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The European EdTech Funding Report 2020

Updated: Jan 28


Welcome to the second edition of the European EdTech Funding Report


A bright New Year and we are pleased to bring you a new, second edition of Brighteye’s European EdTech Funding report. Overall, the sector has shown remarkable growth over the last 6 years, with 2019 seeing particularly potential strong growth (7X) at the Series B stage as the breakout European EdTech companies look to scale. What follows is an analysis focused on venture funding in the last 12 months in European Edtech startups, but incorporating data from around the world and previous years to provide broader context and deeper insight.


Here at Brighteye we are optimistic about the future of education in Europe and we are thrilled to be witnessing such impressive growth in the sector. We are grateful to all EdTech entrepreneurs for creating such a valuable ecosystem. 👏 We would love to have your feedback and to connect with EdTech players building exciting solutions that help people learn and grow, so please reach out (info@brighteyevc.com).



Methodology


We manually consolidated data from Crunchbase and Pitchbook. The database searches include companies based within the European Union and categorised as EdTech (vertical) and/or education (keyword). Both databases were downloaded on January 2nd, 2020, meaning that some recent funding activities may be not be reflected within the figures.





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General overview of all EdTech investments in key markets

Figures include all types of financing rounds: early & later stage VC, growth, private equity, grants, LBO, M&A, debt financing deals.




Key 2019 transactions

🇺🇸

Instructure ($1.8Bn LBO), Turnitin ($1.5Bn M&A), Trilogy Education ($670M M&A), Orbis Education ($320M M&A), Guild ($140M Series D)

🇪🇺

TES Global ($360M LBO), Ilerna Online ($100M LBO), FutureLearn ($58M M&A), Graduway ($60M, Series C), Amboss ($30M Series B)

🇨🇳

Tal Education ($440M PIPE), Zhangmen.com ($308M Series E), GSX Techedu ($227M Secondary trans.), Dada ABC ($223M Series D), VIPKid ($136M Series E)



US is leading the way (with an impressive year in 2018) while China is slowing down from last year. Europe is catching up and passed the symbolic $1Bn mark in 2019 in money invested in the EdTech space (100% increase YoY).




Exits via M&A - Notable recent activities in US and Europe budget






Based on recent exits via M&A, both public and private EdTech/HRTech companies have been the main acquirers for EdTech companies in US and Europe in recent years (2017-19) across the board - from large rounds (i.e. Trilogy Education) to smaller rounds (i.e. Poio). When it comes to private equity funds, Thoma Bravo and Fransisco Partners have shown to be the leading players in the EdTech space.





#1: European EdTech VC investment broke another record in 2019


Figures exclude growth, private equity, grants and debt financing deals.



Europe is gaining momentum with a healthy increase in VC investments in local EdTech startups. Overall, the EdTech VC investment has experienced a 9.2X growth between 2014 and 2019 in terms of $ invested. The total amount of investment has increased by 43% from 2018 to 2019 in investments, breaking a new record for European EdTech. The transaction size has also become larger with $3.25M invested per transaction in 2019, compared to $3.19M in 2018 and $2M in 2017.


Based on these numbers and our observation on the ground, EdTech is getting more popular with generalist European VCs – Indeed, we are witnessing an increasing willingness to dig deeper, and invest time and money in the EdTech world.





#2: EdTech is maturing - Series B investments have considerably increased in 2019

Figures exclude growth, private equity, grants and debt financing deals.




It is safe to say that the EdTech European scene has built a solid foundation and capital is more accessible for entrepreneurs. The investment activity at Series A stages remains strong and keeps growing well: +20% between 2018 and 2019 with leading deals including CoachHub, Eloomi, Perlego, Teach on Mars in 2019.


We are seeing an impressive growth in Series B investments from 2018 to 2019, resulting in a 7X increase from year to year. This trend proves that the European market is becoming more mature and more EdTech startups are “graduating” from earlier stages investments. It is worth highlighting a few companies that closed solid Series A deals from 2019: A Cloud Guru, Brainly, Ornikar, Immersive Lab.




#3: Consumer and corporate-facing companies continue to receive the bulk of VC funding




Startups serving both consumers and corporate segments are still dominating the European VC game, accounting for 75% of total investments in 2019. Even though investments in consumer-facing companies have slightly decreased from last year (2018: $294M; 2019: $258M), it is still the main segments for investors in Europe. Investment in EdTech companies that are serving corporates is growing nicely. Generally speaking, B2B companies typically have more stable revenue than B2C companies and tend to be less capital intensive, which represent less risky bet for investors. While the overall investment activity for universities-serving companies is quietly growing, surprisingly, even if there has been a general scepticism in K12 from investors, investments in solutions targeting schools have shifted quite dramatically in 2019 by reaching $101M of financing (vs. $42M in 2018) – most of K12 investments in 2019 were made in the UK.




