After a record year for EdTech in 2020, we hoped 2021 would follow suit- it has certainly delivered thus far! 💥
European EdTech VC investment has breached $1B in a calendar year for the first time, only 6 months into the year, spread across 111 deals. This represents an increase in investment of 15X since 2014, set to increase further later this year. 📈
We believe this is due to three main factors: (1) significant growth during the pandemic fuelling higher valuations, (2) increasing involvement of US- and Europe-based generalist funds and private equity and (3) the expectation that remote working and learning will continue post-pandemic to a greater extent than first expected. 🧑🤝🧑
We are pleased to see that the largest rounds of this year, 7 of which have been >$50M, are spread across both a range of EdTech verticals and headquartered in 5 different European markets. We believe this will lead to accelerated maturity across the European EdTech ecosystem as these companies scale, develop their offers and reach new customers.
We hope you enjoy the report! 😃
1. European EdTech VC breaches $1B in the year for the first time, only halfway through 2021
2. Average round sizes in 2021 are more than 3X 2020 levels ($9.4M compared to $3M)
3. European EdTech VC has increased 15X since 2014, set to increase further in 2021
Let's dive in!
01 The context: education is at an inflection point
Circa. 50% of education time is digital while <5% of education spending is on digital- this gap presents an opportunity worth over $2.7T. Like the transformation of the media industry from 2010-2020, huge new technology driven companies will be created to fill this gap.
Sources: (1) Morgan Stanley’s ”Internet Trends 2010” report (2010), (2) Citi’s ”Education: Fast Forward to the Future” report (2020)
Why is this happening? EdTech is improving learning
Edtech is making learning:
1. More Affordable – EdTech can make learning cheaper by removing bricks and mortar, overhead and other costs.
Example: Drivers education costs an average of €1,600 in France. Ornikar makes the theory review10X cheaper and driving lessons 35% cheaper(1) by combining online courses with on-demand instruction. The company grew at 30% monthly in 2020 and raised $120M in April, 2021.(2)
2. More Relevant – New learning products can be more directly relevant to users’ personal/professional goals
Example: IronHack has an 89% job placement rate across Europe and LatAm(3), The company is based in Spain where youth unemployment is 40%.(4) The company announced a $20M Series B in January, 2021(5)
3. More Effective – EdTech can make learning more effective by enabling large scale application of more effective techniques, e.g. 1-1 tutoring, which has been proven an effective method of educational intervention.(6)
Example: GoStudent which sees 96% of students improve their grades(7), grew 8X in 2020 and announced a $83M Series B in March, 2021(8)
4. More Engaging – EdTech can make learning more engaging, boosting learners’ motivation and retention.
Example: OutSchool, which allows children to take classes in subjects they love from Minecraft to drawing to karate saw a 16X increase in revenues ($6M in 2019 to $100M in 2020) and raised $75M. The company became a unicorn in 2021(9)
02 Global EdTech sector key stats
03 Global EdTech: a blessing of unicorns
As of June 2021, there are 24 EdTech Unicorns around the world(1). These unicorns have collectively raised over $16Bn and are now worth more than $77Bn(1). The majority of unicorns have been founded in the US and China, with ByJu’s, Unacademy (India) and ApplyBoard (Canada) the only exceptions.
13 EdTech companies have become unicorns since May 2020. 7 were minted in 2020 and 6 companies have already become unicorns in the last 6 months:
5 of the unicorns minted in 2021:
04 The universe of exits has expanded
Exits have increased in both volume and category on both sides of Atlantic. Some examples are featured below.
*As of transaction date or April 29 for traditional IPOs **Transaction still pending, expected to close Q2 2021
05 European EdTech sector key stats
Sources: (1) Brighteye Estimate based on Education Ministry France, IMF data (2) ReportLinker 2021 Study (3) Brighteye EdTech funding report 2021, graph #2, (4) World Economic Forum, (5) Brighteye manual consolidation
06 European EdTech VC investment in 2021
European EdTech VC investment is on course to more than double in 2021 from $711M in 2020 to ~$1.8B in 2021. Funding thus far in 2021, only 6 months into the year, sits at $1.047B. This represents 15X growth in investment since 2014. This investment has been raised across 111 transactions- we expect to see a similar total deal count in 2021 compared to 2020.
Sources: Brighteye analysis – Manual consolidation of databases from Pitchbook and Crunchbase.
