Investment Thesis: Professional Development is the Future of Ed tech

Within the last five years, the ed tech industry has gained interest from entrepreneurs and venture investors throughout the world. Since 2013, venture capital and growth equity firms have invested more than $1B. Despite the large financial interest in ed tech, the industry thus far has produced minimally exits that future investors can point to as an optimal investment return. While many startups have focused on creating products and services that solve the problems that confront K-12 education, I believe the most opportune markets within the education sector are associated with training the near-future workforce. The K-12 education space faces challenges with regulation, customer awareness, and extended customer acquisition timelines. However, the professional development sector features shorter customer acquisition timelines and aligns with new employee and employer preferences.

Market Opportunities
Entrepreneurs and investors that are looking to enter the ed tech space should examine opportunities that 1.) look to solve the needs of the current and future workforce 2.) or assist employers that are looking to recruit or train specific employees. This space is well positioned for future success given macroeconomic factors including the emergence of remote workers, short-term freelance workforce, and online job platforms.

• Employees desire flexibility by working remotely: In an EY survey earlier this year, the results showed that employees desire some flexibility in the structure of their role. The results confirm that working hard at a role while traveling for business can make work-life balance a somewhat unattainable goal. The employees’ goal of work-life balance is one reason why the rise of remote working accounts for 47% of employees in the US.
• The rise of short-term workforce: A majority of the workforce has the internet access to work remotely. This shift in the workforce’s preference for autonomy (hours and where they work) has led to an increase in freelancers (as of May 2015, 15.5 million people in the US were self-employed). It is estimated that the growth of the freelancer economy will increase to more than 40% of the American workforce by 2020.
• Customer awareness of online job platforms: Many online freelance websites have surfaced to meet the needs of companies and employees seeking part-time work. Platforms such as Freelancer, oDesk, and Elance have been able to accumulate over 12 million users.

These three macro trends are why I believe the professional development sector will thrive in the coming years. As more and more of the workforce seek flexibility through self-employment, it will be essential that freelancers are able to distinguish themselves through proven skill development. Employers will also see the value of investing in their workforce to display confidence and maintain employee retention.

Ed tech sectors to watch:

• Career Accelerators/Boot camps: The job market has become more competitive for individuals. A direct result has been the upskill movement or employees learning additional skills. A number of career boot camps are offering extensive 3-month courses and guaranteeing employment at the completion of the program. These startups have developed strategic partnerships with key employers within the engineering community. This model could be applied to other STEM career paths.
• Niche/Customized Job Market Platforms: The increase of skilled employees and access to roles through online job platforms has presented a need for niche job market platforms that allow employers and potential employees to match in for specific industries such as law, accounting, and engineering.

Risks
One minor risk is the improvement of free MOOCs and/or a shift in the workforce preferences to self-guided online resources. These websites provide learning materials but do not assist in the acquisition of desired outcomes (i.e. promotion, new job, certifications). Career accelerators and industry specific job market platforms provide guarantees, relationships, and/or transparency for users to reach their goals.

Conclusion
The career development space is primed for growth thanks to trends changing in the US workforce’s preferences, employers’ desire for contractors with specific skill sets, and the growth of the freelancer economy on online platforms. Despite the risk of free self-guided training resources such as MOOCs, I believe career book camps such as Dev Bootcamp, and customized job market platforms such as Better Weekdays and Lateral Link, will gain a lion share of the future workforce that sees flexibility and upskilling as priorities.

Earnest Sweat is a Venture Partner and Startup Adviser of One Traction. Sweat sources, manages and mentors startups within the fin tech, ed tech, and real estate tech sectors.