Edtech in Latin America: What We’ve Learned and Where We Are Heading - Enzo Cavalie Reach Capital


Edtech in Latin America: What We’ve Learned and Where We Are Heading

October 16, 2023

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Education and economic opportunity transcends geographic borders, and over the past couple years Reach Capital has been looking abroad to support companies bringing impactful ideas to life for millions of learners.

We announced our first investment in Latin America two years ago: Coderhouse. Since then, we have been spending more and more time in the region, meeting entrepreneurs, hosting events across Mexico and Brazil, and talking to students and educators. During these conversations, we confirmed our initial intuition: Latin America is ripe for quality education technology services.

Here is our investment approach to the region and the sectors where we have seen the biggest opportunities to build transformational education companies.

What We Have Learned: Our Theses

Digital Transformation of Education Institutions

In early 2022 we invested in Cometa, a company whose long term vision is to become the operating system for private schools in Latin America (think “Toast” for schools). 

Cometa isn’t your typical edtech investment; it probably has more in common with fintech and SaaS than edtech. But from talking to school operators in the region, it was clear that there was a big need for software tools to better run and manage their schools, which ultimately impacts students. The existing legacy tech stack (or lack thereof) made tasks like cashflow management, parent communication, and financial operations huge burdens for private school owners and their administrative teams, sucking up valuable time and human resources from more important work.

Private universities also face similar issues despite being larger enterprises and with an added complication: high student churn, with some institutions losing as much as 50% of their students during their first year.

In Latin America, the private K-12 schools and universities combined serve around 40 million students. In order for these institutions to adopt at scale the edtech products and services we see in the United States, we believe it is first necessary to equip operators with the right digital infrastructure. Cometa is on track to do so and their success will pave the way for other edtech providers to reach and serve schools and parents more efficiently.

Top of Mind Priorities for Parents and Schools

K-12 is very near and dear to the Reach Capital team, many of whom are former school teachers. We’ve supported some of the biggest and most impactful edtech brands in this space, including ClassDojo, Newsela and Nearpod.

That said, when it comes to selling to public schools, there are important differences between the U.S. and Latin America. Historically, it has been very hard to sell to Latin American public schools given their heavily centralized and politicized purchasing decisions, often made by the central government’s education ministries. These deals are dominated by incumbent publishers and financially unfeasible to navigate for early stage startups. This is in contrast to the U.S., where school districts have budget autonomy to purchase technology tools at their discretion. 

Hence, most expenditures for educational products and services in Latin America have been driven by parents and private schools. Our main investing approach is to look for companies that are addressing challenges that are top of mind for them. There is growing demand for solutions that increase access to quality instruction and materials in math and English, along with student supports such as tutoring.

Our first K-12 investment in Latin America was Innovamat, the most innovative math curriculum for the Spanish-speaking market. They replace traditional textbooks and improve the math learning experience for both teachers and students, as schools are looking for digital solutions and starting to transition from a content-based pedagogical model to a competency-based one.

This is a big market ripe for digital innovation. Santillana and Grupo SM, publishers of Spanish textbooks, generate combined revenues of $1 billion with more than 70% of it coming from Latin America. We expect new players will emerge with competency-based content and tools in other key subjects.

ROI-Driven Postsecondary Online Models

For Latin Americans, the boom of the private higher education market is not news, with several universities making multiple hundreds of millions in revenue per year. Brazil has five large private universities that are public companies: Cogna (estimated $1 billion in revenue), YDUQS ($900 million), and Anima ($700 million), to name a few. More than half of Latin American college students attend private universities. In 2020 over 20 percent of enrolled students participated in distance learning; in Brazil, this figure was over 40 percent.

The impact of higher education in Latin America is unquestioned. In Brazil, college graduates on average earn 2.6 times as much as high school graduates. Yet students are not well served or supported. Graduation rates are just 46% and 3 of the largest Brazilian private universities have poor to average ratings.

Like anywhere else, education is an engine of economic mobility, and the main driver for Latin Americans pursuing education is the expected ROI they will get from a job. But with many students underserved by the current system, they are starting to turn elsewhere.

The recent tech boom in Latin America has not been matched by the growth of tech talent, and there will be demand for an additional 2.5 million IT professionals by 2026. Seventy-three percent of executives in a survey from Harvard Business Review said that talent shortage is the main barrier for digitalization. Unsurprisingly, this has attracted a wave of alternative education providers. The recent surge of tech bootcamps in the region is aiming to meet this labor demand. Coderhouse, our first investment in Latin America, was a great example of this thesis.

We expect to see many companies emerge in other high-growth industries where the existing workforce training isn’t keeping up with the demand from employers, such as healthcare and manufacturing, which has been accelerated by nearshoring to Mexico.

What’s Next

The aforementioned theses address robust challenges that represent big market potential in Latin America’s education systems. But the most interesting ideas are often unexpected, and we are always eager to learn from the founders themselves. There are also other big challenges that we believe could present similarly sizable opportunities. 

We personally see exciting market potential yet to be unlocked in the following areas:

  1. Online Regulated Higher Education Alternatives: Degrees have a huge premium on employability and earnings in Latin America, but starting a “challenger university” usually requires a huge investment upfront in content creation and brand building, in addition to regulatory compliance. Now, with the emergence of Generative AI, the cost of the first two can be dramatically reduced. 
  2. Blue Collar Training and Hiring: Given the vastly improving mobile and digital infrastructure in Latin America, it’s now easier than ever to deliver high quality training cost efficiently at scale. However, for this sector to flourish we anticipate it will require business model innovations like adding a fintech or labor marketplace layer, versus a typical price-per-course model.
  3. Employer-based Education: Much like in the U.S., enterprises and startups across Latin America struggle to find talent. As these pains become more acute, we expect large companies themselves to start playing a bigger role in upskilling their workforce but also investing more in creating new supply of talent for strategic functions.
  4. K-12 Consumer: In China, India and Southeast Asia, parents have played a huge role in edtech spending. We haven’t seen this trend play out in Latin America yet, but expect it will as a growing middle class will fuel demand for services like tutoring and English language learning.

Reach Out!

If you are building products and services that are narrowing gaps in access to education and economic opportunity in Latin America, let’s talk!

Thank you to Esteban Sosnik for reviewing and contributing to this post.