Is 2020 bringing more edtech rounds than ever, or does it simply feel that way?


Image Credits: Nigel Sussman (opens in a new window)

Venture capital activity is high at the moment, making it difficult to keep up with the influx of new rounds that are being announced.

Our cup runneth over, and I would much rather be busy than bored, but not all sectors are as busy as others. We’re not drowning in consumer social rounds, for example. We are, however, seemingly suffering from a deluge of edtech investments.

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Happily for the TechCrunch crew, Natasha Mascarenhas has become our resident expert on the sector, covering it week in and week out. But even though it’s her beat, I couldn’t help but wonder this morning upon yet another large edtech round coming across the wires, just what is going on in the sector in aggregate?

I had to know. So, I’ve done a little digging into Crunchbase data, parsed through some other information and have something approaching an idea. My goal is to help us both understand if there are more edtech rounds than ever being announced, or if it simply seems that way.

Into the breach!

Edtech VC activity

The best way to start examining at a sector is to take its aggregate performance data and cut it into smaller bits. Companies do this with quarterly results, for example, an utterly arbitrary period of time to report on that is also very useful.

To get a handle on edtech in 2020, I went a bit more caveman and decided to look at the sector’s funding totals in 2020 by merely comparing the first and second half of the year.

Per Crunchbase’s “edtech” category, here’s what that data looks like:

So, we can quickly see that, per this dataset, edtech rounds have gotten larger and less frequent. This mirrors what TechCrunch has observed in venture capital more broadly during 2020. Putting that change into numbers, the average round marked “edtech” in the first half of 2020 was worth $17.3 million. In H2 2020, that rose to $53.5 million.

Crunchbase News, the resident news org at Crunchbase where I used to work, ran some data on the same question back in August, expanding the data pull somewhat, including rounds also marked under the education tag. Following in their footsteps over our original time interval, the data becomes less clear:

The average round size discrepancy is now smaller, shrinking from $10 million in H1 2020 to $21.5 million in the second half of the year. As we again see fewer rounds and more dollars in the second half of the year with this second look at the data, the resulting averages are hardly surprising.

But what we can easily see in the numbers is that we’re not enduring a thousand-year flood of edtech rounds here in the second half of 2020; we’re merely seeing more rounds of scale. That’s probably why it seems that there are so many edtech financing events happening; more are occurring that we notice, even if the total number is falling.

A similar trend is happening all over the venture capital and startup world, with more and more VC investment as a percentage of the whole tied up in megarounds, and sectors like fintech seeing their round count fall on a year-over-year basis while the number of dollars they can attract rise.

VC is getting later and larger, and edtech is no exception to the trend.

The drift is not new. Crunchbase News noted in its August edtech report that U.S. edtech funding has gyrated between $675 million and $775 million in every H1 since 2015. The same dataset showed that the number of rounds that money went to fell from 147 in H1 2015, to 130 in H1 2018, finally settling on 85 in H1 2020.

Later, and larger. That might be the real story of 2020 venture capital, more than the return to form that happened in early summer after VCs discovered that selling software was a good business when companies were forced to go digital and remote en masse.

We need a bit more time to sharpen our observations, some venture data for December and other H2 2020 months is trickling in, so we’ll have a better picture in time. More around the start of the new year on this topic.

How unicorns helped venture capital get later, and bigger

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