Edtech startups defy funding blues

Education-focused startups are on a tear across Asia, bucking the broader investment decline in the startup industry.

Funding for tech startups in the region fell by more than 50% in January, with companies in China and Southeast Asia seeing a massive drop in investments. The trend will likely persist as Covid-19, the disease caused by the novel coronavirus, continues to spread like wildfire.

Photo credit: DFID.

Beating the funding blues, however, are a multitude of education-focused startups that rely heavily on technology to scale up. Edtech firms managed to raise fresh capital in a tepid market that has prevented many unicorns from pursuing initial public offerings, as venture capital firms have turned their focus to profitability following the fiasco at SoftBank-backed WeWork last year.

Byju’s, India’s only profitable unicorn, has had the biggest funding round among edtech companies so far this year, raising US$200 million in a deal that valued it at about US$8.2 billion. Another Indian company, Unacademy, raised US$110 million in a series E funding round earlier this month. Snapask, a Hong Kong-based online learning platform, on the other hand, has become the latest edtech company to raise funding as it seeks to expand across Southeast Asia.

Tiger parents pay up

Among the most active investors in the edtech space is Sequoia Capital, with investments in India-based firms Byju’s, Eruditus, Cuemath, InterviewBit, and Doubtnut.

“In highly competitive markets like India and Southeast Asia, parents are even more keen for their children to perform well in exams and find better employment opportunities,” says GV Ravishankar, a managing director at Sequoia Capital India. “This results in them investing significantly in their children’s education, creating a large and vibrant market for K-12 supplementary, test prep, and continuous education – which in turn has created a rich market for startups to succeed.”

GV Ravishankar, MD, Sequoia India. Photo Credit: Sequoia India

There are numbers to back this up. Asian edtech firms raised more capital than their global peers in 2020, according to Pitchbook data.

India in the lead

An untapped opportunity