“The ecosystem in learning and skills is now being viewed as more than just edtech,” said Deborah Quazzo, managing partner of the US-based venture capital firm, in an interview on the sidelines of the ASU+GSV and Emeritus Summit in Gurugram. “It now includes large site-based education players, universities, and corporate entities—because you need more than just edtech to make it real.”
This marks a shift from the massive post-pandemic edtech boom that saw edtech players like Byju’s, Unacademy, and Physics Wallah, among others, come of age in the country.
Five years later, the edtech ecosystem is witnessing a slowdown. Industry leader Byju’s fall has put investors off.
The sector’s total fundraising in 2024 stood at $608.9 million, recovering slightly from $245.8 million in 2023, showed data from analytics firm Tracxn.
In its heydays, the sector saw an influx of investments, totalling $4.1 billion in 2021, almost doubling over 2020 and growing nearly 7X over 2019.
The sector collapse
Quazzo emphasized that the fall of some edtech models, like Byju’s, after their meteoric rise, had little to do with the education sector itself. “It was all the external factors we now know. It wasn’t endemic to the edtech sector. All these subsidiaries are trying to unwind, leaving behind a mess… The real tragedy isn’t just investors losing money—it’s the founders who sold their companies into it, thinking they had secured a future, only to see it vanish,” she added.
Companies like Tynker, Great Learning, Geogebra, Aakash Institute, and several US-based firms are now stuck or struggling to exit the Byju’s ecosystem after being acquired during its hyper-funded acquisition spree in 2021.
“Digital education was the hottest thing in the world as covid-19 hit, and it got overdone. This always happens to sectors with positive fundamentals—whether it’s the internet, mobile, or cloud. The excitement gets ahead of the game, and then the pendulum swings back,” said Michael Moe, the venture capital firm’s founder.
He also pointed out the importance of caution for investors: “It’s also a good warning for investors, reminding them that they always need to be cautious.”
Time to mature
Online-based edtech players, which initially aimed to disrupt the traditional education ecosystem, have now started offering hybrid models. In some cases, they are even partnering with traditional players to build credibility.
Quazzo sees this shift as a sign of a maturing market, with more integration expected between the traditional education system and edtech, whether through vendor relationships or hybrid models. “We see this in the US market, where larger existing players often acquire smaller startups, and private equity investors step in to buy companies as they mature,” she said.
Although GSV Ventures has a few potential investments in the pipeline in the US and India, Quazzo believes activity in both markets remains slow, except for a few top players.
GSV, which has raised three funds, is currently deploying from its third fund. The company has returned about half of its first fund and a part of its second fund. However, Quazzo told Mint that GSV currently has no plans for a fourth fund.
In December 2024, Mint reported that GSV Ventures, which invests exclusively in edtech companies globally, is set to ink two new deals, one of which is expected to be announced in India in 2025.
Having invested about $90 million in over 10 Indian startups, including Physics Wallah, Classplus, Lead, and AdmitKard, by February 2023, GSV has refrained from making new investments in Indian edtechs in 2024.
Disruptive segments
Looking ahead, Quazzo and Moe expect to see more large players emerging from segments like upskilling, financing products, and pre-K education.
“In the US, with abysmal academic results from the K-12 system, many students are entering the workforce less educated than before. As a result, the workforce itself is becoming the fourth education system, filling the gaps left by the failures of pre-K, K-12, and higher education,” Quazzo said.
“We’re seeing a wave of companies providing financial support and efficiency processing for K-12 and higher education, including financing options for parents, and it’s been an interesting trend with some great companies emerging from it,” she added.
Moe also pointed out that there is a significant opportunity in the Pre-K segment, which is currently lacking transformative solutions. “We haven’t yet seen the kind of innovative ideas needed in pre-kindergarten education, though the demand is immense—especially with dual-income families outsourcing early learning that was traditionally done at home. I’m hopeful we’ll see innovation in this space because entrepreneurs tend to run toward challenges,” he said.
Within AI, which is another area of interest for edtech investors, Moe believes existing players have an edge over newer startups. “There are a lot of startups, but it’s not clear to me that they’re going to be sustainable. What’s really creating value is existing companies that are leveraging AI to build a compelling offering, piggybacking off the utility infrastructure of AI.”