For venture investors, the big lesson of 2023 is that valuations set in an upbeat funding environment can quickly come down. They’re applying that learning to the edtech space, where funding has plunged and mega-sized rounds are no longer getting done.
So far this year, not a single education technology company has raised a venture round of $100 million or more, per Crunchbase data. In 2021 and 2022, there were more than 60 such financings globally.
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Overall funding to the education sector has also plummeted this year, down nearly two-thirds from the same period in 2022. To get a longer-term view, we charted out funding for the past six calendar years below:
A similar pattern is playing out in the U.S., where edtech funding skyrocketed in 2021 and has been steadily moving lower ever since.
While global venture funding is down across the board, education has been a bit harder-hit than most other sectors. Potential exacerbating issues include high-profile disappointments in the edtech unicorn crowd, some reversal of the pandemic-driven boost in online learning, and a weak exit environment.
It hasn’t helped that the highest-profile unicorn in the global edtech space is faring poorly. Indian education giant Byju’s — a startup once valued at $22 billion — has seen its valuation slashed to $5.1 billion this year by top investor Prosus following layoffs, resignations in its top ranks, lawsuits and rising concerns around its finances.
In the U.S., meanwhile, Fresno, California-based Bitwise Industries, a startup that provided apprenticeships to students to learn tech skills, filed for bankruptcy in June. The company had previously raised more than $158 million in venture funding, including an $80 million February round led by Kapor Center and Motley Fool.
Like the rest of the tech sector, edtech hasn’t really been seeing public market exits lately either. That’s a sharp contrast to a couple years ago, when several unicorns, including university course provider Coursera, language learning platform Duolingo, and online learning video publisher Udemy all carried out initially well-received IPOs.
Here’s who is getting funded
Still, we are seeing some good-sized rounds getting done in the education space this year. Hot themes include AI-enabled edtech tools and platforms that help fill the staffing shortages plaguing K-12 education in particular.
On the AI front, Vienna-based GoStudent, a provider of online tutoring tools and services, picked up $95 million in debt and equity funding earlier this month. The company said it plans to “double-down on AI integration,” including a lesson plan generator trained on local curriculum.
Weeks earlier, Preply, a Massachusetts-based language learning platform closed on $70 million in debt and equity financing led by Horizon Capital. The company plans to use the money to build up its AI-based teaching assistant, which tutors use to support homework setting and lesson planning.
As U.S. school districts grapple with teacher shortages, another startup, Swing Education is scaling up a platform to match substitute teachers with hard-to-fill positions. The San Mateo, California-based startup picked up $38 million in a June Series C.
Platforms to teach tech skills are also seeing some investment. This includes two upskilling platforms: Cybersecurity-focused Hack The Box, which picked up a $55 million January Series B, and tech skills-focused StudentFinance, which landed $43 million in a February Series A.
Is this a gap year for edtech?
It’s nigh impossible to envision a situation in which education and edtech venture investment will dry up entirely. Education, after all, is a multitrillion-dollar global market that is forecast to be growing at a steady clip.
But nonetheless, it’s looking like many startup investors are taking a break. In higher education, we’ve all heard of prospective students taking a “gap year.” Perhaps edtech startup backers are doing the same, hitting pause on supergiant financings and fast-paced dealmaking until market conditions look more ripe.
Related Crunchbase query:
Edtech is defined by the industries of edtech, education, training and corporate training in Crunchbase data. Funding numbers include pre-seed, seed and all venture rounds, as well private equity funding into startups that previously raised venture capital.
Illustration: Dom Guzman
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