While 2020 will of course primarily be remembered for the difficult circumstances and disruption caused by the pandemic, it will also be remembered as a period that helped bring about a systemic shift in the education sector. The in-classrooms status quo was turned on its head and all education was delivered remotely. The vast gulf this created was to some extent filled by EdTech start-ups, stepping up to improve access to learning and providing solutions to students and consumers needing to work in the remote environment.
According to research conducted by Brighteye Ventures, a reputable venture capital (VC) firm and leading authority on the EdTech (education technology) sector in Europe, the demand for EdTech products increased as online learning became prevalent, educational institutions invested more in technology, and investors became attuned to the range of opportunities within the sector.
Brighteye Ventures, led by Managing Partner Alexander Latsis, believes this is the start of a new era in education, in which remote learning and working is normalised and offered across the board. The firm believes that EdTech entrepreneurs are cultivating fertile ground. Given that barriers to customer adoption have greatly reduced and thus traction is easier to achieve and prove, generalist investors are recognising that EdTech can reap the outsized returns seen in sectors like FinTech, and more EdTech investors from the United States are investing into the European market. These factors have led Alex Latsis and Brighteye to believe that VC investment in 2021 could be triple the levels seen in 2020.
To provide more detailed and evidenced insights on what the immediate future might hold for European EdTech, Brighteye put together a European Funding Report that included VC funding data, dating back to 2014.
The team consolidated data from reputable sources such as Tracxn, Pitchbook and Crunchbase, and focused on companies categorised within EdTech and/or education (as keywords). Some of the highlights are pulled out below:
Increased Capital in 2020
According to the report, EdTech companies in Europe enjoyed a $75 million increase in VC funding between 2019 and 2020. But this increase in funding didn’t translate smoothly to big exits – the pandemic introduced significant revenue volatility given uncertainties around how EdTech companies would fare as we emerge from pandemic conditions and thus it was harder for would-be acquirers to value companies. The research also showed that many transactions were driven by private equity (PE) or formed part of strategic consolidations.
The United States EdTech sector, long considered a mature market, saw more mergers and acquisitions (M&A) activity than Europe. Notable deals within this market saw publicly traded names such as Rosetta Stone and Pluralsight being taken private by PE houses.
At the same time, the market also witnessed its first Special Purpose Acquisition Company (SPAC) activity through the Skillsoft/Global Knowledge deal. This deal also happened to be the only EdTech initial public offering (IPO) for the US market in 2020 – but 2021 promises to see more EdTech companies join the public markets and so it is proving.
Gradual Growth in European EdTech Investment
The move to distance living, working and learning has translated to an increasing reliance on technology for people and businesses to collaborate successfully over digital platforms. As technology use has grown, so too has the level of VC investment in Europe.
According to Brighteye’s research, the sector has witnessed a ten-fold growth in VC investment since 2014 – from $70 million in 2014 to $711 million in 2020 – as investors recognise the opportunities that lie at the intersection of education and technology.
Still, there remains significant room to run – for example, more than 90 percent of academic resources remain offline.
The UK Sits at The Centre of European EdTech
With approximately 40 percent of total deals funded and 30 percent of the value of all EdTech deals being realised in the UK, the country is the dominant player in Europe’s EdTech sector.
However, when both measures are seen in absolute terms, the UK registered a decline in 2020 compared to 2019. It was the same story for second-placed France, which saw lower absolute values regarding the value of deals done. The Nordics, Germany and the Rest of Europe rounded out the top markets within Europe by VC funding.
While the UK is a clear leader, Central and Eastern Europe (collectively classified as the Rest of Europe) saw increases in the number and value of deals in 2020.
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Alexander Spiro Latsis, Nobrow Ltd. founder, has more than a decade of experience as an entrepreneur in media and technology businesses. He has been the Managing Partner of Brighteye Advisors since 2017, working closely with Brighteye’s other Partner, Ben Wirz.
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