EdTech: Fostering Tech Talent and Upward Mobility

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    Livia Solustri MANAGER

Traditional education is failing to develop the tech workforce of the future. It’s an issue that will prevent people and businesses from reaching their full potential and it’s affecting the least privileged the most.

Students are experiencing an ongoing crisis: Student loan debt in the US amounts to more than $1.9tn, affecting around 45 million Americans. African Americans are the most impacted, owing close to double the number of their white peers.[1] The situation is not quite as dramatic in the UK, but the trend isn’t heading in the right direction – the value of outstanding student loans at the end of March 2021 reached £141 billion and is forecast to grow to £560 billion by 2050.[2]

The growing cost of traditional education is preventing underprivileged communities from accessing the very skills they need to overcome their disadvantages. They’re struggling to make it to the consideration stage of recruitment in tech sectors, even before factors such as conscious and unconscious discrimination come into play.

Why is this a problem? Beyond the clear injustice, there are concrete advantages to embracing a more diverse workforce. Diverse firms report around 20% higher returns from their innovation launches, they’re also more likely to retain staff, spot risks, and enjoy greater profitability.[3]

The system is also failing to meet the needs of tech businesses. If the status quo persists, tech and tech-enabled companies globally are poised to miss out on $449 billion in revenue by 2030. The cost of the tech skills gap is holding both sides back.

This perfect storm has prompted a new wave of innovation. New EdTech business models have emerged at the intersection of education, technology and inclusion to address the issues of student debt, a lack of tech talent and the tech skills gap.

To address these problems, companies in this space are offering three types of financing solution:

  • Lowering and offsetting upfront costs for students through innovative loan schemes
  • Subsidising education through non-profit enterprises
  • Sponsoring education through corporate partnerships

Let’s take a closer look at how each one works.

Model 1: Charge the student

Start-ups in this space tend to leverage Income Sharing Agreements (ISAs) and Deferred Loan Schemes (DLSs) as the primary financing methods. ISAs are relatively new financing models. This has resulted in some poorly regulated and at times problematic loans, but the resulting regulatory scrutiny has led to a confirmation in the US that ISAs will now be classified as traditional loans

Most notable in this category is the Bloom Institute of Technology (the rebranded Lamba school) which is valued at $214.922M. Challengers in the sector include Argentinian start-up Henry, which recently raised a $10M series A, and US-based Microverse, which also raised a $12.7M series A in 2021. It taps into the growing demand for tech skills in emerging markets, driven by the prospect of cheaper labour that can work from anywhere.

The second loan-based offer is Deferred Payment. While this practice has become ubiquitous across other industries, it is a fairly new concept in the education space. The biggest names offering this financial solution include SV Academy (valued at $105.79M) and Thinkful (acquired by Chegg for $80M in 2019).

These options are attractive to students because they de-risk their investment. They offer a path to upskill or re-skill that in many cases links payments to career success, reducing stress and offsetting the short-term financial burden.

Model 2: Charge benefactors

When it comes to education, minority ethnic populations face a greater financial burden and a harder time accessing opportunities. It’s a double whammy that continues to stall upward mobility in the tech space.

Non-profits have stepped in to enable disadvantaged communities to get the training, access and connections they need to enter the sector. Non-profit incubator Resilient Coders stands out as an organisation committed to providing equality of access, while Y-Combinator alumni CodeNow offers heavily subsidised courses based on household income. Others such as CodeNation provide grants to empower upcoming talent within the schooling systems.

Model 3: Charge corporate beneficiaries

While non-profit models are powerful engines of change, for-profit models can provide long-term self-sustaining solutions. Working with companies as funding partners is a resilient model that enables upskilling and upward mobility while creating a strong pipeline of talent for corporations. The most notable company in the space – 01 Founders – was also born from the Founders Forum ecosystem.

01 Founders takes students from zero to full-stack developers in two years – for free. Their programme is based on gamified, peer-to-peer on-campus learning, and every graduate is offered guaranteed employment after graduation. Their existing clients include M&S, Snyk and Peloton.

01 Founder’s partners gain access to technically excellent, adaptive and creative software developers who come from diverse backgrounds, ensuring businesses meet their recruitment needs while living up to their inclusive and people-positive ambitions. By all metrics, this model feels like the most robust of the options.

As financial insecurity among young people rises and the demand for highly trained tech personnel accelerates, we expect new EdTech models that answer these two challenges to continue emerging. The skills shortage is predicted to cost European businesses more than $1 trillion in lost output. Tackling this is a business imperative for start-ups and innovators who’ll need to constantly evolve how they support and develop the next generation of workers.

If you would like to learn more about 01 Founders, please drop us a line.

[1] Guardian, 2022.

[2] Commons Library, 2022.

[3] World Economic Forum, 2020.


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