Q1 2020 was an extraordinary period for all of us. No matter where in the world you live, COVID-19 has brought a sudden and unprecedented disruption to humanity. Most governments around the world have temporarily closed campus-based educational institutions in an attempt to contain the spread of the COVID-19 pandemic. UNESCO estimates that more than 1.5 billion learners – over 90% of the world student population – are confined to their homes.
Providing alternative learning solutions has become the top priority for every ministry of education. Investment in education technology and remote learning will both mitigate the immediate disruption caused by COVID-19 and establish approaches to develop more open and flexible education systems for the future.
The chart below shows over $35B of venture capital funding in EdTech since 2010, backing a vision to transform the way the world learns and supporting the United Nations Sustainable Development Goal four (SDG4). Q1 2020 delivered $3B of Global EdTech Venture Capital, nearly 10% of the prior decades total, in just the first quarter of the new decade. As usual, a number of mega-rounds dominated the quarter – for Q1 this came in Yuanfudao’s $1B Series G, the single largest venture financing round in Education Technology ever.
This quarter we are sharing our global venture capital flows update with screenshots from our very soon to be launched 2020.2 Platform release, giving our customers incredible data coverage as well as the analytics and visualization engine to power decisions that matter.
EdTech started the decade with $500M of Venture Capital investments in 2010 and finished 14x higher at $7B in 2019, down 18% off a 2018 high of $8.5B in VC funding. China made up 52% of the last decade’s EdTech VC funding, the US represents 33% followed by Europe, India and the Rest of the World, each investing about 5% of the global funding total.
Emerging Markets such as Africa, Latin America and Southeast Asia are growing rapidly and have large under-served populations looking to leapfrog traditional developed education systems to lower cost and improve access and outcomes, supporting learners, teachers and administrators with advanced technology. On current trends the early half of this decade will see a continuation of growth funding for Indian EdTech followed, in the latter half of the decade by investment traction in large emerging markets, particularly Southeast Asia and Latin America, where multi-billion dollar funds are being set up to deploy capital into education and other impact sectors.
COVID-19 is also highlighting inequality in access to digital and remote learning solutions, especially in an environment where synchronous video and laptop-based applications have been the emergency response, more so in developed economies. Developing economies and emerging markets are more broadly seeing surging levels of mobile and internet access and overwhelming demand for stronger education to employment links. In response to the tragic and sudden circumstances COVID-19 has brought about, confounded by global inequality, access and cost issues, we expect EdTech to be a bumpy ride through the rest of 2020 but bringing an exciting opportunity to help develop a more affordable, equitable, impactful and resilient education economy.
Expenditure on education and training from governments, parents, individuals and corporates continues to grow to historic levels and is expected to reach USD$10T by 2030.
By 2025 there will be half a billion more school and university graduates in the world than today, driven primarily by population growth in developing countries. How will current models of education deliver to the scale, quality and speed required?
Source: Wittgenstein Centre
Innovation requires capital. Governments are struggling to fund education to previous levels and education is not drawing on enough private capital to fund the innovation that’s needed. Public-Private Partnerships will be critical to supporting future growth, innovation and access to education.
As a sector, education is a digital laggard with less than 3% of overall expenditure allocated to digital, presenting a serious challenge given the scale of what’s to come.
In 2018, education spent $142b on digital. While this is forecast to grow to $342b by 2025, it is still less than 5% of overall expenditure.
Applications of advanced technology in education and learning will begin to hit their strides by 2025 with AR/VR and Artificial Intelligence becoming increasingly integrated into core education delivery and learning processes. Most likely starting in the corporate and non-accredited sectors.
Venture Capital investors can see the favourable dynamics of the global education and training market, investing $7b in 2019, up from $500m in 2010, $2b in 2014 and moderating from the $8b high of 2018. 85% of that was in the last 5 years and nearly 50% of the last decade’s funding occurred in the last 2 years. This is set to grow but is not evenly spread across the globe.
China, with the largest education market in the world, has led education VC investment growth over the past five years. China made up 50% of all Global VC investment in education through the decade, the USA 33% followed by Europe, India and the Rest of the World, each investing around 5% of the global funding total.
Venture Capital investment ultimately drives more exits in the form of public listings. In 2015 there were 10 listed education companies with Market Cap’s over $1B, growing to 40 in 2019 and expected to be 100+ by 2025.
Education is a complex system. When it comes to understanding market dynamics and which technologies, business models and parts of the sector are likely to grow or shrink, it pays to understand the nuance. The Global Learning Landscape taxonomy, consisting of 50 clusters of innovation helps to unpack this complexity.
The Complete List of Global EdTech Unicorns
The education innovation opportunity in Southeast Asia is rapidly gaining momentum. Often overshadowed by that of its neighbours, China and India, Southeast Asia is building a vibrant, much needed and regionally focused ecosystem.
The Evolution of VC Funding for EdTech Unicorns