Edtech funding drops by nearly half to $971 million in first 7 Months of 2023, tracking global trend

Total venture capital funding in India’s edtech sector has witnessed a significant decline in the first seven months of 2023, reflecting a global trend.  

From January 1 to August 7, edtech investments plunged by 48 per cent to $971 million compared to $1.87 billion in 2022, according to a report from data intelligence platform Tracxn. This also marks a 50 per cent decrease compared with 2021. Furthermore, the number of funding rounds in 2023 experienced a drop of 77 per cent compared to 2022 and an 82 per cent from the same period in 2021.  

Globally, the appetite for online education has waned as traditional brick-and-mortar schools have reopened. This, combined with the current funding crunch, escalating interest rates, and economic uncertainties, has played a pivotal role in the investment decline into this sector.

The bulk of this year’s funding was secured during the second quarter, totalling a substantial $713 million, which represents a significant 73.43 per cent of the total funding for the entire year. This figure reflects a 37 per cent surge when compared to the corresponding quarter of the previous year.

Late-stage investments accounted for the lion’s share of funding in 2023, amounting to $879 million, contributing to more than 90 per cent of the total funding. This is 23 per cent lower than the $1.14 billion raised during the same period in 2022 and a 39 per cent drop from the $1.44 billion raised in 2021.

Conversely, early-stage investments saw a sharp decline in 2023 YTD, totalling $75.7 million, which represents an 88 per cent drop compared to the $618 million raised during the same period in 2022 and an 82 per cent drop compared to 2021.

K-12, test preparation, and higher education tech attracted the most investments with K-12 start-ups raising a total of $711 million during this period, which marks a decrease of 45 per cent compared to 2022 and 56 per cent compared to 2021.  

No new unicorns have so far emerged in this sector this year, as against two in the same period last year. Acquisitions took a substantial hit, plummeting by 70 per cent with just seven mergers and acquisitions (M&As) so far in 2023 in comparison to 23 M&As during the same period in 2022 and the 19 acquisitions recorded in 2021.  

Among Indian cities, Bengaluru led in terms of total funds raised, followed by Mumbai and Gurgaon. As of the first week of August, edtech start-ups in Bengaluru raised over $8 billion, while Mumbai raised $2.5 billion and Gurgaon raised $497 million.

We Founder Circle, IPV, and LetsVenture emerged as the top seed investors, while Peak XV Partners, Better Capital, and AngelList were the leading early-stage investors. In the late-stage category, MMPL Trust, WestBridge Capital, and The Chan Zuckerberg Initiative stood out as top investors.