In times of quarantine, we have been challenged to rethink a range of activities that, up to then, we were carrying out by, first, leaving our homes. One of them? Education.The COVID-19 pandemic and the resulting social isolation has forced institutions of on-site education to look for other formats. But the so-called edtechs, education startups, have been thinking about how to transform these models for much longer. With 4 investment rounds, Descomplica, edtech that began with preparatory content for college admission exams and in 2020 enters the market of graduations, has raised $ 32 million in funding since 2012.
And this sector is poised to grow. That’s what shows a survey from intelligence platform for education HolonIQ, which revealed that the edtech market started the past decade with $ 500 million in venture capital and ended 14x times higher: with $ 7 billion, in 2019. In the next 10 years, the market intelligence agency expects more than $ 87 billion to be invested, almost three times the previous decade’s amount. Who has been leading these figures is China, with 50% of all global venture capital investment over the decade.
In Latin America, although much smaller, the sector is promising. As expected, Brazil is at the head of this scenario with a more mature ecosystem, and a greater number of major players operating on different fronts, some of them, with shares listed on the Brazilian stock exchange. According to a report by Brazilian innovation platform Distrito, the country has currently 434 startups in the sector, a number that has been on the rise, but it is very far from the international landscape: Beijing alone already has 3,000 edtechs, while New York has around 1,000 startups in the sector. Still in 2020, the global edtech market is expected to grow 17%, reaching $ 252 billion in revenues, according to data from KPMG.
But just as online courses and distance learning have been on the spotlight given the current scenario, a question that is nothing new in the sector, also gains momentum: the quality of these contents. “[With the coronavirus crisis] There will be a great advent of breaking prejudice, more people will start testing [digital education], which is great, and this can speed up the expansion and transition to the online market. The big problem this can cause, on the other hand, is that not all initiatives are prepared for digital, and this can create frustration,” explains Daniel Pedrino, CEO at Faculdade Descomplica, in an interview with LABS. “Online class is not an hour and a half class recorded and posted on the internet. The online class is a class designed for digital, and we’ve been doing it since we were born, which is completely different”.
Descomplica not only seems to have grasped this logic, but it also knew how to turn this strategy into its asset for growth. Founded by physics professor and today CEO Marco Fisbhen, the startup was born in 2011 out of his desire to expand the impact of his classes. “He started recording classes at home. At the time, he read the newspaper and commented on the news with a pedagogical imprint,” says Pedrino.
The feedback was positive: with a lot of traffic to the content he created, the educator spotted the opportunity and went in search of capital: in 2012, Descomplica raised its first VC round: $ 1.5 million, from the American fund Valor Capital Group – resources that allowed the edtech to adopt the subscription model. The focus was to offer preparatory content for ENEM (secondary school national exam, needed for college admission) at an affordable price. “As he taught and knew all the teachers, it was easy to call the best ones to join the project. The model in which Descomplica operates, from that pitch until today, has changed very little,” explains the executive. According to Pedrino, the edtech is nowadays the big player in this sector: 80% of students who prepare for ENEM online, and 35% of those who prepare in a hybrid way (on-site and online) study with Descomplica.
With 300,000 paid students and a base of 5 million subscribers who download free content prepping for ENEM; by 2017, Descomplica had already secured a profitable business unit, supported by resources from two more fundings of 4 and 6.4 million dollars, in 2013 and 2015.
“In November [period of ENEM] , we teach 1.5 million people simultaneously. At that time, we understood that from 2011 to 2017 we had learned to make digital, that we had a strong brand – it is an education hub in any social network, but we needed to take this to be effective for the life and social transformation of families: this was Marco’s DNA when he took a plane and went to raise the first investment,” recalls Pedrino.
While the average among OECD countries is 40% higher salary for those with a degree; in Brazil, those with higher education earn, on average, 140% more than those who only attended high school, according to the Education at a Glance report by the OECD, reported by Distrito. In parallel, KPMG data show that between 2010 and 2017, ODL (open distance learning) enrollments in higher education grew by almost 90% – while on-site education rose by 20%. More than that: in the last 3 years, ODL has won 363 thousand students. On-site education lost 104 thousand. It was this scenario that attracted Descomplica to the graduations market.
If by then, Descomplica’s three investment rounds were to boost the growth of the category that it became its core business; from 2017 on, the edtech started exploring new oceans. With two acquisitions along the path – the preparatory platform for public contests Masterjuris and the software startup Paper X – the edtech also started to aim at preparatory content for public tenders, implementing micro-tests in all its products and at offering content support for high school.
With more business units and backed by a strategy that paved the startup’s growth – controlling the entire production chain from software engineering to video production – Descomplica’s latest bet, however, is more challenging.
Unlike corporate education and free courses, basic and higher education are regulated markets, with specific requirements from the responsible bodies. “In reality, for regulatory reasons, the student must go at least once a semester to take the test on-site. In our model, the test is online (…) when MEC (Ministry of Education) removes this restriction, we have a product ready and fully online. The only necessary adaptation was to actually have the hubs (which are being built in coworking spaces, so that students can benefit from this exchange experience),” explains Pedrino.
2021: Expansion is the watchword
Backed by a $ 20 million round led by Invus Opportunities in 2017, the edtech’s forecasts for the new venture are as big as the challenges. “We have 1,200 vacancies [on graduation] and almost 50,000 people who showed interest. Our candidate/vacancy relationship is unprecedented for us,” reveals Pedrino.
With four graduation courses launched at first, as required by the Ministry of Education – Bachelor of Accounting Sciences; Bachelor of Administration; Degree in Pedagogy and Technologist in HR – Descomplica intends to hire professors and developers, build hubs, and launch 20 new courses in 2021, aimed at Engineering, Technology and Management. Behind the plans, there are BRL 55 million that the edtech will allocate within three years for these investments – a resource financed by the ENEM category, which is already profitable.
The postgraduate program, a product that started being tested in 2019 and today has more than 100 courses and 700% growth per year, the goal for 2021 is to reach 200 offers. “And speaking of ENEM: we are going to expand even more with other products that provide access to more people. It is not because of the coronavirus, but we are investing more in a solution for schools.”
Pedrino says that Descomplica is creating a product for institutions to engage in their teaching models, using in a complementary way to the classroom.” One thing I think will happen after lockdown is that schools will understand that it’s not possible to look for a digital solution only when this happens, they will have to live with digital forever.”
About expanding to other countries in Latin America, he guarantees that, for now, the focus is on Brazil, but adds: “There are countries that have models similar to Brazil, in which there is a test that gives access to the university. So yes, this is in our plans, we already have the right team and a mapped business plan, but maybe it won’t happen in 2021.”