Over the last decade, Brazil has “come online” in a big way. The percentage of people using the Web in Brazil leapt from 9 percent in 2002 to about 50 percent in 2012,according to the ITU. With 60 million Brazilians now using Facebook, thanks to increasing access to the Internet and the rise of social media, the country is undergoing a digital transformation — and with that comes a slew of exciting opportunities for startups.
However, usually when it comes to growth potential, Brazil’s eCommerce market getsmost of the attention. Nonetheless, a flurry of noteworthy developments over the last six months have begun to make it clear that another big market (and opportunity) is quietly emerging in Brazil: Education technology.
While Google and Apple have made sizable strides in education in the U.S., and chip makers like Intel have begun to reveal EdTech aspirations, Amazon’s plans have been less clear. But with its announcement yesterday, we now have an idea, and it looks to start (at least in part) with Brazil. Though the textbook industry is a fragmented market in the U.S., Jeff Bezos and company see the thriving market in Latin America as a big opportunity for its textbook business.
According to BetaNews, Amazon has landed a major contract with the Brazil’s Ministry of Education, which will see it work with the country’s educational development fund to convert and distribute textbooks to schools across Brazil. The pair have already begun to digitize more than 200 textbooks and distribute them to hundreds of thousands of Brazilian educators through Whispercast.
Amazon claims that over 40 million digital textbooks have already been distributed through its service around the world, and, while it’s not yet clear what its targets are for Brazil, it no doubt intends to be a wide-scale roll-out.
The news of Amazon’s deal with the Brazilian Ministry of Education follows hot on the heels of another key piece of news from the EdTech front. Today, Bertelsmann, the German media giant announced that it has partnered with Brazilian investment firm, Bozano Investimentos, to launch a new fund in Brazil that will be dedicated to making investments in education technology startups.
According to the announcement, the companies have so far raised two-thirds of what they intend to be a 100 million real, or $43 million, fund. Bertelsmann is to take a 30 percent stake in the new “BR Education Ventures,” with Bozano set to manage day-to-day operations. The new EdTech fund will make eight to ten investments in total, two of which have already been secured thanks to video training startup, Evolve, and QMagico, the makers of an adaptive learning platform.
In essence, the new Brazilian EdTech fund will follow the blueprint laid out by University Ventures Fund in the U.S., the $100 million education investment firm Bertelsmann co-created with the University of Texas Investment Management Company, which has itself invested in nine startups to date.
However, the launch of a local EdTech investment vehicle is an important step for Brazil, and particularly, for the development of early-stage education startups. (Just as the launch ofAleph has important implications for local, early-stage companies in Israel.) A sign of just how much interest there is in the education market among Brazilian entrepreneurs can be found in the make-up of Start-Up Brazil’s first class of technology companies.
Start-Up Brazil, the government-backed seed-stage program designed to help accelerate and develop early-stage businesses in Brazil, counted 56 teams as part of its first batch, 11 of which are focused on the education markets. That’s a sizable share of EdTech startups for any accelerator not catering to a particular vertical, in the U.S. or abroad. That means that about 20 percent of Start-Up Brazil’s first class were EdTech startups, a share which happened to beat out retail (at 14 percent of the class), as well as health, finance and events and tourism.
This early-stage interest and activity in Brazilian EdTech comes during a period of high activity for the nation’s later-stage businesses and the education sector as a whole. As EdSurge reported in October, a trio of blockbuster M&A deals went down in 2013, involving three of Brazil’s largest education companies, followed by two major IPOs.
The first being Ser Educacional Group, which planned to raise $275 to $447 million as part of its initial offering, and Anima Educação, which operates a number of post-secondary institutions that serve approximately 50,000 students in total. Anima, by comparison, planned to raise between $160 and $287 million as part of its IPO. These two IPOs served as a sign that the Brazilian market continues to favor education companies, which are beginning to feel the pressure of mounting expectations, considering that the two most profitable companies on the Brazilian stock market, Kroton and Estacio, are education companies.
In the U.S., we’ve been waiting for the emergence of the next generation of big EdTech players, which could act as more attractive exit opportunities for the laundry list of education startups that have emerged in the last few years. In the U.S., most of the acquisitions or M&A activity in recent years has been at the hands of the old guard of educational publishing giants, like Pearson, Macmillan, McGraw-Hill and Kaplan, for example.
While a similar dynamic exists in Brazil to a certain degree, the increasing number of IPOs among education companies means more potential acquirers, giving entrepreneurs and early-stage businesses a potential off-ramp, should they need it. And the more these companies are seen as younger, technology-first organizations, the better.
Beyond IPOs and M&A, Brazilian education companies have been racking up the funding over the last year, with particular interest (and capital) being given to distance learning and online learning solutions. Descomplica, for example, recently raised $5 million in Series B financing led by The Social+Capital Partnership, Peter Thiel’s international investment vehicle, Valar Ventures, Valor Capital Group and 500 Startups. In fact, the round also included a number of angels, who invested in Descomplica through an AngelList, representing its first Brazil-focused syndicate.
Naturally, it’s another good sign to see familiar names on the investor roster of a Brazilian startup, and while it’s positive that foreign investments have begun to work their way into the market (and to Brazilian education companies), it’s arguably just important for the country to find more ways to support the growth of its early-stage EdTech players.
Either way, the kind of sizable investments like the $43 million round poured into OpenEnglish, are good for the industry and could very well be a good sign for the Brazilian Education marker.