The precipitous pre-pandemic growth in edtech venture capital funding, followed by the investment boon in 2020-21, is far behind us, suggests an analysis from HolonIQ, a global market data platform.
Venture capital investments in edtech platforms in the first quarter of the fiscal year (Q1) totaled $580 million, a far cry from the $80 billion invested in the past 10 years. It also represents a 90% drop in investment compared to the 10-year high of $20.8 billion in 2021.
“Overall, EdTech startups are hiring below the rate of departures (shrinking) and global VC funding continues to fade driven by relatively high interest rates and cost of capital,” the report read.
Surges in global investment following the pandemic in 2020 and 21 combined for $36.9 billion, making up nearly half (46%) of the past decade’s $80 billion growth. Capital growth was stymied in 2022 when funding fell by 72%, reaching only $10.6 billion. In 2023, global venture capital funding only reached $2.97 billion, below HolonIQ’s $3.5 billion forecast.
Markets across the U.S., India, Europe and China formulated this analysis. Each followed similar trajectories, including the post-pandemic investment boon. They have also all regressed to similar levels not experienced in around a decade.
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What about AI?
AI is proving to be a joker card; while investors are still unsure how to value its upside, the “hype train” surrounding it is keeping funding levels somewhat buoyant. However, HolonIQ predicts the technology will be given less runway to perform compared to other edtech companies from five to 10 years ago.
“Not even an AI tailwind could hold up this 10-year low,” analysts wrote.
Like investors, faculty and administration aren’t implementing AI technologies on their campus, citing confusion as to how to best integrate it, according to a recent survey. Surveyed administrators stalling the use of edtech on campus also mentioned their lack of confidence in determining which products are effective and an overall distrust of the market.
