Mapping EdTech Investments in 2020: Where Did the Money Go?

COVID-19, for all its disastrous effects on countless lives, has accelerated a positive trend that we’ve all been witnessing over the past few years: the move towards digital education. As schools and universities were shut down worldwide in March 2020, parents, educators and students alike scrambled to find a close substitute to something we think of as irreplaceable: in-person education.

As a response to these unusual circumstances, education-themed companies have proliferated across the world. Investor interest in these companies has increased, even as economic downturns reverberated across the world. To understand and quantify the (increased) value that society has put on this industry, I look at the investments made in the Education Technology — EdTech- field so far in 2020 (from January 1st to September 1st). I sourced my data from the Crunchbase database of funds raised by startups. A further, original step in this blog post is my categorization of EdTech companies into 14 sub-fields (e.g., K-12, Higher Education, Tutoring Marketplace, Workforce Development). The latter will help us understand the relative importance of these fields in 2020 vs. in other years.

Insight #1: 479 EdTech Companies raised money in 2020, most of them in the Seed Stage, and most in North America

The first figure below shows the majority of EdTech companies that raised money in 2020 are those categorized in the “Seed” funding stage. Indeed, close to 250 companies are in the “Seed” stage, and another ~70 are “Early Stage” ventures.

The next figure shows that the majority of EdTech companies are located in North America (~180), followed by Asia (~150) and Europe (~110).

The next figure gives us a picture of the distribution of funding stages across the continents. We notice that the distribution is similar across all six continents, except for one key difference: Only North America, Asia and Oceania have late stage, “mature” companies that raised money in 2020.

This is good news for the rest of the world — the market is hungry for competition!

Insight #2: USD 5.6 Billion were invested in EdTech companies in 2020, ~68% of which went to Asian companies

As the figure below shows, the majority of funds raised in 2020 went to Asian companies, specifically “Late Stage Ventures.”

When we look at the total money raised by these companies in 2020 and before, that figure reached USD 17.3 Billions. This number does not represent the market cap of the entire EdTech space, as it only includes the companies in my database (those that did raise funds in 2020). We notice from the following figure that the majority of funds, again, went to Asia (around 75%).

Insight #3: Two Chinese companies and one Indian company collectively raised USD ~2.4Billion, 42% of the total raised in 2020

When we look closely at companies that might have raised a disproportionately high amount of funds in 2020, three companies stand out:

• Chinese firm Yuanfudao, which offers online courses and homework help for K-12 students, has raised USD 1 Billion from Tencent and private equity company Hillhouse Capital Group. Between January and March 2020, Yuanfudao ranked first in China in-app purchases in the education category. This round of funding raised Yuanfudao’s valuation to USD 7.8 Billion. (Source: Reuters)
• Another Chinese firm, Zuoyebang, a company that is similar to Yuanfudao in its offering and which a lso offers a tutoring marketplace, has raised USD 750 Million from Tiger Global and private equity company FountainVest Partners. This round of funding has raised the company’s valuation to USD 6.5 Billion. (Source: Reuters)
• Indian company BYJU, also active in the K-12 space, has raised USD 622 Million from global technology investment firm BOND. This round of funding has raised India’s first EdTech company to USD 10.5 Billion. (Source: LiveMint)

The three companies above are “Late Stage” Ventures, and already have millions of users. Their combined valuation reaches ~ USD 25 Billion. By way of comparison, Airbnb is valued at USD 31 Billion, and Ford is valued at USD 37 Billion (Source).

From now on, we exclude these three companies from further analysis becaues they might skew some of the results below.

Insight #4: 40% of all funds raised by these companies was raised in 2020

In order to understand whether there was a “surge” in investor interest and funds for the EdTech field, we look at the share of money raised by these companies in 2020, compared to the total amount of money shared (in 2020 and earlier). The average across all funding stages is 40%, meaning that these companies raised a significant amount of funds in 2020, compared to previous years. Moreover, in order to separate the effect of “Seed” stages, the figure below breaks down the share by funding stage. We notice that even for later funding stage companies, the share of money raised in 2020 remains high (above 30% across the board).

Insight #5: Within EdTech, the number of companies that raised money in 2020 were mostly in fields of General E-learning, Education Management, and K-12

Here, before I present any findings, it is worth describing how I got to this categorization. While the crunchbase database does provide some sort of categorization for each company, I found it to be imprecise, and sometimes misleading. Therefore, I used keywords (and some manual labor!) to categorize the companies in my database into 14 EdTech fields. A few examples below:

• Companies whose descriptions included “K-12” or “children” were categorized under K-12
• Companies whose descriptions included “language” or “english” were categorized under Language Learning.
• Companies whose descriptions included “textbooks” or “e-book” were categorized under Digital Library.
• Companies whose descriptions included “track”, “curriculum management”, or “student engagement” were categorized under Education Management.
• Companies whose descriptions included “employees”, “training”, “corporate” or “coaching” were categorized under Workforce Development
• Companies whose descriptions included “tutors” or “tutor matching” were categorized under Tutoring Marketplace.
• The General E-learning category includes companies like MasterClass, Coursera, and online platforms that offer online courses in the creative spaces such as the arts.

The figure below shows a simple count of companies by category, of those that raised money in 2020.

In terms of funds raised in 2020, we find that General E-learning attracted most of the funding, followed by K-12, Education Management and Digital Library.

Insight #6: “Fresh” Money in 2020 went to the fields of Higher Education, Education Management and Talent Marketplace

To understand which companies disproportionately raised funds in 2020 vs. earlier years, we look at the share of money raised in 2020. Here we notice that “fresh” money went to the top categories represented in the figure below.

Conclusion

The EdTech field has seen significant investor interest in 2020, as shown by this analysis. Companies in Asia have reaped the majority of the funds raised in 2020, and those in Higher Education and Education Management have witnessed “fresh” money compared to previous years.

This trend will not end now, and will continue until the global market is satisfied. In continents such as Africa and Oceania, companies are just getting started, and will probably grow to match the size and valuation of those leading companies in Asia and North America.