Despite creaky markets, European edtech is showing its resilience


Cap and stack of Euros. Isolated on white.For more money and finance images:
Image Credits: cogal (opens in a new window) / Getty Images

Rhys Spence


Rhys Spence is head of research at Brighteye Ventures, a European edtech-focused fund.

More posts from Rhys Spence

These are turbulent times. Given the circumstances, it’s hardly surprising that public markets are creaking and only niche sectors remain either unaffected or in a marginally positive position. Edtech is no exception.

Today, Brighteye Ventures published its Half Year European Edtech Funding report, built around Dealroom’s data. The report primarily focuses on investment activity in Europe but is contextualized with what we are seeing in other markets.

Global VC funding into edtech startups totaled $6.5 billion in H1 2022 compared to a total of $20.1 billion raised in 2021. This pullback in global funding can partially be explained by fewer edtech mega-rounds (over $100 million) in H1 2022 compared to previous periods.

The first half of 2022 saw 16 so-called mega-rounds, compared to 24 in the second half of 2021 and 30 in the first half of 2021. At the same time, the number of early-stage rounds, categorized as deals under $15 million, has fallen fairly consistently since a peak in H1 2018.

Note that this doesn’t necessarily reflect lower activity in the ecosystem — it simply means that more early deals are being done by angels and via involvement with incubators and accelerators, which are not comprehensively covered in the data.

We were pleased to see that the European edtech ecosystem has managed to maintain most of its momentum, at least for the time being. The fact that the sector has secured $1.4 billion thus far in 2022, 40% more than a year earlier, demonstrates its resilience to maintain growth even amid challenging conditions.

This isn’t surprising given the inverse correlation between worsening macro employment markets and appetite for education, particularly in the market for post-18 education.

This resilience isn’t present across the world, though. As the data shows, edtech in Europe is proving more resilient than in other regions. This is evidenced by both the comparison between 2022 and 2021 figures and the increasing proportion of global edtech VC investment secured by European startups — rising from 6% in 2020 to 11% in 2021 and to 22% in H1 2022.

The portion of global edtech VC funding received by European companies is increasing
Image Credits: Brighteye Ventures

We remain cautiously optimistic that the European market will continue to see early- and later-stage deals in the second half of this year, but we do expect the number of deals done this year to be about 25% to 30% lower than in 2021, in addition to lower VC funding in the second half.

The fact that we’re seeing fewer deals but more funding in the market means the size of the average deal has gone up. Indeed, the average deal size in Europe this year is about $13.1 million compared to $8.4 million last year. We believe this reflects investors doubling down on companies that they think will survive and thrive in the current environment.

The U.K. leads the way, as it has in recent years, when it comes to both deal count and total VC funding secured this year on the continent. Indeed, more than twice as many rounds were raised by U.K. edtech companies than any other European country. However, the U.K. saw only 35 rounds raised so far in H1 2022, compared to 87 in 2021, which leads us to expect a lower deal count across Europe.

So far in 2022, 3 European companies have raised more than $200 million each
Image Credits: Brighteye Ventures

It’s worth noting that so far in 2022, three of the top 10 largest rounds were raised by companies based in Germany, which is fast becoming a thriving ecosystem. The largest deal was also raised in the DACH region — GoStudent’s $340 million Series D.

The three largest deals in Europe, all $200 million or more, spanned three verticals, which bodes well for the depth of the ecosystem. These deals were secured by GoStudent (Austria), Multiverse (U.K.) and Coachhub (Germany).

As funding rounds get bigger and the number of deals falls, it’s not surprising that we’re seeing bigger deals account for an increasing portion of total European edtech VC funding. In 2021, just 27% of funding was raised in rounds over $100 million, but this figure leapt to 54% in H1 2022. Meanwhile, only 14% of funding was secured in rounds under $1.5 million in H1 2022 compared to 22% in 2021.

in 2021, just 27% of funding was raised in rounds over $100M, but this figure has leapt to 54% in H1 2022.
In 2021, just 27% of funding was raised in rounds over $100M, but this figure has leapt to 54% in H1 2022. Image credits: Brighteye Ventures

We expect the European edtech market to maintain some positive signs of resilience, but naturally, the ecosystem cannot be immune to the headwinds it faces.

So what does all of this mean for founders?

In short, fundraising has become more challenging and is likely to remain so for some time. Just because you can raise doesn’t mean you’ll necessarily be able to raise at a premium to your last round.

If you can grow quickly and efficiently, capital is still available. Otherwise, you should try to give yourself as much flexibility as possible with runway (ideally more than 24 months) and consider prioritizing profitability over growth, as well as exit opportunities.

The picture is slightly rosier if you’re at the pre-seed stage. Generally, seed funds operate on time horizons of six to nine years, so they are less likely to be affected by the current downturn in terms of the pace of deployment. Seed valuations are based less on traction and more on potential, the size of the round and the team working on the project.

We do, however, expect the median size of seed rounds to decline in coming quarters. The expectations aren’t likely to be very different when you’re raising a Series A 18 months from now, so understanding what is expected now will help you better gauge key metrics needed for the next round of funding and how to best allocate your seed funding.

That said, there remain some positives for edtech companies.

Part of our pitch at Brighteye is that education is a recession-resistant industry. As we mentioned earlier, economic downturns drive people to seek training and governments to increase spending on training and education. Conversely, booms increase the return on knowledge and expertise.

VCs are still writing checks after raising large funds during the previous, more obviously sunny period, and lower investment expectations pose less emphasis on the “growth-at-all-costs” approach. This gives founders and early teams the ability to build at a more rational pace, which is generally favorable for edtech companies. It’s also likely that there will be less noise in the space, given there are fewer companies getting funded, which will essentially result in less competition, at least in the short term.

The good news is that if you’re in edtech, you’re operating in a relatively resilient sector in terms of funding availability and with relatively reliable, and sometimes increasing, demand. The less good news is that the number of deals done this year, at all stages, will likely be lower than we saw in 2021.

It will be a challenge to navigate this environment, but we look forward to doing our bit to help the sector through to calmer seas ahead.

More TechCrunch

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

6 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?