Figures exclude growth, private equity, grants and debt financing deals

There are some overlaps between categories as some companies are targeting two or more different customer segments





#4: The UK received 72% of total EdTech VC investments in 2019

Figures exclude growth, private equity, grants and debt financing deals




The UK is back to its historic #1 position with a 3.2X increase in investment from last year, followed by France as #2. We are seeing a big gap being created in EdTech VC investment between the two leading countries - UK & France - and the rest of Europe. Even if Germany is in position #3 this year, its EdTech investments have decreased considerably compared to 2018 and this story applies to Nordic countries as well.






#5: The bar is rising for top-5 EU companies




It is impressive to witness such a spike in amount invested in the “yearly top-5” companies over the last 5 years. In 2015, the 5 most funded EdTech companies received between $6M and $30M, compared to $37M and $60M in 2019. The bar is rising as EdTech companies are able to raise much more money than before, especially in the UK and France, the strongest EdTech nations in Europe.


Over the last 5 year, we are seeing a well-balanced investment activity in both B2C and B2B companies - B2B companies might have a slight advantage over B2C companies in terms of number of deals with companies such as Graduway, 360 Learning, Klaxoon but B2C companies like Ornikar, Amboss, OpenClassrooms, Brainly are still in the race.





#6: Raising subsequent round in 22 months seems to be the new standard




Most EdTech startups in Europe raise their Series A (32%) or Series B (34%) round in less than 15 months after their previous round with an average round size of $6M for Series A and $16.8M for Series B. Having said this, there are also a large percentage of startups (34%) that tend to raise their Series B after 25+ months. We discovered that on average it takes a bit more time for B2B EdTech startups (>21 months) to raise their next round in contrast to B2C companies that take 20 months to raise subsequent rounds. With than in mind, B2B companies tend to raise slightly larger rounds (~$9M) than B2C startups (~$8M) on a blended basis.


On the back of this study, we performed a correlation analysis in order to understand the relationship between (1) time to raise a round (# days) and (2) size of the round: we found out that the correlation between those two variable is weak, meaning that raising in a timely-fashion a larger than average Seed or Series A rounds doesn’t appear to increase the probability for entrepreneurs to raise bigger and/or faster subsequent rounds.



Sample of 63 companies based in Europe that raised at least at least 2 rounds of financing (Seed -> Series A AND/OR Series A -> Series B) between Jan 2014 and Dec 2019.





Review of our 2019 predictions from last year


Let’s see how the predictions that we made from our EdTech funding report published last year played out.

Prediction #1: More financing options for post-secondary and lifelong learning

We are definitely seeing a number of new solutions being created and deployed by both private and public players in order to make education more accessible in general with a new crop of ISA and student loan providers (i.e. StudentFinance, Knoma, Edbridg, Unly, Stepex), and more financing options being rolled out by governments, such as CPF in France. It is still early and we cannot understand the true impact of these new financing mechanisms but let’s be fair, we sort-of got it right.

Mark: 3.5/5 😬


Prediction #2: A new crop of US players will enter the EU market to scale disruptive lifelong learning solutions

We know that a few US players (e.g. Chegg, Degreed, Udemy, Lambda) are either quietly acquiring small players in Europe or simply setting up shops here to launch their operations. To be transparent, it is less than what we expected but we think we got this one 80% right.

Mark: 4/5 😎


Prediction #3: At least 5 EU EdTech transactions to be larger than $20M

100%! If we refer to our slide on “top-5 EU companies”, in 2019 the top 5 transactions were between the $37M to $60M range.

Mark: 5/5 💪


Prediction #4: France and the UK combined will exceed $350M in EdTech investments

Another one that we got 100% right and we were perhaps too conservative in our prediction. In 2019, the UK and France combined account for $576M (139 transactions).

Mark: 5/5 🙌


Our 2020 predictions



#1 Proliferation of professional learning platforms for 21st century skills

We anticipate a rise in the number of specialised academies that (1) allow white-collar workers (B2C & B2B) to develop specific technical skills in short periods of time (e.g. cyber security, business development, marketing, sales, etc.), and (2) empower blue collar workers (B2B) by providing guidance and training. We believe that a total of $100M will be invested in this space in 2020 in Europe alone.


#2 The # of Series A rounds will increase by >40%

As the pipeline of promising early stage EdTech startups is growing in a healthy way, it is safe to predict that the amount of EdTech VC investment will increase by >40%, reaching at least $250M in 2020.


#3 Learning platforms will incorporate more humans

As the cost of video conferencing has decreased, the cost of integrating people into online learning has also come down. We see online learning moving from single-player mode to multiplayer as a growing number of platforms integrate humans as coaches, mentors and peers. Human interaction increases the incentive for learners to stick around and makes learning more effective. 10 companies fitting this model will raise a Series A+ rounds in 2020.


#4 Learning platforms will also become more automated

We believe that the number of EdTech companies leveraging AI will further accelerate in 2020. We are still early on our journey but we feel that “AI-enhanced learning” has not been fully cracked yet and since automation (and its productivity enhancing benefits) are still high on everyone’s priority list, AI remains an exciting opportunity to be unlocked. We think that at least $60M will be invested in this space in 2020.



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illustrations (main) Jarom Vogel (elements/spots) Ben Newman