A report in partnership with Dealroom.
Education is a $6.5T industry only in the infancy of its digitisation. Though the last 2.5 years proved to be a period of huge growth for the sector, Edtech remains largely underinvested compared to other industries of similar size. Huge potential remains- it's only a matter of time until the dry powder raised by VCs in 2020 and 2021 begins to be deployed at pace.
To reflect on recent activity trends, Dealroom and Brighteye Ventures have put together “The evolution of Edtech: Activity in private and public markets”, a report that sought to understand how markets have evolved in recent years and to contextualise what we’ve seen so far in 2022.
Value creation in global Edtech
Since the start of the year, the market caps of public Edtech companies have been slashed along with other sectors, down almost 50% compared to the end of 2021.
This pullback can largely be explained by the overall macro environment affecting tech and high-growth companies. Assessing individual cases, it seems the performance of Edtech companies varies across different sub-sectors: companies that appear to be more robust tend to be largely B2B Saas, while MOOC-providers like Coursera and 2U have suffered significant falls in their market caps. Of course, these changes are not only associated with overall macro trends- they are inextricably linked to performance.
However, it’s important to remember that publicly traded value represents a fraction of the overall Edtech sector. The value of private companies is still growing, although at a slower pace than previous years.
Market consolidation still in motion, while IPOs are few and far between.
After last years’ IPO fever, public exits have almost entirely frozen this year. While big public exits for Edtech companies aren’t an appealing exit strategy in this climate, M&A activity has already surpassed levels seen in 2020.
Boosted by pandemic-related growth, Edtech started to show signs of maturity in the form of major M&A activity led by the sector’s biggest names, like Byju’s.
VC funding has equally cooled off but early-stage funding maintains signs of resilience.
Global VC funding into Edtech startups totaled $7.6B in the year to September 2022. This represents a pullback on the equivalent point in 2021. The pullback has been largely due to a drop in late-stage rounds.
Globally, early-stage investment has shown more resilience, up 33% in H1 2022 compared to H1 2020.
European Edtech leads investment growth but correction might be underway
The European Edtech ecosystem leads investment growth in the first half of 2022, attracting a larger share of global Edtech funding (21% in H1 2022 compared to 12% in full-year 2021). However, some correction might be underway for the European Edtech ecosystem, with Q3 results showing a considerable decline.
Europe is also the smallest of the major Edtech regions by combined private value, but is the second fastest growing, ahead of the US (and behind India which is blazing a trail.
Sub-sector overview and trends
There’s several trends within the user verticals (K-12, Corporate learning, Lifelong and consumer learning) that are particularly exciting. This report also showcases innovation happening in Edtech related to all learning ages, from corporate learning, and age-learning to higher education.