Why EdTech is getting top marks from angel investors

May 29, 2022

By Sam Louis, Director Brokerage, Angel Investment Network

Sam Louis - Why EdTech is getting top marks from angel investors

Angel Investors are a vital part of the startup ecosystem. They back companies at an earlier stage than investors such as venture capital and private equity firms and so are a clear indicator of where trends in the tech industry are heading.

It was therefore telling to see that in our recent investigation on the Angel Investment Network platform, EdTech was revealed to be one of the fastest-growing sectors for investor searches. Up 56% since the start of the pandemic. Drawing on data from 40 networks extending to over 90 different countries, this underscores its rapid global ascent. In fact, EdTech has transformed from niche to mainstream for angel investor interest in the past two years, and I am personally seeing more investors asking about businesses in this sector. There are several reasons for this.

The Black Swan event
Previously the barriers to entry for EdTech companies were prohibitively high. The challenge lay in the system with educators and institutions having busy schedules. Learning new tech on top of strenuous schedules was a bridge too far for many. After all, it takes real-time, energy and capital to introduce step changes in how you deliver or receive education. Until the potential benefits significantly outperform the current system (and these benefits have to be significant for most learners), the change is a genuine risk.

The pandemic has been a Black Swan event in regard to investment. With education in person suddenly shutting down, institutions were forced to adapt and change. This then forced educators to engage with these new opportunities. This change in consumer and educator sentiment has been recognised by investors, which in turn has given them the confidence that startups can find a significant and willing market.

We are now seeing a plethora of companies solving for a variety of problems. In an unsaturated market, many are able to demonstrate a real need for their product and develop clear paths to profitability. There are five key sectors within EdTech that are seeing the most early investment.

a) Digitally enabling existing learning
Firstly, those digitally enabling existing learning have been the most numerous. Companies providing technology to enable learning that was already taking place. This trend was driven by the pandemic, but the shift in behaviour will endure. It’s also one of the areas with the least need to stimulate new consumer behaviours. This gives it a strong chance of adoption, recognised by investors, and evidenced by the capital deployed in the past couple of years. For example, BibilU, who digitise print textbooks and provide them seamlessly across all your devices, had to do an extension to their initial seed funding round due to the incredible demand for their product, before now rapidly progressing to Series B stage.

b) Adult learning
Secondly, there has also been astonishing growth in digital solutions for adult learning. The evolution of job roles and rapid pace of change has created a need for lifelong learning. Time pressed adult learners are increasingly getting this learning from home. A new generation of smart apps offer learners a tailored pathway and instant feedback and data. People like DuoLingo have shown the heights possible with self-motivated learners, while Coursera has done the same in the B2B market.

c) Tech to boost efficiency
Solutions also exist for educators alongside learners. With increased reporting and accountability, many teachers struggle to manage the added workload that comes on top of teaching time. A range of new tools enable teachers to streamline their tasks and work more efficiently. Pango is a great example here, providing teaching resources from trusted publishers, all in one place.

d) AI and personalised learning
The most exciting and arguably the most controversial is AI and personalised learning. Atom Learning, having recently received the backing of Softbank, have developed high-quality, teacher-made content with sophisticated AI-driven technology to keep students on individual, optimal learning paths. This can have a transformative impact on pupils’ progression, arguably helping to reduce educational inequalities.

e) Ancillary services
Finally, we are also seeing the development of new solutions outside of curriculum learning. This includes championing social education, with startups like Vygo reinventing the conventional social support ecosystem in higher education with their innovative SaaS platform and support network. A recent funding round they conducted on AIN saw them oversubscribed quickly as investors spotted a clear unrealised opportunity in the EdTech space.

Ability to Demonstrate Traction
Unlike other developing markets, these EdTech firms can build significant traction and product-market fit at an early stage, even when bootstrapped. At AIN we like to see strong uptake and engagement in the startups we showcase to investors. This includes evidence that they’ve really tested the product or service with consumers and learners and that the feedback has been encouraging. Not just they like the product, but that it delivers real value. For many firms, getting engagement with universities and institutions is critical. We’ve seen so many fantastic ideas but when someone has really proven they can move the needle for educators, it shows.

All in all, EdTech is in an exciting place. The buzz surrounding it reminds me of the same excitement around FinTech 10 years ago. Much like then, there’s an expanding number of startups solving a range of existing problems, in an industry that hadn’t seen much innovation for decades. As the growth in interest on our platform shows, we are likely only at the beginning.

About Sam Louis, Director Brokerage, Angel Investment Network

Sam has worked in the venture space for over 7 years, in which time he has led over 100 intermediary transactions. EdTech businesses he has worked with include BibliU and Vygo, as well as other fast-growth companies such as Ziglu, Pinpoint Data Science, The Dots, and EleXsys Energy.

In addition to the venture space, Sam has previously completed over 50 real estate transactions while co-leading an emerging UK property investment platform. He regularly advises start-ups and sits on the board of an early-stage tech recruitment platform, a spinout of Europe’s largest developer community. He has been an angel investor for the past 6 years with a successful personal portfolio and is a regular blogger and commentator on the startup ecosystem.

New to EdTech?  Read our EdTech 101 guide: https://global-edtech.com/edtech-definitions-products-and-trends/