International expansion in EdTech: budgets, barriers and blueprints

Project overview

Many companies, particularly those with VC-backing, harbour ambitions to internationalise and do business overseas. This is, of course, the case for most fast-growing EdTech companies.

Each expansion journey is different- markets are nuanced, regulatory hurdles vary, and some companies’ operating models are more scalable than others. But some lessons and guidance hold relevance to many companies. This report focuses on the expansion of EdTech companies. Here, we define EdTech companies as those that can respond ‘yes’ to ‘do you help people to learn and grow?’. This typically includes companies that help people learn in schools, colleges, universities, corporations and individually. A quick look at the Brighteye portfolio provides examples of companies that we consider ‘EdTech’.

In this report, we define international expansion (or internationalisation) as entering a new market, in addition to your home market. Whether you internationalise, and the rate at which you do so will depend on a number of factors: the size of your home market, product market fit in other markets, your level of investment or revenue available for expansion, and a range of others.

As per Brighteye’s European focus, this work is focused on companies based in Europe or planning to expand to Europe. We are however pleased that some colleagues in the US and Asia completed the survey, as you will see in the content that follows.

This is the first part of our new work stream on international expansion. Subsequent pieces include a playbook, breaking down the high-level guidance featured in this report as well as blog articles on each of the three main customer markets featured in the report (companies, institutions and consumers).


Survey overview

We designed a survey to consider EdTech companies’ experiences of international expansion. The survey, containing 14 questions, attempted to capture insights on key issues from companies that have internationalised and those yet to internationalise (but planning to do so in the next 24 months).

We are grateful to the 57 companies that completed the survey!

In order to substantiate the survey findings, we conducted a number of interviews with senior EdTech leaders and investors with substantial expansion expertise and experience. We are grateful to these leaders for generously sharing their time and perspectives.

In the following, we walk through the data from the survey, with relevant commentary from the Brighteye team and the expert commentators.

We cover the findings in four ways: aggregated responses from all respondents, responses from companies yet to internationalise, responses from companies that have internationalised, and responses divided by respondents’ target markets (we have split target markets into ‘companies’, ‘institutions’ and ‘consumers’).

We hope that you find this work helpful and that it helps you in your journey!

We are grateful to the following organisations for their insights and for their collaboration in helping us reach respondents:

Executive summary:

  • We were pleased to see a relatively even spread of target customer markets across the 57 companies that responded, with 17% focused on large companies, 17% on small and medium-sized companies, 14% on governments, 19% on schools, 12% on universities, 17% on consumers and 4% targeting other groups.

  • We were also pleased to discover a broad range of home markets, with 13 companies based in the UK, 9 in France, 7 in the US, 5 in Norway and 4 in Spain, Finland and Switzerland, with the remaining spread quite evenly across Central, Southern and Eastern Europe, with 3 companies based in Asia.

  • The most popular destination for European Edtechs’ expansion was other European markets, with 50% of respondents having either expanded to or planning to expand to these markets, followed by North America with 26%, South America with 12%, Asia and Oceania with 9% and the Middle East with 3%.

  • The average number of first expansion destinations is 1.5, demonstrating that many companies opt to simultaneously expand to more than 1 new market- companies based in North America (NA) are more likely to expand to more than one market at a time than those in Europe (EUR) (1.8 NA vs. 1.4 EUR). This said, companies based in Northern Europe were most likely to expand to more than 1 market, with the average responding company expanding to 1.9 markets in their first expansion. This suggests that companies opt to consider ‘expansion periods’ rather than siloed entries, with companies moving through their expansion pathways.

  • The single most popular single destination for expansion, across all markets was the US, with 18 companies including the US in their first expansions, followed by the UK with 9, Spain with 7 and Sweden with 5. 9 of the companies opting to expand to the US planned to expand to the US only, with 9 planning to expand to the US in addition to another market. The top 3 in particular are likely popular because they are considered gateways for entry into other markets (the UK into the US or wider European continent and Spain into South America, for example).

