To raise money for an edtech startup, target the angel investors and VC firms that specialize in education technology, then cross off any that already fund your competitors. You also need a unique value proposition and an unfair advantage before you pitch.
If you’re a founder or executive at an edtech startup, funding is available, but it is more selective than it was at the 2021 peak.
According to HolonIQ’s report on global edtech funding 2021, in the first half of 2021 there was $10 billion of investment in edtech startups around the world. In the United States alone, edtech investment reached more than $3.2 billion between January and July 2021. That period also saw major developments from edtech companies, including IPO filings from Duolingo and Instructure and the acquisition of the edX online learning platform. Funding has fallen since: HolonIQ reported $2.4 billion of edtech venture capital worldwide in 2024, the lowest level since 2015 and an 89 percent decline from the 2021 peak.
All of this leads to one question: how can your edtech startup get a piece of the action with a deliberate fundraising funnel? In other words, what is the best way to seek edtech seed funding and pre-seed funding from angel investors and venture capital (VC) firms? Below, we’ll explore the process of raising funds for your edtech startup.
What is edtech?
Edtech (education technology; also spelled EdTech) refers to the development of software applications and technologies to improve and facilitate the learning process. Edtech products span a wide range of fields. Here are just a few examples:
- Learning management systems for planning and implementing educational courses, with features such as content delivery (e.g. prerecorded videos or PDFs), gradebooks, course announcements, student analytics, etc
- Immersive technology (such as augmented reality and virtual reality) to provide a more hands-on learning experience
- Platforms that “gamify” the learning experience with high-quality content, helping engage students as they explore a particular topic (e.g. programming, science, or other STEM fields)
- MOOC (massive online open course) portals that provide asynchronous distance learning to students around the world
- Digital study aids and tools for reinforcing the learning process (e.g. flashcards, quizzes, virtual tutoring, etc.)
Through 2021, the edtech startup field boomed and investor interest rose. The rise in online education during the COVID-19 pandemic was one of the most immediate causes. At the start of the pandemic in Q1 2020, for example, edtech startup funding worldwide soared by 22 percent.
Market forecasts from that period pointed to sustained growth. For example, in 2021 the market intelligence firm MarketStudyReport projected that the global edtech market would expand by 20 percent annually, from $75 billion in 2019 to $319 billion in 2027. Forecasts differ because analysts define the market differently, so treat any single figure as a rough guide.
Communities such as the EdTech Founders Initiative have sprung up in support of edtech founders. These communities provide everything from networking events to assistance with hiring and fundraising.
What is edtech market?
Analysts have long predicted growth in the edtech market. According to Research & Markets, the global edtech industry stood at $85 billion in 2021 and was predicted to reach $218 billion by 2027, an annual growth rate of 17 percent. That forecast uses a narrower definition of the market than the one above, which is why the two do not match.
As of 2021, a few dozen unicorn startups stood at the forefront of the edtech market. In the world of business, a “unicorn” is a privately owned company that has achieved every founder’s dream: reaching a valuation of more than $1 billion. If you have lofty designs for your own startup, there has been no shortage of edtech unicorns.
The MOOC platform Udacity was one of the first edtech startups to reach unicorn status back in 2015. By 2021, there had been more than 30 global edtech unicorns, with a collective valuation of more than $100 billion.
Other edtech unicorns from that period include the study aid website Course Hero, the virtual homeschooling marketplace Outschool, and the online learning platform MasterClass, which is headquartered in San Francisco and offers courses taught by experts and celebrities. In addition, businesses such as Udemy, Duolingo, and Coursera are former unicorn edtech companies that have since gone public in an IPO.
How do I get funding for edtech?
Edtech remains an active category for startups, but investors are choosier. So how can founders get the edtech startup investing that their business needs to survive?
First, you’ll need to take a look at who’s funding education technology. Do your research to find the angel investors and venture capital firms who specialize in the edtech market. You might also consider reaching out to VCs and angel investors in other industries who are looking to diversify their portfolios, given the growth edtech has seen.
Due to the unique nature of the edtech market, some startups have been successful in attaching themselves to an institutional investor, such as a university, school, corporation, or other educational system. In exchange for a stake in the company, these institutions can provide brand recognition, a built-in user base, and access to valuable resources that your startup needs to get off the ground.
After doing your research into potential investors and casting a wide net, it’s time to filter your results. In order to narrow down your search, remove investors that match the following criteria:
- Already funded your competitors
- Specialize in the wrong industry, geographic area, or stage
- Not actively funding companies
- Have a bad reputation in the startup community
Regardless of which investors you decide to approach, your edtech startup must have two essential components to secure investment:
- A unique value proposition: You must be able to succinctly explain what differentiates your startup from its competitors. If you’re building a MOOC platform, for example, why would customers choose you over better-established competitors?
- An unfair advantage: Your business strategy must be difficult enough to copy that it dissuades potential rivals. This “unfair advantage” could be everything from a patented idea to having brilliant engineers or marketing professionals on your payroll.
Once you’ve identified the best investor candidates and refined your own startup pitch, you can begin to fundraise for your edtech startup.
Founders Network is a peer mentorship community for tech startup founders. If that fits where you are, request an invitation.
Frequently asked questions
Which investors should an edtech startup avoid?
Remove investors who already funded your competitors, specialize in the wrong industry, geography, or stage, are not actively funding companies, or have a bad reputation in the startup community.
Can a university or school invest in an edtech startup?
Some startups have attached themselves to an institutional investor such as a university, school, or corporation. In exchange for a stake, the institution can provide brand recognition, a built-in user base, and resources.
What counts as edtech?
Edtech is software and technology that improves and facilitates learning. Examples include learning management systems, AR and VR learning, gamified platforms, MOOC portals, and digital study aids such as flashcards and quizzes.
How big is the edtech market?
Estimates vary by source. The post cites a 2021 Research & Markets forecast putting the global edtech industry at $85 billion in 2021 and $218 billion by 2027, and HolonIQ's figure of $2.4 billion in edtech venture capital in 2024. It also notes more than 30 global edtech unicorns as of 2021.
