X REPORT - JANUARY 2023

For this New Year, the X Report has a new fresh look, bringing you news and insights in a more streamlined format. We share a snapshot of key trends, showcase the stars of today and tomorrow, offer our insight on mergers, acquisitions and fundraising, as well as providing some further food for thought. Enjoy the read...

FEATURES

Benjamin Vedrenne-Cloquet shares his perspective on the newly launched Tech-Led Impact Investing platform, IMPACTX2050, and discusses the role of AI & ChatGPT in creating positive outcomes.

Memrise co-founders share insights on how AI is creating new opportunities for language learners.

Find insightful articles on hypotheses for 2023, ChatGPT, China's online education sector, Future of Work, ESG investments and more.

Notable activities last month include the acquisition of Arco Platform, Offcn and Coversia, and significant fundraising from LEAD, Beamery and APEI (American Public Education, Inc).

Read a summary of Q4 2022 Mergers, Acquisitions and Fundraising activity in the global education landscape.

2050, Tech-Led Impact Investing, ChatGPT

By Benjamin Vedrenne-Cloquet, CEO and Co-Founder ImpactX2050 & EdtechX | Operating Partner at IBIS Capital

Dear X Report readers,

Building on 10 years of thematic coverage of the education technology and human capital industry, IBIS Capital and EdtechX are proud to launch IMPACTX2050.
 

IMPACTX2050 is a global platform, connecting capital and technology across 3 “IMPACT” industries that are experiencing unprecedented inflows of tech-led impact investments: Education, Health, and Food. 

Impact investing is a long rising tide already representing $1.1Tn of AuM and growing at 30% per annum. As such, we will soon be launching an edition of the X Report that will expand its thematic coverage to tech-led IMPACT investing with a specific focus on EdTech, HealthTech, and FoodTech industries.

Our ethos is one of accountability to the 2050 generation and defines “IMPACT” as Profitable, Sustainable, and Inclusive. 

Everyone talks about OpenAI, the ChatGPT inventor that has taken the tech world by storm…

As 2023 is about to experience a gold rush of tech-led investments in next generation AI ventures on the back the buzz and “FOMO” created by OpenAI, we have asked ChatGPT what “Tech-led impact investing” is about?

This is what we got:

“Tech-led impact investing refers to the use of technology to identify, evaluate, and monitor investments that generate both financial return and positive social or environmental impact. This can involve using technology to gather and analyze data on potential investment opportunities, as well as using technology to track the performance and impact of investments over time.

Tech-led impact investing can take many forms, such as investing in technology companies that are developing solutions to social or environmental problems, or using technology to improve the efficiency and effectiveness of traditional impact investment sectors such as clean energy or affordable housing.

Overall, tech-led impact investing is an approach that leverages the power of technology to help investors identify and support investments that can generate both financial return and positive impact.”

We also asked ChatGPT how AI can play a role? 

Artificial intelligence (AI) can play a number of roles in impact investing, including:

•    Identifying investment opportunities: AI can be used to gather and analyze data on potential investment opportunities, helping investors to identify companies and projects that are aligned with their impact goals.
•    Evaluating investment impact: AI can be used to gather and analyze data on the social and environmental impact of potential investments, helping investors to assess the potential impact of their investments.
•    Monitoring investment performance: AI can be used to track the performance and impact of investments over time, providing investors with real-time data on the impact of their investments.
•    Improving investment efficiency: AI can be used to automate certain investment processes, such as due diligence and impact reporting, improving the efficiency and effectiveness of impact investing.

Verdict? Not bad.

As Elon Musk, also an early stage investor in OpenAI, rightly said “We are not far from dangerously strong AI”.

OpenAI is already valued at around $29 billion via a secondary stock sale co-led by venture capital firms Founders Fund and Thrive Capital, as reported by the WSJ. This makes it one of the most valuable US startups on paper despite generating little revenue. 

From an Impact & ESG lens: Is OpenAI’s latest invention a good thing?

On one hand, OpenAI is at the forefront of the most promising and radical wave of productivity gains experienced so far, one equivalent to the discovery of an infinite source of intelligent energy (natural language processing or “NLP”) with potential to both replicate and expand human capital and creativity.

On the other hand, its carbon impact is questionable. Researchers at the University of Massachusetts Amherst analysed various NLP training models to estimate the energy cost required to train them. They estimated that the carbon footprint of training a single big language model is equal to around 300,000 kg of carbon dioxide emissions. This is of the order of 125 round-trip flights between New York and Beijing, and equivalent to the energy required to feed the new energy hungry beast that OpenAI secured in 2019 - $1 billion of funding from Microsoft (much of which was in the form of Azure credits).

From a governance standpoint, OpenAI has set up a unique corporate structure, whereby investment returns for outsiders and employees are capped, ensuring any excess is returned to a non-profit organisation sitting on top of the for-profit. Yet, rumours already suggest that OpenAI may fall in the hands of Microsoft.

A tech for good with evil and monopolistic temptations, ChatGPT may well turn into Mr Hyde.

High in hype and paranoia, but low in clarity. That’s certainly how the potential outcomes of the next generation AI feels at the moment.  

This is precisely why we believe IMPACTX2050, a global community connecting investors and entrepreneurs with a strong impact ethos, is needed now. We are predicting the volume of tech-led investments in the next generation of AI ventures to 10X by 2028. Let’s ensure most of them are deployed with a sense of responsibility, accountability and sustainability. Let’s ensure the main user case of this fascinating technology is not one of “Orwell meets Machiavelli”, but remains focused on creating positive outcomes in 3 industries crucial to our future: Education, Health and Food.

Welcome to IMPACTX2050.

2050 starts now, in 2023, and it starts with Tech-Led Impact Investing!