  • International expansion begins earlier than one might expect for many companies- 82% of responding companies opted or plans to opt to first expand with revenues under $1m. 25/57 (44%) of responding companies planned their first expansion when revenues were between $50k-200k, with 11 (19%) expanding with annual revenues of $200k-500k and 11 (19%) with $500k-$1m annual revenue. 10 (18%) of the companies first expanded when revenues were $1m+.

  • The most important consideration for companies planning to expand should be performance of the existing business, as international expansion creates significant additional stress and uncertainty. Companies should: fully understand their local performance, new market potential and have developed a full expansion process including not just a go-to-market strategy but full knowledge of the logistical and regulatory elements of expansion.

  • The top priority for companies deciding where to expand is not the size of the new market, but the product market fit of their product or service. 60% of companies consider product market fit their top priority, followed by market size with 21% and suitable regulatory environment with 7%. The least-commonly cited top priorities were strength of competitors with 4% and suitable local talent with 3%.

  • But this picture changes when considering the top 3 priorities noted by responding companies. 56/57 (98%) companies selected product market fit in their top 3 priorities, 47 (82%) for market size, and interestingly, 31 (54%) for strength of competitors, despite only 4% of companies considering it the top priority. The remaining 24 votes were split 15:9 between suitable regulatory environment and suitable local talent.

  • There are 5 key factors to consider prior to deciding where to expand, including: product market fit, political and regulatory environment, competitors’ profile, unfair advantages (such as existing networks with decision-makers) and your people.

  • Companies should develop and test expansion hypotheses- for example, if they market to schools, they might favour a more centralised education system with a high degree of centralised procurement or alternatively, a system in which individual schools have significant autonomy over spending decisions. As their hypotheses become more developed and sophisticated, they should be tested in user interviews and trials in new markets.

  • Expansion budgets (for basic set up in a new market, including testing and any third-party assistance) are relatively low, which is unsurprising given the annual revenues of many respondents at the point of expansion (82% with annual revenue under $1m). 23/57 (40%) responded that their expansion budget was $50k or less, suggesting, among other points, that these companies opted to reallocate resource in the business to the new markets, rather than hiring a new team, given the possible costs incurred by user testing and regulatory assessment and fulfilment, as mentioned above. 9 (16%) allocated budgets between $50k-200k, 10 (18%) between $200k-500k, 6 (11%) between £500k-$1m and 6 (11%) more than $1m.

  • Budgets provide an indication of the possible go to market strategies of responding companies when they enter new markets. Given relatively low expansion budgets, it is unsurprising that 71% of respondents opted for or plan to opt for a quiet entry, without a public launch (46% for ‘quiet, localised marketing’ and 25% for ‘stealth entry, no launch’). This portion rises to 90% when including companies that entered or planned to enter quietly first, before a public launch. Only 10% responded that they intended to have a ‘public launch, with high marketing spend’- we can assume that the companies with larger expansion budgets are likely to be those opting for a more public entry, likely to be in more competitive markets or in larger, more difficult to penetrate markets.

  • Less than half of respondents opted or plan to opt to commission a third-party market study before or during their market entry. Of those that did or plan to pursue a study, the budgets for the study varied between $5k and $50k with the cheaper options being market overviews, the mid-range focusing on regulation evaluations and the higher sums being for market entry scenario planning.

  • Pulling together insights from the data, interviews and our experience, the expansion process can be split into 5 phases: understanding your options, testing your hypotheses, establishing appetite for and securing early sales, hiring appropriate people to lead your team and then building your team and your presence in the new market. All companies should work through these steps in their expansion process- though the process will look different in each company.

  • Key challenges during expansions include: setting achievable objectives and entries that reflect the budget you have available; making effective early hires that fit what you need, not what you think you need; spending time thoroughly user-testing in the new market to improve your understanding of customers’ needs; planning and tracking spending closely; and building and maintaining relationships and culture between the central team and a new satellite team.

Overview: aggregated data across all respondents

When to expand:

Where to expand:

How to expand:

Challenges when expanding

Upcoming projects and annex: