Global Ed-Tech Venture Capital Investment on the Decline In 2023 as Mega Rounds Fizzle
Venture capital funding for ed-tech companies continues to tumble in 2023, according to a new report that declares that the “golden age of mega rounds” is a thing of the past.
Ed-tech venture investments were $707 million in the second quarter, bringing the total through the first six months of 2023 to roughly $1.8 billion, according to new data from market intelligence firm HolonIQ.
That total for the first half of 2023 is a 58 percent decline from the same period a year ago.
For the full year, HolonIQ is forecasting global ed-tech venture investments to be at $3.5 billion, down from $10.6 billion in 2022 — and far off a record of $20.8 billion set in 2021.
The total number of ed-tech funding rounds has dipped by as much as 40 percent compared to 2022, but the “major” decline has been in deal value, according to the report.
The most recent three-month period marked the second consecutive quarter without funding rounds in excess of $100 million, known as mega rounds. Those mega rounds had become somewhat routine over the last few years: global ed-tech venture investments tallied more than 115 total since 2019.
But that trend started to cool earlier this year, during the three month period between January and March, when for the first time since at least 2019 there was no deals over $100 million, according to HolonIQ
“We don’t expect to see any newly minted ed-tech unicorns, nor mega rounds anytime soon,” the report says. “The compression in valuations and challenging funding environment are creating major pressure for models and platforms that relied on rapid succession fundraising and ever expanding valuation multiples.”
Alternate Forms of Funding
Investors and education company leaders have previously told EdWeek Market Brief that some of the evaporation of venture capital can be attributed to changing market conditions. For instance, VC investment soared during and after the pandemic as remote learning led school districts throw their support into digital technologies, and billions of dollars in federal aid flowed into schools.
But now, students are once again learning in-person and federal aid is set to expire after next year.
Moving forward, the report says the ed-tech sector should expect smaller and more frequent rounds of funding.
The companies that did attract investments in the second quarter were ones mostly working outside of the K-12 sector, and those that focus on training and worker upskilling.
Red6, an augmented-reality based training platform for military pilots, landed $70 million in Series B round. The workforce-training platform Pathstream raised $39 million. Australia-based workforce-focused learning platform Go1 raised $30 million. Meanwhile, Swing Education, which helps schools connect with substitute teachers, raised $38 million in a Series C round. And student mental health platform Uwill raised $30 million in a Series A round.
Combined, those five deals amounted to almost one third of all global ed-tech venture investments during the second quarter.
The drying up of venture investments “turns a spotlight” to alternative forms of funding, HolonIQ says.
During the foreseeable future, education startups are going to need to assess all financing options on the table, and consider how alternate sources could be more or less advantageous for their organizations.
“We need to support the ed-tech ecosystem with more flexible government funding and foundation-led philanthropic investments to protect and diversify the supply of capital fueling new ideas and bold visions to transform the way the world learns.”
Image by Getty.
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