Brighteye Ventures, Europe’s leading edtech VC, has published its fifth annual funding report. Like all sectors, they report that the edtech sector is still nowhere near the highs of 2021. But it remains resilient, with Europe and the UK remaining particularly active and, perhaps, closing the gap with the US when it comes to funding.
Just like last year, TFN has identified some highlights of the report, and asked Brighteye Ventures’ Head of Research, Rhys Spence, about some of the report’s findings.
Is funding diversity going in reverse?
One particularly notable finding in their report is that diversity in funding might be taking a step backwards. In its focus on the UK, the report notes that both the capital raised and number of deals by female-only and mixed teams, has declined.
In 2023, only 17% of capital was to female-only or mixed teams, down from 23% in 2022. Indeed, in the seven years since 2017, that figure only exceeded 20% twice, with all other years in the mid- to high-teens.
There was a more profound fall in deal activity. The proportion of deals with female-only and mixed teams had been steadily increasing to its 2021 peak of 51%. But, since then, it has dropped, to 28% in 2022 and to just 15% in 2023, the lowest two proportions in the past seven years.
It’s a worrying trend, since much needs to be done to improve funding diversity. Unfortunately, the data Brighteye Ventures have currently obtained is not enough for them to draw any conclusions about the causes or potential improvement, but are continuing to investigate.
Europe and the UK remain strong markets, despite the overall funding fall
The market remains dominated by the US, but Europe remains a strong market and has been closing the gap.
Both the US and Europe saw similar falls in funding this year, 40% and 37% respectively, but that has meant the gap between the two markets closed. Europe is now $1 billion behind the US, down from $1.7 billion in 2022, and a huge $6.8 billion in 2021. Indeed, the US has now fallen below 2020 levels of investment, while Europe remains comfortably above.
And the UK has remained the strongest individual market in Europe by some margin. 2023 saw $547 million in funding in the UK, while France, in second place, saw just $162 million.
Spence attributed these strengths to several factors, part, he said, was down to “government-aligned investors across the continent, with notable examples in France, Spain, Italy and Wales, supporting companies at the earliest stages and also supporting markets for some solutions.” He also pointed out that the diversity of systems across the continent creates the opportunity for the private sector and startups.
In the UK, a combination of factors has come together, says Spence, “we put it down to the density of prospective corporate clients, the intensity of the tech ecosystem and in K12, the quality of guidance given to school leaders and willingness of teachers to test new interventions.”
The rise of AI, and the opportunity for humans
Brighteye Ventures’ report notes that, like almost everywhere, AI is increasingly a part of the edtech sector. Indeed, its use is now so widespread the report concludes that, with so many tools built on AI, edtechs must compete on other factors.
The report also highlights the broad scope for AI in edtech, from content creation and administration, to assessment and tutoring. However, its use for discovery and synthesis appears currently appears to be the major focus for edtech funding, with companies like Sana — which creates training based on the company’s knowledge — raising $28 million in 2023.
However, they predict that although AI will continue to be a subject of intense debate, it will see learning become more embedded in everyone’s workflows. “Some users of GenAI are using it for search, which can be substituted for just-in-time learning in some circumstances,” said Spence. But this can be more powerful in dedicated tools. “We are excited by edtech companies helping individuals and organisations to better understand and expand the knowledge they use, particularly when they combine resources internal to the organisation with best practices and research that are external to the organisation.”
And, for some, the seemingly unstoppable rise of AI might mean a return to the prominence of traditional face-to-face teaching, improving the jobs of those who teach, regardless of level, and the outcomes for their learners, as the administrative burden is lifted from them.
“We believe part of the role of edtech is freeing up teachers to do the most impactful and enjoyable parts of their role, helping to bring back the joy in teaching,” Spence told us.
“Teachers’ roles are evolving,” he continued. “Their role is becoming more like curators of fantastic, engaging content, including designing lessons and activities that vary by learner type, which in theory should help learners to make more progress more quickly.”
