It wasn’t a good year for financing edtech startups.
Barring a last-minute mega-run, space investment in 2024 can be on track to hit its lowest level in years. The same applies to the variety of transactions, as shown below.
There is no single explanation for the slowdown. Rather, there look like several aspects that have played a role in suppressing investment.
One is the obvious indisputable fact that financing in most sectors has declined significantly since its peak in 2021. The variety of IPOs and venture-backed mergers and acquisitions are also declining. It didn’t help the edtech industry that the industry’s most famous and best-funded unicorn, India’s BYJUgot into trouble and its valuation collapsed.
The return to in-person learning after pandemic shutdowns – while by no means a recent phenomenon – could also have a lasting impact on the edtech funding environment. Educational institutions likely do not feel as much pressure to spend money on upgrading digital learning tools now that fewer students are learning remotely.
The increase in funding for generative AI can also play a role in the edtech industry. One school of thought is that leading platforms resembling ChatGPT AND Embarrassment are extremely popular among students and teachers. However, these platforms are not classified as edtech investments. If that were the case, the variety of edtech funds could be much, much higher.
Where are investments going?
Even in the face of a weak funding environment for the edtech sector, we have seen few large deals.
The biggest round of the year took place in India Physics Wallaha platform focused on academic coaching and preparing students for entrance exams. In September, it raised $210 million at a valuation of $2.8 billion.
Based in Mumbai Scholarfocused on continuing skilled education, advanced to its second-largest round: October’s $150 million Series F led by TPG‘S Uprising Fund.
But while there has been strong investment in India, funding for edtech startups in the U.S. has looked particularly weak, with not a single round of $100 million or more emerging so far this year. The largest deal in the Crunchbase data set was October’s $80 million Series B for an Austin-based company School linkswhich bills itself as a college and profession readiness platform for K-12 school districts.
Public markets are cooling on edtech
In addition to the decline in funding, the variety of exits has also been reduced this year.
The IPO market was particularly slow, because it has been for some time. In fact, the last round of huge U.S. edtech IPOs was in 2021, when enterprise capital-backed unicorns Duolingo, Kursra AND Udemy became public.
Since then, shares of language learning platform Duolingo have surged. However, Coursera, a higher education course provider, and Udemy, a skills training marketplace, are well below debut prices.
This year, we also didn’t observe large acquisitions of venture-backed edtech startups. However, private equity firms have shown enthusiasm for this space, making several large purchases of publicly traded corporations.
The biggest deal was The capital of Bainacquisition of the company for $5.6 billion PowerSchooll, a cloud software provider for K-12 schools that it took private in October. It wasn’t far off a second KKRpurchase of an educational software supplier Infrastructure for $4.8 billion, which he also took privately.
What must be done for investments to extend again?
Education is a huge space, so it’s likely that startup investments will rebound at some point. A revival of the IPO market and the mergers and acquisitions scene would help. So would more data showing that startups are making progress in areas resembling training employees in career-enhancing skills and helping K-12 students proceed and improve in the classroom.
There’s also a potential shortcut that would make the ed tech numbers look much brighter: If one or more big generative AI players form an education subsidiary, funding will likely come en masse.