Edtech Investors Avoided The Space This Year

This has not been a good year for funding edtech startups.

Barring some big last-minute funding, 2024 is expected to see investment in the sector reach its lowest levels in years. The same goes for the number of transactions, as shown in the image below.

There is no single explanation for the economic slowdown. Instead, there appear to be several factors inhibiting investment.

One is the obvious fact Funding has fallen sharply in most sectors Since the peak in 2021. Initial public offerings and venture capital-backed M&A activity also declined. For edtech in particular, India, the industry’s most prominent and best-funded unicorn, isn’t helping. BYJU’sfloundering, valuations collapsing.

The resumption of in-person schooling after pandemic shutdowns — while by no means a new phenomenon — could also have lingering effects on the edtech funding environment. With fewer students studying remotely, educational institutions may not feel as much pressure to upgrade digital learning tools.

Increased funding for generative AI may also have an impact on edtech. One school of thought holds that leading platforms, e.g. Chat GPT and Puzzled Widely adopted by students and educators. However, these platforms are not considered edtech investments. If it were, the amount of funding for edtech would be much higher.

Where investment flows

Even in the soft edtech funding environment, we did see some larger deals.

This year’s biggest funding round goes to India Physics Wallaa platform focused on academic tutoring and preparing students for entrance exams. In September, the company raised $210 million at a valuation of $2.8 billion.

Headquartered in Mumbai learnedFocusing on continuing education for professionals, it received the second largest financing: US$150 million in Series F financing in October, funded by TPGof Rise Fund.

While India is seeing some big investments, edtech funding for U.S. startups is looking particularly weak, with no rounds reaching $100 million or more so far this year. The largest deal in the Crunchbase data set was an $80 million Series B in October for the Austin-based company school linka company that describes itself as a college and career readiness platform for K-12 school districts.

The public market is lukewarm on edtech

In addition to lower funding, there have been fewer exits this year.

The IPO market in particular has been slow for a while. In fact, the last time we saw a series of big U.S. edtech IPOs was in 2021, when VC-backed unicorns Duolingo, Coursera and Udmi It’s on the market.

Since then, shares of language learning platform Duolingo have soared. But higher education course provider Coursera and skills training marketplace Udemy are priced well below their initial launch prices.

We also haven’t seen large-scale acquisitions of VC-backed edtech startups this year. However, private equity firms did show enthusiasm for the sector and made significant acquisitions of public companies.

The biggest deal is Bain Capital$5.6 billion acquisition power schooll, a K-12 education cloud software provider, went private in October. The not-so-distant second is KKRPurchase educational software providers structure Acquired the company for $4.8 billion and took it private.

How can investment surge again?

Education is a huge sector, so new venture capital is likely to rebound at some point. Revitalizing the IPO market and M&A scene will help. More data points will also show how startups are making progress in areas like training employees with career-enhancing skills and helping K-12 students stay on track and thrive in the curriculum.

I can also envision a potential shortcut that could make edtech numbers look more dynamic: If one or more of the big generative AI companies created an education subsidiary, the money might come flooding in.

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Illustration: Dom Guzman