Join us >>

How AI is creating new opportunities for language learners

By Steve Toy and Ben Whately, Memrise

For most of us, our best language learning experiences happen when we live in-country,  surrounded by native speakers. The trouble is, most learners can’t uproot their lives to a new country every time they want to learn a language. Classrooms are fine for learning words and grammar rules, but they don’t have a great track record of helping people to reach fluency.

Memrise has pioneered the use of AI in two distinct ways in order to bring the best aspects of in-country learning to us wherever we are in the world, changing the paradigm for language learners everywhere.

How does it work? 

1. Cutting-edge Speech to Text to turn all the media content on the web into level-adjusted language lessons

The only way that we gain the ability to understand people speaking in a new language is by trying to understand a lot of spoken language that is just above our current level. The act of practice is how we actually learn the skill. That is the first crucial thing that we get when we are “in-country”: a ton of people speaking to us. 

Memrise recreates this benefit by taking any video content on the internet (YouTube, Instagram, TikTok etc), using state of the art Speech to Text tools to ingest it into the Memrise system where it is then deconstructed into the key words and phrases. The words in the video are then matched against the words and phrases each learner already understands. Memrise uses this data to suggest videos to each learner that are just above the learner’s current level - re-creating the optimal learning environment. Just by the simple act of watching these videos, learners improve their language skills. 

2. Leveraging GPT-3 to create the world’s first AI Language partner 

Building on top of OpenAI’s Large Language Model, GPT-3, Memrise has developed an AI tool that can hold totally human-like conversations. It can talk to you about virtually anything. It is endlessly patient, never tiring of boring conversations about buying sandwiches or asking for directions. It’s available at any time of the day or night, and you can never wear it out.

Best of all, because it is a computer, you never have to worry that it might judge you - which turns out to be the thing people fear most when learning a language. So you can get the practice you need without risking embarrassment.

Read more from Ben Whately on how this new technology can bridge the "confidence gap" in language education on EdTechX360

EDUCATION

Edtech has grown more common, more global and more sophisticated. What’s next?

As 2022 turned into 2023, EdSurge asked educators and education leaders to share reflections on learning “lost” and “gained.” Source: EdSurge

EdTech enters its golden age

Schools and colleges need help and 2023 is the first year it will be impossible to imagine education without education technology. Source: Forbes

China tightens reins on EdTech in new blow to private tutors

A clear signal that Beijing’s not yet prepared to unshackle the private tutoring arena despite loosening curbs on tech giants. Source: Bloomberg

WORK

The future of work: predictions for 2023

Will the economic downturn put an end to post-Covid work trends? Source: The Financial Times

Is the metaverse the future of work?

It could help create connection and inclusion in the world of remote working. Source: UNLEASH

4 pillars for using AI responsibly in a skill-based organization

As the world moves towards skill-based workforces more companies are drawing on AI to support them with this. Source: World Economic Forum

INVESTMENT

Leading players prioritize ESG investments in the EdTech industry: Astra ESG Solutions

EdTech industry players are gearing up to plan, report and monitor their ESG performance amidst an exponential rise in digitization. Source: Bloomberg UK

Euan Blair’s EdTech firm Multiverse reports sixth straight year of losses

Company valued last year at £1.4bn says revenues rose almost threefold to £27m. Source: The Guardian

Tech investors wary of China’s charm offensive to attract funding

Beijing about-face met with caution after brutal regulatory campaign to tame large internet groups. Source: The Financial Times

M&A ACTIVITY

¹Source: S&P Capital IQ

SIGNIFICANT FUNDRAISING ACTIVITY

Industry Analysis – Q4 2022 Mergers, Acquisitions and Fundraising

Key Points

Global education deal making had a stronger Q4 in 2022 compared to that of 2021, with a 59% increase in global education deal value to $3.1bn. Despite this increase, the value of M&A deals still remains below pre-pandemic levels. Fundraising has decreased from Q4-21, with the $4.3bn of capital raised in Q4-22 being a $3.8bn decrease when compared to the same period a year ago. Barring Q4-16, Q4-22 has been one of the weakest performing quarters with regards to fundraising values. 

Strategic buyers continue to dominate the majority of M&A transactions and account for 81% of acquirers in the space. Denmark’s KIRKBI was a notable strategic acquirer this quarter, acquiring America’s FWD Media, doing business as BrainPOP, for $862m. From a geographic perspective, North America continues to be the dominant geography, accounting for 42% of transactions, whilst Europe and Asia Pacific follow with 31% and 23% respectively.

Unsurprisingly, small deals (defined as deals with a transaction value of less than $50m) accounted for the vast majority of deals. Aside from KIRKBI’s deal mentioned above, another notable deal was General Atlantic Service Company and Dragoneer Investment Group’s $687m acquisition of Arco Platform, an educational content provider to private schools in Brazil. In the fundraising space, notable transactions include a $350m investment into India’s educational institution, Leadership Boulevard, as well as Qatar Investment Authority’s $250m investment into Think and Learn, an online educational service provider (doing business as BYJU’S).

The global M&A market for education has slowed since the pandemic boom, largely attributed to global uncertainty influenced by high borrowing rates and inflation. Following this pandemic-induced slowdown, the fourth quarter's M&A appetite  showed gradual signs of improvement. The fundraising boom, which can also largely be attributed to COVID-19, is beginning to subside. This is evident as the value of fundraising deals peaked in 2020 before drastically declining by 58% by 2022. Along with the general economic slump and the possibility of a recession approaching, M&A and fundraising activities are under threat and slowing down globally.

¹Only relating to deals with disclosed transaction amounts. Small deals are considered to be <$50m; Medium deals are considered to be ≥$50m<$150m; Large deals are considered to be ≥$150m