Every January, we look back on the prior year to reflect on Venture Capital investment in education technology. This January marks the close of an extraordinary decade for education technology with over $32B in funding backing a vision to transform the way the world learns and supporting the United Nations Sustainable Development Goal four (SDG4). HolonIQ’s dataset of investments in the global education market powering this analysis has now reached over 18,500 transactions and is available from Q2 as an annual SaaS subscription.
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. The latter half of the next decade may well see investment traction in large emerging markets, particularly Southeast Asia, India and Latin America, where multi-billion dollar funds are being set up to deploy capital into education and other impact sectors.
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