Education is among the key pillars that drive the development of societies for centuries. Its manifold effect provides an opportunity to improve the quality of life for an individual, and the positive development of the world as a whole. Consisting of acquiring new knowledge and skills, education is one of the key forces that drive forward the evolution of civilizations.
In the past decade, the traditional way of tutoring has changed and both teachers and students had to change the way they interact with each other. With the advancement of technology set in the digital era, teachers had to adapt and find the right tools and techniques to stimulate the students. A lot of startups and tools have emerged from the digitalization of the education industry looking to solve different roadblocks in the teacher-student relationship.
However, one of the strongest roadblocks to the mass implementation of digital education practices is the conservatism and technophobia among teachers. Different reports show that between 40% and 50% of tutors have a negative attitude toward different e-learning platforms. With the onset of the pandemic, teachers were forced to adapt to the learning environment. After 2 years of constant online tutoring, it seems that everything in the industry is going back to the pre-covid era. And teachers are the main evangelists of returning to the classroom full-time. With these constant changes in the industry, it’s no surprise that EdTech is trailing compared to other business verticals like HealthTech, FinTech, and many others.
The European landscape
The first boom of companies developing EdTech solutions was in the USA and Asia, while European representatives seemed to be a step behind. Since the beginning of 2022, data from Dealroom shows the trend is changing and European startups are closing the gap with their international competitors.
K-12 education and corporate learning segments have secured more than 60% of all VC money invested in the industry in 2022. This establishes them as the two pillars to shape the future of European EdTech. Among them, we find learning management platforms, online education providers, interactive learning and gaming tools, and marketplaces connecting students and tutors online. In addition to the variety of tools, the European market isn’t homogenous and there are discrepancies between different countries.
Private companies are among the main growth drivers for the development of the European EdTech industry. Although the market in Europe is still trailing behind other regions, the combined private value of companies in the industry has grown by more than 20% compared to 2021.
A second boom on the horizon
As such an impactful industry for the development of the world and the rise of venture capital funds across Europe, one would expect that the number of investments in the sector will be among the highest in comparison to others. Education is roughly a $6.5T market, of which only <4% is digitized. The sector is vastly underfunded in comparison to other sectors of similar size, like health.
After the initial boom in 2020 of EdTech startups, the expected rapid growth in the next few years didn’t happen. This brought uncertainty and many of the top-tier startups that emerged in this period are now underperforming, leading to a drop in megarounds (over €100M) in the industry and lowered valuations. However, there are clear signs of a second growth wave. This optimism comes from the number of funding deals happening in the early-stage rounds compared to the same period in 2021 – 56% growth at the seed phase, 14% at Series A, and 12% at Series B.
The increasing amount of deals at an early stage of the development of the companies combined with a larger sum of invested capital in 2022 compared to the previous year, is another sign that investors believe in the future of EdTech and are willing to fund early-stage companies that are aligned with the needs of their customers, delivering a more personalized approach toward learning.
This is another sign that a second boom is expected in the EdTech industry. With this in mind, all founders should think of how they develop their products and how to establish meaningful relationships with tutors and students that can be fruitful in the long run.
Marketplaces in focus
Thinking of the successful EdTech startups during the initial activation at the start of the pandemic, most of them solved a problem that had just come up, and very few were trying to implement long-term plans for future development. Now, if startups want to succeed, they need to build a product that will survive through these difficult economic times and develop long-term relationships with their users. Marketplaces connecting tutors and students are a good opportunity to do that. Following data from the report, we highlight some of the companies aiming to build solutions that help millions of users.
Odilo is a white-label platform that allows businesses or organizations to build their own customized e-learning offerings in a B2B2C model. Among the company’s customer list, we find government bodies, libraries, and education organizations like MIT, but also big corporate customers such as Google and Vodafone. One of the biggest advantages of the platform is the opportunity for customers to customize their experience with the platform using a variety of APIs and other tools.
Studytube offers mid-sized and large enterprises an online learning and development platform through a SaaS-enabled marketplace, providing courses from third-party providers. T-Mobile, Vattenfall, Aegon, NS, Eneco, and STORK are only a few of the 300+ Studytube clients. The company offers a fully integrated learning platform, consisting of a learning management system, a learning experience platform, an integrated authoring tool, and a learning marketplace.
Aiming to join the list of the most promising EdTech marketplaces is Bulgarian startup Vedamo. The company is looking to expand its offering and develop an online learning marketplace to connect students with tutors. As an established player in delivering top-quality virtual classroom experiences for students, the company now aims to establish a platform for connecting tutors and those eager to learn.
While facing many challenges such as the conservativeness of tutors, the decrease in student engagement, and the lack of results from top-tier startups in the industry, European EdTech is aiming for a second wave of early-stage companies that will shape the sustainable future of the vertical. Especially in a turbulent economic environment, investors will be very careful in choosing the right startups to invest in. This will be a process of natural selection to the startups and solutions that are in sync with the needs of the market.
