Half the most valued EdTech startups raised money this year

Steven Loeb · May 19, 2016 · Short URL: https://vator.tv/n/4587

The EdTech space saw a big decline in Q1, but the best companies still manage to raise funding

One thing that I hear investors say a lot is that, even when the market is down, the best companies will still find a way to get funding. Most spaces are feeling the pinch right now, but EdTech in particular has taken a big hit, with funding dropping 75 percent in Q1.

Still, the best companies find a way to get that capital, and on the list of the top 10 highest valued startups in the EdTech space, put out by Pitchbook, half of them have raised money this year.

The most recent funding went to Age of Learning, which raised $150 million in May, to be valued at $1 billion, making it into a unicorn. That also makes it the second highest valued education company, behind Udacity, which is valued at $1.1 billion, and tying it with iTutorGroup and Pluralsight. 

The sixth highest valued company is HotChalk, which raised $83.1 million in January, to be valued at $690.1 million, followed by Chinese education startup 17zuoye, which raised $100 million to get a valuation of $600 million, for seventh place on the lit. 

The other two companies to raise funding this year were Knewton, which raised $52.25 million in January, for a $502.3 million valuation, and NetDragon, which raised $52.5 million in February, to be valued at $477.5 million. The two companies are the eighth and ninth highest valued EdTech startups, respectively.

The EdTech space

Despite these big deals, ehe EdTech space is not doing well this year. fter at least four years of increases in both dollars and deals, now EdTech is expected to see a steep decline in 2016.

The space is projected to see $1.3 billion invested in 376 deals, which would amount to a fall of 57 percent in dollars, and 23 percent in deals. 

That was after activity EdTech startups hit record highs in 2015, when funding went up 64 percent, to over $3.1 billion, and the number of deals rose nearly 10 percent to 491. Now it is expected to the lowest amount of funding since 2013, and the lowest number of deals since 2012.

Things are looking down on a quarterly basis as well, as the number of dollars fell to their lowest level in seven quarters in Q1. With $361 million invested, the last time there was less funding put into EdTech  companies was in the the second quarter of 2014. 

Funding fell 75 percent quarter-to-quarter, though, to be fair, Q4 was something of an anomoly, with $1.3 billion invested. That was thanks to mega deals in companies like HotChalk , which raised $230 million; Tutor Group, which raised $200 million; HuJiang, which raised $157 million; and Udacity, which raised $105 million. 

In fact, that is the only quarter to ever see more than $1 billion invested. Combine that with the low funding for this past quarter and the dropoff seems more dramatic than it perhaps actually is. This is now the third quarter out of the last four, minus the historic Q4, to see funding drop, so Q1 is more in line with the current trend. 

Compared to Q1 2015, this past quarter saw dollars drop 54 percent.

There are some markets where EdTech is picking up, though. China actually was the second largest in terms of deals in 2013 and 2014, before India overtook it last year. From 2011 to 2015, deals rose 483 percent, from just 6 to 35.

It's telling that three of the top 10 biggest EdTech companies are based in China. 

(Image source: edtechreview.in)

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