Education and entrepreneurship can change lives – and deliver opportunities for investors
Education and aspiration
Education is a powerful agent of change, especially when it includes the most disadvantaged. At the individual level, it improves livelihoods and even life expectancy. At the country level, it contributes to social stability and stimulates long-term economic growth.
The United Nations Sustainable Development Goal 4 (SDG 4) reflects this and aims to “ensure inclusive and equitable quality education and promote lifelong learning opportunities for all” by 20301. Unfortunately, according to the United Nations, the COVID-19 pandemic has reversed the progress achieved in education with an additional 100 million children worldwide now below the minimum reading level required for their age.2
For investors keen to incorporate social criteria into their portfolios, investing in education can be a natural starting point.
Diversity of opportunity
The challenge in education is twofold. First, to widen access and draw in everyone, young and old, in an equitable and continuous manner. Second, to develop quality and effective learning methods. As such, we believe that new players, particularly in education technologies (edtech), are emerging, offering students low-cost solutions for more effective and personalised learning.
In the school sector, the online student support platform Chegg – which claimed 4.9 million subscribers as of end-June 2021 – has highlighted the potential.3 It aims to offer affordable services to students who may find themselves under pressure. Indeed, many students juggle a job to pay for their studies, and it is not uncommon for them to decide to throw in the towel. Chegg claims that many students who use its platform say that their stress and anxiety levels drop. The company also offers free modules, for example one in financial education aimed at helping students manage their budget.
“Learning while having fun” is a less traditional but fashionable form of education that has helped to drive growth at Norwegian learning platform Kahoot!. Originally designed for social learning, it is used as an educational technology in schools and other educational institutions and includes online multiple-choice quizzes and questionnaires, in individual or group-play formats. It recently announced paid subscriptions had moved above one million and we are closely monitoring its development prospects in emerging and developed economies.4
IDP Education is an Australian company that offers student placement services, international English language testing, and English language teaching services around the world. In 2019, IDP Education placed 51,000 students in universities, a majority of which are from emerging countries, particularly in Asia.5
At the other end of the journey is Bright Horizons, a company that has been providing comprehensive childcare and early education services for over 30 years. It aims to offer quality solutions, often subsidised by employers, providing children with access to an early learning environment and quality supervision from a young age, while giving parents a way to better reconcile their work-life balance. The company has continued to expand its services, for example in terms of emergency childcare, educational counselling or summer camps.6
Supporting small business
Another important goal within the UN SDGs is “decent work for all and economic growth”, with particular emphasis on entrepreneurship. SDG 8 aims to stimulate the growth of micro enterprises and small/medium-sized enterprises7. We believe that supporting entrepreneurship encourages innovation and creativity. When they find success by responding to new needs, these micro enterprises create jobs and can help revitalise a region or country. In the US, the share of GDP attributed to companies with less than 500 employees has been falling, but at the last measure still accounted for 44% of the national economy8 and 47% of employees.9
Among them, Etsy, the international online platform where people buy and sell non-mass produced items, is both an entrepreneurial venture made good – and a hub for new entrepreneurs. With products accessible to consumers around the world, Etsy is an international showcase for self-employed makers of unique gifts and collectables. It charges fees to post product catalogues and a further levy on transactions as it seeks to boost the profiles of its sellers.
US company Intuit offers online management, tax and accounting services for small business owners and the self-employed. The company has expanded over the years and moved into other countries, such as France, to win new market share. Intuit recently announced the acquisition of digital marketing company MailChimp with the ambition to solve the number one problem for SMEs: Attracting and retaining new customers.10
The all-in-one digital payment solutions offered by Square have made it one of the major fintech players. Gross profit rose by 43% in the third quarter from a year earlier to more than $1bn.11It has been particularly popular among independent traders and individuals and its services include mobile payment terminals, an app which allows money transfers between individuals, and – more recently – banking services. The strong growth can be partly explained by Square’s strategy of directly targeting small businesses, until now largely neglected by traditional players.
Education and entrepreneurship are two sides of the same coin. They represent important drivers of social mobility and we believe these themes also represent a rich and diversified pool of potential investment opportunities.
The companies are named as an illustration only and do not constitute investment advice or a recommendation from AXA IM.