Brighteye Ventures has published its fourth annual report focusing on edtech funding in Europe. Generally, 2022 saw a decline in deals and funding, as the post-pandemic optimism from the previous year failed to flourish when faced with the harsh realities of sluggish world economies.
But while the second half of the year might have been characterised by stories about lay-offs, Brighteye Ventures’ report shows that, in the edtech sector at least, there was some good news. The report analyses data provided by Dealroom, and shows that while 2020 and 2021 were good years, 2022 could hardly be called a bad year, and the longer-term trends for the edtech sector remain positive. Take a look at the panel discussion below.
Download the full report here. Meanwhile, we’ve identified the top ten things to know from their report, and the deals behind it.
1. Europe has been the most resilient region
Every region has seen falls in both the number of deals and funding totals but Europe has been the least worst hit. Although the drop in funding was 26%, the 62% fall in US funding dwarfed it. And even that was less than China, which saw a drop of 89%.
It also means that that gap between the European and US markets has significantly narrowed from $6.8 billion to $1.7 billion.
2. The UK keeps the top spot in Europe
The UK continues to have both the highest number of deals and total funding. This year, it has more than twice the number of deals and a third more funding than second-placed Germany.
However, there may be competition, Germany and Austria both saw increases in total funding. And Italy stood out as the only nation to see increases in both the number of deals and the total value.
3. Specialist investors were the most active
When there is market uncertainty, it’s natural for any business to minimise risk and focus on their core activities. And this was certainly true in funding, with edtech specialists dominating the list of most active investors.
Of the top ten investing in European edtech, six were specialists, and between them secured 29 of the 51 deals done; a trend that was also reflected in global data. And, among those specialist investors, Brighteye Ventures was the second most active in the world, and retained top spot in Europe for the third year in a row.
4. Corporate learning was the only edtech sector to grow
Corporate learning was already the biggest sector within edtech by deal total. Its lead only increased in 2022, reaching a total investment of $1 billion, up from the previous year’s $926 million. All other sectors saw drops, some significant.
This may reflect the post-pandemic environment, as schools and universities return to normal, reducing demand for edtech. And people returning to physical offices also reduces their time available for lifelong learning, which saw a huge drop from $652 billion to just $162 million in 2022.
5. Europe is the home of the edtech angels
Angel activity in the European edtech sector rose sharply in 2021 and slightly increased the number of deals with angel involvement in 2022, making it the only major region to see an increase in angel activity.
More generally, though, it reflects the increased interest that the sector has for angels. In 2022 nearly a quarter of deals had some angel involvement, up from just a tenth only five years earlier.
6. Gender equality remains an issue in edtech
Edtech is not immune to the inequalities that exist throughout venture capital, despite education being one of the more representative professions (although gender balance varies dramatically between sub-sectors). Although the proportion of capital raised by male-only teams in the UK has fallen to 49% in 2022, from a high of 88% in 2017 there is still inequality.
Only 3% of the capital raised in 2022 was for women-only teams, down from 8% in 2017. Although the gender balance is improving, and arguably improving rapidly, there is still a long way to go before we are close to gender parity.
7. Focusing on lower overall investment misses the sustained vibrancy of the sector
Although the total investment has fallen, there remains a vibrant European edtech sector behind these headline figures, especially in Europe. Globally, the average deal size fell by more than 50% between 2021 and 2022. In Europe, however, the drop was only 17%, from an average of $8.4 million to $7 million.
In the same year, the number of deals fell from 299 to 256. While they are both decreases, it reflects the underlying confidence in edtech, and based on the longer-term data, suggests it might be better to view 2021 as a fantastic year, than viewing 2022 as a bad year.
8. It wasn’t a good year for unicorns
There were only six new edtech unicorns for the entire year globally. Two of these were in Europe: Spain’s Domestika and the UK’s Multiverse. Interestingly, this did reflect the global spread of investments, with the other four coming from the US, Canada, and two from India.
However, the global herd of unicorns got significantly smaller, with most Chinese unicorns losing their status during the year.
9. 2023 might, finally, be the year of AI
It wouldn’t be a new year without predictions about the rise of AI! However, this might finally be a year they come true. With the use of ChatGPT already being debated, it’s likely the discussions about the acceptable use of AI, by both students and their teachers, will become even more prominent in 2023.
And Brighteye Ventures will gamely mark their homework whatever happens. If you are interested in their record, they gave their 2022 predictions an average mark of 2.9 out of five!
10. Edtech is still doing well
It’s easy to look at the headlines from 2022, especially the latter half of the year, and think it was a terrible year. But underneath the figures, there are plenty of positives. The world is emerging from the pandemic and still suffering economically, and it’s hard to suggest these are anything like normal times.
However, overall funding remains high, the global investment of $9.1 billion can hardly be called small, and compares to 2018 levels of investment. It compares even better to previous years, at almost twice the 2014-2017 average of $4.7 billion.
With the sector looking strong after the roller coaster of Covid, there’s a lot to suggest it will continue to flourish in 2023.