07 Average deal size is increasing
Average deal size is increasing after a period of relatively consistent levels. The average deal size thus far in 2021 is more than 3X the 2020 level (including all rounds of all sizes, including Seed). On round sizes, 31% of all deals have been under $1M, 32.5% between $1-$5M, 16% between $5-10M, 7% between $10-20M, 7% between $20-50M and 6% over $50M. Relative consistency in deal count across the $10M+ ranges shows some positive signs of maturity in the market- indeed 21% of 2021 deals are over $10M. The pipeline for further large rounds in 2022 looks promising, given that 49% of deals thus far in 2021 have been in the $1-10M range.
Sources: Brighteye analysis – Manual consolidation of databases from Pitchbook and Crunchbase.
08 Geographic split of funding broadens: the European landscape expands
The funding landscape is broadening. For the first time, Austria and the Netherlands take a place in the top 6 countries/regions by total funding, driven by large rounds by companies headquartered in the markets (GoStudent in Austria and StuDocu in the Netherlands). This graphic, therefore, is more a representation of where the biggest rounds have taken place rather than where most activity has occurred. For example, France sits in pole position by total funding, with more than triple the 2020 level of investment (only 6 months into the year), but $200m of the $223M total has been raised in 2 rounds (Ornikar and OpenClassrooms). The Nordics appear on a roll, with morethan triple the level of 2020 funding.
Sources: Brighteye analysis – Manual consolidation of two databases from Pitchbook. *= 1 deal; **= 95% raised In 1 deal
09 Deal activity in 2021 by geography
The UK leads the way by deal count, with around 4X the next individual market (France and Germany) and around 2X the nearest region (Nordics). However, the average deal size in the UK is relatively small compared to the other markets- the UK’s average deal size across its 40 transactions Is $5.2M, compared to $9.1M in the Nordics and $27.9M in France. This tells us that the UK is a very active startup hub with a flourishing ecosystem, but that few UK-based companies are raising the biggest deals. Indeed, none of the 7 $50M+ deals raised in 2021 have been by UK companies.
Sources: Brighteye analysis – Manual consolidation of two databases from Pitchbook and Crunchable.
10 Consumer EdTech leads the way in 2021, followed by corporate, K-12 and universities
Consumer EdTech leads the way with 70 companies raising $718M (broad lifelong learning focus and emerging themes include financial education, digital skills and skills bootcamps). Corporate EdTech sits behind with 48 deals and $414M raised (emerging themes include cybersecurity, employment support, and productivity tools), followed by K-12 with 30 deals and $264M (emerging themes include teaching and learning resources, adaptive personalised learning and tutoring), and universities with 24 deals and $227M (emerging trends includestudent finance, teaching and learning resources and VR/AR).
*Disclaimer: There are some overlaps between categories as some companies are targeting two or more different customer segments so the figures above exceed the overall total $ invested and deal counts.
Sources: Brighteye analysis – Manual consolidation of database from Pitchbook and Crunchbook.
11 The biggest rounds in 2021
The biggest rounds are getting bigger. As a reference point, Digischool raised the biggest rounds of 2016 at $16M, while, Ornikar secured $120M in 2021, reflecting a 7.5X increase in round size. We believe that these increases are driven by 3 factors: (1) significant growth during the pandemic fuelling valuation increases (2) increasing involvement of generalist funds and private equity such as Andreessen Horowitz, Balderton, General Atlantic, Coatue, Chan Zuckerberg and others (3) the expectation that remote learning and working will continue to a greater extent than first expected.
Sources: Brighteye analysis – Manual consolidation of two databases from Crunchbase and Pitchbook
12 A centaur stampede or unicorns in waiting?
Growth in investment in recent years has seen a particular increase in Series B & C funding(1) 7 companies have raised $50M+ rounds in the last 5 months alone.
5 of the centaurs minted in 2021:
Similar growth is occurring across a number of other companies, yet to raise this year, such as Busuu (UK; >100m users and >200% user growth in 2020), Babbel (3x user growth year on year), Graduway (>21m students, donors and alumni on platform), and Amboss (>90% market share gained in 2 years).
Sources: (1) Brighteye 2021 Edtech Funding Report (2) TechCrunch (3) TechCrunch (4) TechCrunch (5) TechCrunch (6) TechCrunch, (7) TechCrunch, (8) EU-Startups, (9) TechCrunch, (10) TechCrunch, (11) Labster