Brighteye launched last year to invest in early stage companies that leverage technology to help people learn in Europe. We did so knowing that education technology (Edtech) has seen a big boom in the last 5 years as the €5.5 trillion education sector adopted technology at a faster pace, yet the bulk of investment has been in the United States and China.
At Brighteye, we believe that there is a big edtech opportunity in Europe. To give a sense of what is happening and why, we thought it’d be helpful first to examine the growth in investment in the European edtech sector over the last 4 years.
Key Point #1: Investment in European Edtech has grown, a lot
Per data we pulled from Pitchbook & Crunchbase, between 2014 and 2017 annual investment in edtech startups in Europe has grown more than 3X from €140M to €490M. Moreover, the number of transactions per year has remained roughly the same over this period meaning that average transaction size has also tripled as investors have begun to invest meaningful amounts. For perspective, €490M is still only ~1/3 of the venture funding invested in edtech in the US last year and 3% of venture funding overall in Europe, but the trajectory is clear: investors are increasingly willing to invest in European edtech.
Key Point #2: Funding is concentrated at the Series A and Series B Stages
As the graph below demonstrates, the big growth in edtech funding has been at the Series A and B level. This is in stark contrast to more mature venture sectors (fintech, e-commerce, enterprise SAAS among others) where the bulk of funding is in later stage investments. When we talk about the coming wave in edtech funding, part of that will simply be the larger rounds raised by successful companies currently at the Series A & B level. Further validation will come as and when large exits of the kind we have seen in the US (Lynda, Instructure, 2U) begin to occur on this side of the Atlantic which we expect to happen over the next 5 years.
Key Point #3: The UK & Nordics are leading edtech investment growth in Europe
Over half of edtech funding in Europe is going to the UK (35%) and Nordics (18%), with the Nordics showing the most growth over the last four years. Unsurprisingly, these markets have the highest penetration of devices and broadband in K-12 schools (we dive into some of the advantages the UK has in a separate post here). France, a nascent edtech market, also saw a positive uptick since 2014 (€18M invested and 19 deals in 2014 vs. €34M and 46 deals in 2017) especially thanks to deals in the consumer, corporate and lifelong learning sectors.
Key Point #4: Edtech investments are widely distributed, but lean towards consumer, lifelong learning and corporate
We took a subset of the Edtech investments in Europe and we found out that most of the investments have been concentrated in (1) study tools (i.e. any tool/platform that help improve learning activities inside and outside classrooms), (2) corporate training, (3) online learning (i.e. any interactive formal or informal online services) and (4) language learning. These 4 categories amount to 57% of the total money invested in Edtech between 2013 and 2017. On the other end of the spectrum, LMS (Learning Management System) and tutoring have received less attention with ~8% of the total money. This is in keeping with broader global trends.
Key Point #5: A real European Edtech ecosystem has started to emerge
The European Edtech market has been helped by not only the presence of an increasing number of Edtech hubs in London, Helsinki, Oslo and now Paris but also by Edtech accelerators, VCs, governments and other key players reshaping the Edtech sector through disruptive educational solutions. These include launches of specialized edtech testing programs at universities (like Educate in London and IE Rockets in Madrid), events, new educational policies, among other initiatives. For instance, Edtech accelerators are mushrooming across Europe, reinforcing the ecosystem and propelling the creation of young Edtech companies. European accelerators have invested in 150+ Edtech startups between 2013 and 2017, which represents ~€+5M in investment. Among the accelerators that support Edtech entrepreneurs you will find:
Emerge Education (London)
NUMA (Paris, Barcelona, Berlin)
Entrepreneur First (London)
Swiss Edtech Collider (Lausanne)
Techstars (London)
xEdu (Helsinki)
Open Education Challenge (City not disclosed - Spain)
Founders Factory (London)
LearnSpace (Paris - Launching in May 2018)
Brighteye’s view
The European education sector has grown rapidly over the last 4 years and has developed a diversified base on which to build. At Brighteye, we believe the growth is sustainable and a function of (1) strong fundamental dynamics and (2) increased willingness to pay for consumption of education in Europe.
Sources:
Pitchbook. 2018. “Companies & Deals search”, Downloaded January 31, 2018. www.pitchbook.com
Crunchbase. 2018 “Companies search”, Downloaded January 21, 2018. www.crunchbase.com