The landscape for edtech startups has radically changed over the past four years as venture capital flattened in the first quarter of 2024. Founders of edtech startups that survived the pandemic funding bubble are older, more seasoned and deeply mission-focused.
WGU Labs, the research arm of Western Governors University, surveyed 37 founders to pulse-check the edtech environment and offer a glimpse into the market’s foreseeable future. Among its most sobering findings were:
- 55% have no impact investors
- 60% have raised $3 million or less in seed funding, falling well below the $3.5 million average found in other sectors
- 71% have gone more than six months since their last raise, and 41% only completed a single fundraising round in three years of their edtech company’s operation
“This is probably the new normal,” says Jason Levin, executive director of WGU Labs. “If you take 2021 out and draw a trend line, the edtech space is not that different than before [the bubble].”
However, those captaining today’s edtech startups have changed. More than a third (38%) of the founders surveyed were in their 50s, and half have run other startups—a far cry from the young, Silicon Valley prodigy we might conjure when we think about these entrepreneurs. Moreover, nearly three-quarters of the surveyed edtech companies were co-founded by one or more people, emphasizing the importance of collaboration.
“If you’ve been working in education, you’re kind of used to this boom-and-bust model of investment and enthusiasm,” says InScribe co-founder and CEO Katy Kappler, a survey respondent.
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With the edtech founders surveyed reporting a longer time between funding, fewer rounds of fundraising and less capital raised in those periods, those most likely enduring today’s market restrained themselves from exorbitant spending during the pandemic’s market boon, Kappler explains.
“If you were focused on the mission and conservative about your deployment of dollars, you’re probably more likely to be able to weather the storm right now. From a buyer’s perspective, I think that’s actually a positive thing because those organizations that are still in the market and available are more likely to be more durable.”
The strategies edtech founders are deploying today to help them stay relevant hint at how higher education at large is changing. For example, as the appetite of faculty and administrators for AI grows—albeit cautiously—every surveyed founder said that they were considering the impact of AI on their product.
“People are using AI in their jobs,” Levin says. “So either you prepare people for that future or not.”
Founders were most attracted to raising seed funding for AI to help with its potential for learning and learning analytics. The report urged higher ed stakeholders to cultivate stronger buy-in surrounding AI as faculty and student use policy continues to develop.
Secondly, investors and founders alike are increasing their appetite for edtech products that function beyond the realm of higher education. “In terms of the technology and how people are innovating, industries are coming together in all kinds of really cool ways,” Kappler says.
The emergence of edtech products that work across sectors echoes demands by policymakers and higher ed administrators to create a college and university landscape that’s more responsive to the workforce. Furthermore, platforms that can operate across sectors are more tempting for investors interested in expanding their customer base, Levin says.
“If the only viable business model is selling to institutions, that’s a bit of a red flag. We have to kind of believe that there’s something bigger out there.”
