Mapping the Global EdTech Venture Capital Space: Insights From 2015–2020
Following up on my earlier post on EdTech investments in 2020, and digging deeper into venture capital in EdTech, this article explores the space’s trends, players and insights between 2015 and 2020.
This article contains a small part of the insights that I was able to generate with this dataset. To stay up-to-date on my future posts on the topic, or to suggest additional analysis you’d be interested in seeing, please fill out this form. I will email you the articles when they come out.
Important Note: The analysis below depends entirely on the accuracy and completeness of the Crunchbase data.
VCs in the EdTech space: Mapping the growth and composition
Over the past 10 years, EdTech deals have exploded in number and value, reaching around ~300 transactions and more than USD 10B in 2020 alone.
In parallel, the number of VCs that have invested in EdTech companies has dramatically increased over the years. Figure 1 shows the evolution of the number of VCs that have performed at least one transaction in the EdTech space between 2010 and 2020. The strong growth is especially pronounced in the first half of the decade, where the number of VCs increased from ~100 in 2010 to ~750 in 2015, a 140% growth year-over-year on average. The year 2018 was a record year for EdTech, when the number of VCs that invested in the sector exceeded 800. Since then, there has been a decreasing trend, but we might expect the pace to pick up again after the COVID-19 crisis. Note that the dollar value of EdTech transactions increased rapidly. In this article published by GSV Ventures, Mujtaba Wani & Nafez Dakkak show that the value of EdTech transactions increased from USD 0.5 Billions in 2010 to an expected USD 12 Billions in 2020, at a 36% CAGR.
Next, a natural question to ask is whether there are any VCs that focus solely on education and EdTech, and whose strategy is to invest in these sectors alone. This is important, because it signals to others around the world that the sector is large and healthy enough to warrant an exclusive treatment from the guardians of capital movements. Figure 2 maps the number of education-focused VCs that have invested in edtech startups, 2010–2020. While the number of transactions completed by Education-focused VCs is small compared to the total number of transactions, it exhibits a similar trend to the one in figure 1. In the past 5 years, approximately 50 transactions have been completed by education-focused VCs.
So who are these companies?
Figure 3 breaks down the most active VCs in the EdTech space (defined as VCs that have made more than 8 investments in 2015–2020), both those that are education-focused and those with a general investment strategy.
On this list, we find the usual suspects (Learn Capital, Rethink Education, Owl Ventures, Reach Capital, GSV Ventures), a Chinese corporate-linked VC (TAL Education Group) and some angel investors (Deborah Quazzo, also Managing Partner of GSV Ventures).
The list of General VCs is just as interesting to look at, and is useful to identify which VCs are more likely to look at the EdTech sector. We find some prominent VCs (e.g., Accel, IDG Capital), well-known accelerators (e.g., Y Combinator, Techstars), impact investors (Omidyar Network) and conglomerates (Tencent Holdings). The prominence of the names on this list, and the relatively large number of investments they made in EdTech in the past 5 years, are definitely a testament to the sector’s growth and quality. It is also notable to see a number of Chinese companies among the top 10 investors on both lists.
Digging deeper on the VCs that are solely focused on EdTech: Is there competition?
The prior section introduced a number of VCs that are solely focused on EdTech and have made a significant number of investments in the sector over the past five years. But the list of EdTech-focused investors is much larger than the 11 VCs presented in figure 3; the total number of education-focused VCs stands at 122. The large majority of these funds have only made a handful of investments in the EdTech space. Figure 4 shows the breakdown between the education-focused VCs: the share of transactions complete by the top VCs has steadily decreased over the years, suggesting that new entrants have increasingly found the sector attractive.
Another interesting question is to see who, within the top VCs, has been able to make the most transactions over the past 5 years.
Figure 5 below gives us that view, from which we can observe the following:
- 2016 was a particularly active year for this group of top education-focused VCs, especially for Learn Capital. Most VCs participated in at least 4 transactions during this year.
- Deborah Quazzo, an angel investor, has been quite active, and has participated in 3 transactions in 2020 alone (in Fiveable, ClassEdu, GoPeer)
- University Ventures has not participated in a transaction in EdTech since 2018.
- In 2020, the most transactions were completed by Owl Ventures, followed by Reach Capital, Rethink Education and LearnLaunch Accelerator.
