethics, Hujiang, iTutor Group, Luojislwei, Plurasight, Tencent, unicorn, VIPKids, Yuanfudao0
Richard Taylor
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