Global ed-tech venture funding hit its lowest level since 2014 during the first quarter of this year, new data show. 

Venture investments in ed tech were around $580 million in the first three months of the year, down 47 percent from $1.1 billion invested in the sector in Q1 2023, according to a new report from market intelligence firm HolonIQ. 

The first quarter’s dismal results are in line with falling venture capital funding in the market overall, and could indicate that ed-tech investment is approaching the “end of one cycle, and the beginning of a new cycle,” said Patrick Brothers, co-CEO and co-founder of HolonIQ. 

In the report, first quarter funding results were described as indicative of a “collapse” of ed-tech venture capital. 

“At any time in the last decade, there has been more venture capital to support new ideas and new innovation than there has been in the first quarter of this year,” Brothers said in an interview. 

“People have yet to appreciate just how dramatic the collapse in education technology VC has been. Ed tech has enjoyed a long run now of quite bold and ambitious venture capital supporting education innovation. And that’s not where we are today.” 

Changing market conditions — high interest rates and the cost of capital — have played major roles in the drying up of venture funding. 

Venture investment soared during and after the pandemic as remote learning led school districts to boost their support into digital technologies, and billions of dollars in federal aid flowed into schools.

The HolonIQ report did not provide a full-year prognostication for ed-tech venture funding, but the $580 million in the first quarter puts investments in 2024 at a pace far below recent years. 

In 2023, total ed-tech venture investments reached $2.97 billion, down from $10.6 billion in 2022 — and far off a record of $20.8 billion set in 2021.

Brothers said ed-tech venture funding is now “on the other side of the pandemic,” and entrepreneurs looking to jump into the education space should brace for more tough times ahead.

“There’s arguably never been a more challenging time than today to decide to quit your day job and build a brand new solution for education,” he said. “We don’t think it helps to create expectations of ‘Don’t you worry, it’ll all be OK soon.’ It’s gonna be challenging for a while.” 

Funding Comes From U.S., India

There were slightly more than 100 ed-tech venture investments during the first three months of the year, according to the HolonIQ report.

About half of the $580 million Q1 total — roughly $300 million — was raised by U.S.-based ed-tech firms, according to the report. Startups from India raised about $200 million, and European education companies raised around $100. 

Ed tech has enjoyed a long run now of quite bold and ambitious venture capital supporting education innovation. And that’s not where we are today.Patrick Brothers, Co-CEO, HolonIQ

Not included in HolonIQ’s tally for Q1 is a $140 million Series E round landed by California-based Zum, a K-12 transport company. The report did not include Zum because it is not a pedagogy or classroom-based tool, but rather a fleet of electric buses and a communications app “that underscores the top trends this quarter coming mostly from services to education such as transport, finance and accommodation,” the authors say.

International education “dominated” Q1 trends for ed-tech venture investments, according to the report. India-based Avanse, which provides educational loans globally and supports Indian academic institutions, raised $120 million. And another India-based company, Amber, a global student housing solution, raised $21 million. 

Brothers said there have also been some interesting investments into ed-tech companies focusing on early childhood, an area that he described as having “really strong natural demand.” 

AI’s Promise and Bluster

Many of the challenges currently facing ed-tech venture funding have been “obfuscated by a buoyant AI hype cycle,” according to the report.

Artificial intelligence will continue to be “out in front” in conversations with education investors, Brothers said. 

But there will be more pressure for AI-based ed-tech investments to go beyond hype and actually deliver evidence and actual educational outcomes, he said.

“We’ve seen a pretty significant debate around the use of tools to detect AI cheating and the ongoing conversation around how assessments need to change in that process,” he said. “So we expect to see some investment there.”

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See also:

• Imagine Learning Launches AI-Focused Venture Capital Fund
• Venture Capital Has Plummeted in Education. How Can Companies Find Alternate Financing?
• Bringing Research Into Ed Tech, Through the Muscle of Venture Capital
• Winning and Losing Pitches: Why VCs Choose to Invest, or Not