This year, deals and dollars are on track to see their first annual declines in four years.

Ed tech startups faced a chilly investment environment earlier this year, with deal count dropping to a four-year low in Q1’16. However, the sector began to recover in Q2, and stabilized in Q3 with a comparable deal count and slight funding growth compared to the previous quarter.

Still, even if ed tech funding continues at its current pace, 2016 will snap the sector’s four-year growth streak with drops in both deal count and investment dollars.

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Quarterly deals and dollars

Ed tech startups attracted 115 funding deals in Q3’16 worth $626M in total, representing roughly flat deal count and slight funding growth from Q2’16. As the chart below shows, quarterly deals to ed tech startups increased throughout 2012 but have fluctuated since then. Deal count peaked in Q1’15 with 145, but fell below 120 for the past four quarters. While this past quarter saw one fewer deal than Q2’16, the data still shows continued recovery from Q1’16, when deals dropped to a four-year low.

Chinese companies raised the three largest deals of the quarter: a $100M Series C to online tutoring platform Vipkid; a $60M Series B to homework mobile app provider Xiaochuan Chuhai Education; and a $60M Series B to K-12 online learning platform Zuoyebang. Sequoia Capital China participated in both the Vipkid and the Zuoyebang deals.

Rounding out the top five deals this quarter were a $50M investment into Indian exam prep startup Byju’s, from investors including the Chan Zuckerberg Initiative and Sequoia Capital India, and a $50M Series F to NYC-based video learning platform Kaltura, by Goldman Sachs.

3Q16 Ed Tech Quarterly funding


Annual deals and dollars

If ed tech investment continues at its current pace, 2016 will see deal count drop to around 2013′s numbers, and dollar funding fall to below last year’s total but still above that of 2014. Investors poured nearly $1.7B into ed tech so far this year across 312 deals. At the current pace, the sector is on track for approximately 416 deals worth $2.2B in full-year 2016.

The drop in funding is partially due to a decline in large ed tech mega-rounds. Last year, we saw seven $100M+ mega-rounds, while we’ve only had two so far this year. The biggest deals in 2015 included Bertelsmann’s $230M corporate minority investment into HotChalk; a $200M Series C to Shanghai-based English learning platform iTutorGroup; a $186M growth equity round to (since acquired by LinkedIn); and a $157M Series D to language learning platform HuJiang.

This year, the largest deal went to CA-based childhood education software company Age of Learning: a $150M growth equity round from Iconiq Capital in Q2’16. This was followed by Chinese tutoring platform Vipkid’s $100M Series C in Q3’16.

3Q16 Ed Tech Annual Funding

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