Q2 did indeed turn out to be the bottom of the funding market for EdTech VC (so far🤞). Q3 delivered stronger funding overall, despite the number of funding rounds remaining well below 50% of the previous few years. Tutoring, Language Learning, Finance and VR are attracting major funding support.
2021 was peak EdTech VC, reaching $20.8B through 3,000+ funding rounds and holding up 32 EdTech Unicorns by the end of the year. By December 2021, EdTech Venture investment was 40x larger than it was in 2010, nearly 5x the previous investment peak in 2015 and 3x pre-pandemic investment levels in 2019. 2022 halved EdTech VC to $10.6B and 2023 will now likely reach one-third of 2022's funding levels, expected to come in around $3.5B. So far in 2023 we've seen around $2.7B of VC through nearly 700 transactions. Check out our Q1 Note and Q2 Note to catchup on the year so far. You will also note we've been holding our $3.5B full year forecast since April and as mentioned expect to finish the year somewhere around that level.
On a brighter note, major funding rounds in Q3 demonstrate where investors are committing 'dry powder' and where they see scale and impact in a post pandemic and more tech-mature education and training landscape. Q3 saw highly innovative teams raise funding including 🇦🇹 Austria based GoStudent, the global tutoring school, raising $95M in a mix of debt and equity to "enhanced hybrid learning solutions to the DACH region" likely involving more online and offline educational support and an expansion of the use of its GoVR — GoStudent’s recently launched virtual reality language learning platform.
🇮🇳 India based Auxilo, an education focused non-banking finance company, raised $57M in equity to "expand our loan base and grow our product offerings". 🇦🇺 Australian based Secure Code Warrior closed a $50M Series C. 🇺🇸 US based Preply, a tutoring based online language learning platform, raised $42M in equity and another $28M in debt, extending its Series C to $120 million. 🇧🇷 Brazil based Principia, provides financial solutions for educational institutions and announced a 200-million-reais ($41 million) Series A funding round. Principia's main solution, "Receita Garantida" (guaranteed revenue), ensures payment of student fees to universities. Finally for the larger fundraising in Q3, 🇺🇸 US based Transfr, a virtual reality-based skills training platform for middle-skilled careers, announced a $40 million Series C.
Figure 1. Global EdTech Venture Capital. 2010-Q3 YTD 2023
EdTech's reduced VC funding activity is broadly in-line with peer industries. In some markets such as India however, the effect is much more pronounced when compared to the abnormal funding levels we saw in ByJu's for example. For transparency in our analysis, we've stopped classifying ByJu's various transactions as funding/growth capital until we see resolution of the current events, hence ByJu's recent (2023) financing events do not appear in this VC/growth capital analysis as we now have a better understanding of the debt/equity profile of the organization.