It’s obvious that periods of enormous growth won’t continue forever, but it’s still somewhat startling when they end. Edtech hasn’t been immune to the ongoing downturn, but at least the turn came at the end of a period that saw robust investment activity. Indeed, it’s very easy to forget just how far edtech has come in the past 2.5 years.
Per Dealroom and Brighteye Ventures’ paper, “The evolution of Edtech: activity in private and public markets,” there’s still hope for the sector, and edtech remains an enormous, underinvested opportunity. However, the momentum that has been building in recent years has slowed significantly as investors tighten their belts to better understand the more robust parts of the sector.
The public market pullback can largely be explained by the overall macro environment affecting tech and high-growth companies. Assessing individual cases, there is clear variation in the extent to which market caps have evolved, and there is some correlation with subsectors. Companies that appear to have more robust caps appear to be B2B SaaS companies, while MOOC-providers like Coursera and 2U have suffered significant declines. Of course, these changes are not only associated with overall macro trends and the subsector, they are inextricably linked to performance.
That said, it’s important to remember that publicly traded value represents a fraction of the overall edtech sector. The value of private companies is still growing, although at a slower pace than previous years.
Image Credits: Brighteye Ventures, Dealroom
Market consolidation continues, and IPOs are few and far between
After last year’s IPO fever, public exits have been rare thus far in 2022. Big public exits aren’t necessarily an appealing exit strategy in this climate, but M&A activity has already surpassed 2020 levels.
Bolstered by pandemic tailwinds and significant rounds raised in good times, edtech has begun to show signs of maturity in the form of major M&A activity led by the sector’s biggest names. Notably, Byju’s, edtech’s most valuable company, has bought 11 edtech startups since 2020 in an acquisition spree.
