After a big 2015, ed tech fell back to earth in Q1'16, with funding dropping to a 7-quarter low and deals well off their peak levels.

Funding to ed tech companies plunged dramatically in Q1’16 compared to the previous quarter, and put 2016 on track for the lowest annual funding total to the category since 2013. The flurry of $100M+ mega-deals that shaped ed tech trends in 2015 have been conspicuously absent so far this year.

Using CB Insights data, we analyzed companies integrating technology into education, in areas from online tutoring, to K-12 classroom apps, to test prep, digital universities, and adult or career-focused education. This report contains detailed information on:

Free Bonus: Ed Tech Whitepaper
We detail the top investors, companies, financing and M&A trends within Ed Tech.

Annual deals and dollars

Deal activity to education technology startups jumped to record annual highs in 2015, with annual funding up 64% to over $3.1B, and the number of deals rising nearly 10% to 491.

However, year-to-date activity is sluggish, and at the current run-rate 2016 will see just 376 deals and $1.3B in funding, which would be a dollar funding decrease of 57% compared to 2015.

A small group of outsize deals fueled 2015′s funding peak. Learning management system HotChalk‘s $230M corporate minority financing led the pack (compare to 2014′s largest deal, Pluralsight’s Series B, which was $135M). A $186M growth equity round to lynda.com — acquired by LinkedIn just a few months later — also boosted the 2015 total, as did five $80M+ deals to Chinese companies.

EdTech Global Yearly Financing History Final

Quarterly deals and dollars

Funding in Q1’16 fell to a 7-quarter low, well off ed tech’s quarterly peak of $1.3B in Q4’15, even as deal count stayed essentially flat compared to the previous quarter, at 103. However, Q1’16 marks the eighth quarter-straight of more than 100 ed tech deals.

Deals in Q1’16 were also significantly smaller. Average deal size in Q1’16 dropped to $4.7M from $15.7M the prior quarter. The sector hasn’t attracted any $100M+ rounds in 2016 year-to-date, compared to 4 such rounds in Q4’15.

Q4’15′s peak was driven by several ed tech mega-rounds: HotChalk’s previously-mentioned $230M corporate minority round, a $200M Series C to Shanghai-based digital English learning platform Tutor Group (which put the company in the unicorn club), a $157M Series D to Shanghai-based language learning platform HuJiang, and a $105M Series D to Udacity.

Companies in China and India received the largest deals in Q1’16. These included $75M in growth equity to Indian video-based learning app Byju’s, and Tencent invested $50M for a corporate minority stake in New Oriental Xuncheng Network Technology, which operates Chinese digital-learning platform Koolearn.

The largest deal so far in Q2’16 (not pictured in chart) is a $16M Series B to enterprise-focused learning platform EdCast. Investors included Softbank Capital, StartX, Cervin Ventures, and GE Capital.

Edtech global quarterly financing history final

Deal share by investment stage

Ed tech has seen seed deals take an increasingly larger share of deals from 2011 to 2016 year-to-date. Seed/angel deals accounted for 58% of deals in 2016 through 4/12/16, while they only accounted for 45% of deal share in 2011.

At the same time, Series A deals have seen their share decrease over the same period. They accounted for 20% of deals in 2011, 13% in 2015, and 7% in 2016 year-to-date.

 EdTech Global Deal Share by stage final

Dollar share by investment stage

Our data shows a gradual shift in dollar share from early-stage to later-stage companies. The trend is especially apparent among 2016’s deals to date, which saw a high of 32% of dollars going to Series E+ deals.

EdTech Global Dollar Share by Stage final

Most active investors

NewSchools Venture Fund took the top spot for most active ed tech investor with over 35 deals, while Kapor Capital and 500 Startups tied for second (NewSchools is a non-profit venture fund focused on education). Intel Capital is the sole corporate venture on the list, tied for sixth with over 10 deals.

See the full list below. Note these rankings exclude deals by startup incubators/accelerators.

Ed Tech Most Active VC Investors, 2010-2016 YTD (4/12/16)
Rank Investor
1 NewSchools Venture Fund
2 Kapor Capital
2 500 Startups
4 Learn Capital
5 Accel Partners
6 Rethink Education
6 Intel Capital
6 GSV Capital
9 Social Capital
9 SV Angel

 

Most active early-stage investors

Kapor Capital and 500 Startups tied for first place as most active investor in early-stage ed tech startups, and NewSchools Venture Fund placed third with over 30 deals. The vast majority of these firms’ ed tech deals have been to early-stage companies. In contrast to the overall most active investors list, the early-stage list does not include any corporate ventures.

See the full list below. Note these rankings exclude startup incubators/accelerators.

Ed Tech Most Active Early-Stage VC Investors, 2010-2016 YTD (4/12/16)
Rank Investor
1 Kapor Capital
1 500 Startups
3 NewSchools Venture Fund
4 Learn Capital
5 Social Capital
5 Rethink Education
5 Felicis Ventures
8 SV Angel
9 Accel Partners
10 New Enterprise Associates

Video-based online classes crowd top 10

The 10 most well-funded ed-tech companies have all raised over $100M. Many of the top 10 are video-based online learning platforms, including Shanghai-based English learning site TutorGroup, online course platforms Udacity and Coursera, and personalized study platform Knewton. The only non-software company on the list is AltSchool, a San Francisco-based company building a system of K-8 “micro-schools.”

See the full list below. Note that these funding figures exclude debt rounds, lines of credit, and exited companies.

Most Well-Funded VC-Backed Companies, 2010-2016 YTD (4/12/16)
Rank Company Total Disclosed Funding ($M) Description Select Investors
1 TutorGroup $315 Digital English Learning Platform Alibaba Group, Goldman Sachs
2 HotChalk $249 Learning Management System Berg & Berg, McGraw-Hill Ventures
3 Achieve3000 $248 Digital Learning Platform Insight Venture Partners, NJTC Venture Fund
4 Pluralsight $208 Digital  IT Learning Platform Insight Venture Partners, Felicis Ventures
5 Udemy $173 Digital Learning Platform MHS Capital, 500 Startups, Insight Venture Partners, Naspers
6 SkillSoft $171 Digital  IT Learning Platform Warburg Pincus, SI Ventures
7 Desire2Learn $165 Learning Management System New Enterprise Associates, Silicon Valley Bank
8 Udacity $161 Digital Learning Platform Andreessen Horowitz, CRV
9 Knewton $157 Digital Learning Platform Accel Partners, Bessemer Venture Partners
10 Coursera $146 Digital Learning Platform New Enterprise Associates, Kleiner Perkins Caufield & Byers

Want more ed tech data? Check out our venture capital database below.

 Featured image credit: Flickr/ US Dept of Agriculture