What’s happening in the EdTech sector?
We take a look at the latest EdTech investment trends and forecasts for the future.
The EdTech sector plateaued at the beginning of 2024 but innovations surrounding AI give reason to be optimistic for future evolutions in global education.
Despite a decrease in global ed tech funding in 2023, there is an abundance of interest from venture capital and private equity firms that will lead to a resurgence in the later part of 2024.
Following a boom in 2020 and 2021, the volume of funding fell quite drastically in 2022, a decrease that continued in 2023.
Venture investments in EdTech were around $580 million in the first three months of the year, down 47% from $1.1 billion invested in the sector in Q1 2023, according to a report from market intelligence firm HolonIQ.
2024’s first quarter results are in line with falling venture capital funding in the market overall, and, according to Patrick Brothers, HolonIQ’s Co-Founder and Co-CEO could point to the fact that EdTech investment is approaching the “end of one cycle, and the beginning of a new cycle.”
Brothers stated that EdTech venture funding is now “on the other side of the pandemic,” and entrepreneurs looking to jump into the education space should brace for more tough times ahead.
“There’s arguably never been a more challenging time than today to decide to quit your day job and build a brand new solution for education,” he said. “It’s gonna be challenging for a while.”
India and the US markets dominate funding but optimism for Europe
There were just over 100 EdTech venture investments during the first three months 2024 according to the HolonIQ report.
About half of the $580 million Q1 total — roughly $300 million — was raised by US-based EdTech firms, according to the report. Startups from India raised about $200 million, and European education companies raised around $100.
In Europe, the number of EdTech deals showed particularly strong resilience, rising from 256 in 2022 to 288 in 2023. This is a sign that appetite for European EdTech deals will remain strong and the pipeline of well-funded companies continues to expand, according to a Brighteye Ventures report. Furthermore, the portion of global ed tech deals inked in Europe rose from 21% in 2019 to 32% in 2023.
“The European ed tech market showed more resilience than most major ed tech markets, in deal number and funding amount – 32% of global ed tech deals done in 2023 were done in Europe (relative to 26% in 2022) with an increasing portion in the earliest stages,” said Rhys Spence, Head of Research at Brighteye Ventures. “We also observed green shoots emerging in the headline funding data, with European ed tech investment seeing its second consecutive rise in half-year funding, reflecting the continuation of a muted but definite resurgence.”
Impact of AI: It’s here to stay
AI will not surprisingly stay out front for the rest of 2024 as the top talking point. In Q1, US company, Quora (borderline EdTech, now more an adjacency) returned to the funding fray, raising $75M from Andreessen Horowitz (a16z), breaking a nearly seven year period since their last raise and now valued at $500 million, down from $1.8B in 2017.
Quora will use the funding to power the growth of Poe, Quora’s AI chat platform, expecting “the majority of the funding will be used to pay creators of bots on the platform through our recently-launched creator monetization programme,” wrote Quora CEO Adam D’Angelo.
Furthermore, HolonIQ noted that UK-based AI workplace learning video platform, Colossyan raised a $22M Series A to invest in ongoing development of the tool. Colossyan helps companies change the way they create training videos, by taking text inputs to create training videos in minutes and auto-translating the results to dozens of languages. Colossyan suggest that their customers regularly save up to 90% of their costs, while producing videos 80% faster.
Just at the end of last year Imagine Learning launched its own venture capital fund — and it’s all about AI.
The digital curriculum giant announced the rollout of Imagine Learning Ventures, a new fund it plans to use to invest in emerging AI-powered educational products.
The fund will focus on supporting early-stage companies, largely through small, minority investments alongside other firms in seed and Series A rounds.
Imagine is particularly interested in fueling artificial intelligence tools that can improve student learning and outcomes.
“We decided to launch this fund to invest in all kinds of artificial intelligence applications in education so that we would have front-row seats to the learning that’s going on, outside of what we do everyday to serve our teachers, students, and parents the best we can.” Chairman and CEO Jonathan Grayer said.
But there will be more pressure for AI-based EdTech investments to go beyond hype and actually deliver evidence and actual educational outcomes. That being said, the technology is only just beginning and the prospects are exciting.
