2022 EdTech VC funding totals $10.6B, down 49% from $20.8B in 2021

Global EdTech Venture Capital had a strong 2022 delivering $10.6B of investment, albeit 49% down on 2021's record levels. Expect 2023 to moderate back to pre-pandemic levels with growth in the US, Europe and India replacing China's six year run before COVID delivering more than 50% of global funding in EdTech.

On pre-pandemic standards, EdTech VC had a massive year in 2022. But alongside the biggest boom in venture funding's history (2020-2021), the party's over and it's back to fundamentals and outcomes. With innovation surging across the entire EdTech Landscape notable mega rounds in 2022 included 🇮🇳 BYJU'S ongoing funding spree, 🇦🇹 GoStudent‘s $340M Series D, 🇺🇸 Paper's $270M Series D, 🇺🇸 Guild's $270M growth round, 🇮🇳 UpGrad's $225M growth round, 🇬🇧 Multiverse's $220M Series D, 🇩🇪 CoachHub's $200M Series C and 🇺🇸 Handshake's $200M Series F to name a few of the larger deals that dominated the first half as the second faded away month by month.

2022 closed with 30 EdTech Unicorns around the world, collectively valued at $89B. 6 EdTech Unicorns joined the list through 2022 and HolonIQ removed 12 companies from the list in our annual review (2 Jan 2023), assessed as 'lapsed' based on 5 years or greater since the last priced equity round or in the case of Chinese Unicorns, companies that in our view require a publicly disclosed equity round following major regulatory changes to rejoin the list. There were no EdTech Unicorn exits in 2022 and 2023 will prove a challenging exit environment at this stage.

In a 'Mark to Market' scenario, where Dec 2022 consensus valuation multiples are used to 're-price' the last round of each of the 30 EdTech Unicorn's, we note this list would likely further reduce by 25-50%, perhaps more.

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Figure 1

The major change in EdTech VC through the pandemic was the withdrawal of Chinese investors from the market, so much so that 2022 saw less Chinese VC than a decade ago. Meanwhile, the US delivered massive VC funding growth in all industries, and EdTech was no different. Indeed the pandemic brought EdTech to the attention of mainstream investors who no doubt helped take valuations to new highs and due diligence timeframes to new lows. Excited by the transformational potential of technology in education, but unfamiliar with the risks and challenges of innovation in learning and teaching, the broader investor base drove EdTech investment to surge in 2021, nearly triple that of 2019 and as 2022 progressed, the market flipped and investment slowed to a crawl.

Europe and India have both grown EdTech VC investment significantly over the the last few years, however in both cases in addition to a broader and higher quality base of early stage startups, the large investment levels are principally driven by a few outliers that may or may not be repeatable over the next 2-3 years. Beyond the major funding markets, we've seen further expansion and scale across Africa, Latin America, the Middle East, Southeast Asia and Oceania as local leaders scale to fulfill gaps in their home markets and find new customers around the world.

Beyond geographic changes in funding, the rise and moderation of mega-rounds explains much of the the structural changes to the market. 2021's record was driven primarily by over 50 mega rounds (> $100M) with 18 of those rounds greater than $250M. 2022 delivered an overall fall in VC funding rounds greater than $50M, however the level of investment in $20-50M rounds and below has increased consistently year over year and continued to do so in 2022.

Figure 2

2023 Education Expectations

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The Open-Source Global Learning Landscape is our primary reference for a granular understanding of the trends and patterns emerging in education. Figure 3 sets out the value and volume of VC funding around the world according to the sub-sectors of the Global Learning Landscape, shown in different colors.

Management Systems have risen through the pandemic period as schools, colleges and universities around the world accelerate their digital transformation and look to engage or upgrade their core systems of record and learning management.

Learner and Teacher support has surged over the past five years as governments seek to address the learning loss students have suffered through COVID and the teacher/faculty wellbeing, professional development and retention challenges faced around the world.

Workforce and Skills continues to expand as companies and governments globally seek faster, lower cost and high efficacy options to re-skill and up-skill labor forces that are themselves undergoing transformation from automation, artificial intelligence and new demands for skills in areas such as cybersecurity.

For context and for the purpose of the analysis below and this quarterly EdTech VC analysis note, HolonIQ excludes a number of clusters from the Global Learning Landscape that many would classify as HR Tech. These clusters include Talent Acquisition, Performance Management, Workforce Planning, Workforce Wellness and Gigs. While these clusters are critical to analyze to see the lines blur between education and work, we exclude them for this analysis to isolate a more traditional and perhaps expected definition of EdTech.

Figure 3

Leveraging new charts and analytics on HolonIQ's Intelligence Platform, we are now able to explore high granularity patterns and trends with 'X-Ray Charts' in HolonIQ's data analytics studio, adjusting for different time frames and geographical dimensions to see the anatomy and composition of insights over time.

Figure 4 shows an 'X-Ray Chart' to see the underlying share of each cluster of the Global Learning Landscape, aligned to the sub-sectors shown in figure 3 and below colored as different columns of that chart. Within each sub-sector/column, the clusters are revealed to show their share of the 1,400+ EdTech Venture funding rounds that occurred through 2022.

Here we can see Learning Environments (LMS/VLE), Education Management Systems (SIS/SMS) and Financing Platforms dominate the landscape and make up the Management Systems Sub Sector. Games and Simulation, XR (VR/AR/Metaverse) and STEAM and Coding make up the Experience sub sector and also take a very large share of the funding rounds. Support comprises Study Notes, Teacher Support, After School, Tutoring and Test Prep and together with Skills and Jobs dominated by UpSkilling but also Mentoring and Proprietary Platforms (Non Marketplace, Proprietary Content).

Figure 4

Beyond the activity levels of funding rounds, figure 5 shows how the funding was distributed in dollars (USD). This is of course skewed by large mega-funding rounds and as such can be a very different representation to the funding rounds shown in figure 4.

Through a dollar based lens, we see tutoring has the biggest variation when compared to figure 4. This is one of the few categories that has attracted mega rounds and is further skewed by BYJU'S ongoing funding activity, together with players such as GoStudent and Paper in 2022.

Figure 5

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As we look further to the geographic trends, we see the United States' explosive funding growth in 2021 and whilst 2022 was significantly less (almost half), it remained 2.5x larger than pre pandemic funding levels in 2019.

Europe saw the largest rise in funding through the pandemic and 2022 held strong, however bolstered by a handful of very large funding rounds.

India has emerged as a strong market, sometimes difficult to evaluate given the scale of BYJU'S funding and a small number of large high growth companies, some of whom are still executing an offensive growth strategy and others firmly playing defense.

China meanwhile, has felt the full impact of major regulatory changes announced mid 2021 that has forced the market to rebase and refocus on the post secondary and workforce market, away from it's previous core in K12, specifically tutoring and english language learning.

Figure 6

Putting these markets back together again, we see the change in share of various markets more clearly on the right-hand side of figure 7. The red wave shows China's rapid growth through the last decade to dominate EdTech investment globally, before the sudden collapse. We see the US losing share through that period, and rapidly re-taking the lead with India and Europe expanding through the pandemic and how together comprising 45% of the global funding.