In which funding rounds are VCs participating?
Taking a step back of the EdTech VC market composition, let’s now turn our attention to the evolution of EdTech transaction types between 2015 and 2020, shown on Figure 6.
The most notable trend depicted below is the shrinking of the share of angel, seed and early-stage transactions in favor of an expanded share of late series transactions (18% in 2020, up from 8% in 2015). Moreover, we observe an expanded share of pre-seed transactions, signaling that VCs are more comfortable betting early on companies. Finally, we see a small and steady share of transactions going to PE, Corporate & Post-IPO rounds, hovering around 3%, in every year since 2015.
The picture below signals, once again, the growing maturity of the EdTech space, especially evident in the growing share of transactions that are in the later funding rounds.
There was no significant difference in this picture between General and Education-focused VCs, showing that all players are in the same “game” together.
Are VCs venturing out to the emerging markets’ EdTech space yet? The evidence suggests that yes, but only in a handful countries
Figure 7 shows the breakdown of transactions between mature and emerging markets, from 2015 to 2020. We observe a steady increase of the share of deals in transactions in emerging markets, from 22% in 2015 to 39% in 2020 (to-date). Mature markets include mostly Europe and North America, while emerging markets include the rest of the world (Mexico is considered outside of North America for the purposes of this work).
This is a promising picture for emerging markets, as they appear to be catching up to mature markets in the EdTech space. 2020 will probably see a higher share than 39% as more deals are completed in the remaining two months.
Figures 8 and 9 below present the same picture as figure 7, but now broken down by VCs that focus solely on education vs. those that are general.
For General VCs, we notice a similar trend as the global picture, because the large majority of deals are completed by these general VCs. In fact, figure 8 mirrors figure 7 almost perfectly.
Does the picture look different for education-focused VCs?
It looks like the trend towards emerging markets is slower for education-focused VCs than the general VCs, except in 2018.
The difference is most pronounced in 2020, when the share of emerging markets transactions for education-focused VCs is half that of general VCs.
But when we mean emerging markets, what are we talking about? Figure 10 shows an interesting picture of where EdTech transactions are concentrated in emerging markets:
- India’s share of transactions almost doubled between 2019 and 2020, suggesting the rising prominence of the Indian EdTech market in the world (Among funded companies in 2020, we find BYJU, Miko, Vedantu, ClassPlus, etc).
- China’s share of transactions has been hovering around 30% throughout the years, before shrinking to 15% in 2020, mostly as a result of India’s share expansion.
- Brazil’s share of transactions was relatively high in 2015, but has since shrunk to ~2%. A similar trend could be observed in Israel.
- Other emerging markets include some larger markets than others. For example, Argentina, Mexico, Indonesia each have ~30 transactions over the past five years. By contrast, Morocco, Tunisia and Cote d’Ivoire only have 2.
EdTech in emerging markets, while having gained more attention from the global VC space, still has enormous opportunities for growth.
For now, it looks like it is India’s time :)
Co-investments in EdTech
Next, we turn our attention to how frequently VCs make co-investments in EdTech transactions. Figure 11 presents the picture of the average number of investors per EdTech transactions, both for emerging and mature markets.
We observe that, on average, 2–3 VCs co-invest in any given EdTech funding round. We also observe that the number of co-investments in mature markets is slightly higher than that in emerging markets. The latter trend is consistent throughout the years, except for 2020, where the number of co-investments in emerging markets was higher (probably the BYJU effect!)
Figure 12 shows the same picture, but only for transactions classified as late series.
Here, we observe that there is a substantially higher number of co-investments per transaction. The trend appears to be declining for mature markets (4.4 in 2020, down from 6.1 in 2017), while it is likely increasing for emerging markets.
An interesting exercise would be to map which entities are likely to co-invest, but we’ll leave that analysis for another day.
Lastly, a Venture Capital Map: Here is who is investing in what in emerging markets
Lastly, figure 13 represents a capital map of VCs that are actively investing in EdTech in emerging markets. I hope it is useful for entrepreneurs who are actively looking for funding!
Do you want to see the same map for mature markets (e.g., North America, Europe)? Or want to see other views of the above? Fill out this form to register your interest and be the first to know about the insigths!
