This year has not been a good year for edtech startup funding.
Barring a few last-minute mega-rounds, space investment in 2024 is expected to reach its lowest level in years. The same is true for the number of transactions, as shown below.
There is no single explanation for the slowdown. Rather, several factors appear to have played a role in suppressing investment.
One is the obvious fact that funding to most sectors has fallen significantly since its peak in 2021. M&A activity through IPOs and venture support is also decreasing. When it comes to edtech in particular, it hasn’t helped that India’s BYJU, the sector’s most famous and well-funded unicorn, has fallen on hard times and seen its valuation plummet.
The return to in-person education after pandemic school closures is by no means a new phenomenon, but it may also have a lasting impact on the education technology funding landscape. Educational institutions are likely not feeling as much pressure to upgrade their digital learning tools now that fewer students are working remotely.
Increased funding for generative AI could also play a role for edtech. One idea is that leading platforms such as ChatGPT and Perplexity have been widely adopted by students and educators. However, these platforms are not classified as edtech investments. If that were the case, the number of funding for edtech would be much higher.
Where will the investment go?
Despite the sluggish funding environment in edtech, we have seen some sizable deals.
The biggest round of the year went to India-based Physics Wallah. The company is a platform focused on academic guidance and preparing students for entrance exams. In September, it raised $210 million at a valuation of $2.8 billion.
Eruditus, a Mumbai-based company focused on continuing education for professionals, raised its second largest round, a $150 million Series F in October led by TPG’s The Rise Fund. Obtained.
But while there have been some big investments in India, funding for U.S. startup edtech seems particularly weak, with no rounds of more than $100 million so far this year. The largest deal for the Crunchbase dataset was Austin-based SchooLinks’ $80 million Series B in October. SchooLinks bills itself as a college and career readiness platform for K-12 school districts.
Public market cools down on edtech
In addition to lower funding this year, exits have also been curtailed.
As has been the case for some time, the IPO market was particularly depressed. In fact, the last time the U.S. saw a flurry of big edtech IPOs was in 2021, when venture-backed unicorns Duolingo, Coursera, and Udemy went public.
Since then, language learning platform Duolingo’s stock has soared. However, higher education course provider Coursera and skills training marketplace Udemy are trading well below their debut prices.
This year also saw less large venture-backed acquisitions of edtech startups. However, private equity firms have shown enthusiasm for the sector, making several large acquisitions of publicly traded companies.
The biggest deal was Bain Capital’s $5.6 billion acquisition of PowerSchool, a cloud-based software provider for K-12 education that went private in October. The next, not too distant example was KKR’s $4.8 billion acquisition of education software provider Instructor, which it also took private.
What will it take for investment to surge again?
Since education is a huge area, investment in startups may recover someday. A revitalized IPO market and M&A scene will help. There will also be more data points showing startups are making progress in areas like training employees in career-boosting skills and helping K-12 students stay in class and thrive. Dew.
There are also shortcuts I can imagine that would make the edtech numbers look more vibrant. If one or more of the big generative AI players establishes an education subsidiary, a ton of money will likely follow.
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Illustration: Dom Guzman
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