During the darkest days of the pandemic, cash was no object in many developed markets.
Governments, public sector organizations and many private companies have left no stone unturned to ensure public safety and an adequate supply of basic services. Clearly, spending has reached unsustainable levels.
But 2022 was the year that this ‘spending’ slowed down and was more widely rebranded and accepted as actually ‘borrowing’. This realization justified the start of severe cuts in public spending compared to before and during the pandemic.
Despite these cuts, which have always been slower to implement than to communicate, inflation has plagued across Europe and beyond, in part due to supply chain issues related to the situation in Ukraine. Wages not rising in line with inflation and cuts to public services have led to a cost of living crisis in many markets.
These conditions are not conducive to instilling confidence in investors or founders. Edtech, and education more broadly, usually one of the most resilient sectors in times of economic crisis, has not been immune to the downturn.
Against this backdrop, we have formed our annual review of European edtech activity for 2022. For the first time since 2014, venture capital funding for European edtech startups has seen a year-long decline on the other, startups raking in $1.8 billion in 2022 from $2.5. billion a year earlier.
The global ecosystem has been on an upward trajectory, albeit less steadily, but declines in new investment in 2022 have been steep: global funding fell to $9.1 billion last year from $20.1 billion. billion in 2021. This is in line with macroeconomic trends in public markets. as well as other tech sectors (both trends were highlighted in our October report with Dealroom).
Italy was the only European market to see an increase in both financing and the number of transactions.
Perceived declines in funding are felt more acutely, given that 2021 has been a banner year. Optimism that the pandemic was coming to an end and the world was reopening extended to ambitious founders and early teams. This dynamic continued until the first half of 2022 for European edtech. Indeed, as we reported in July, European edtech funding increased by 40% in the first six months of last year compared to the previous year.
But as we now know, that momentum petered out in the second half of 2022. The optimism faded, and European edtech startups raised only around $400 million in the last six months, compared to 1 .4 billion in the other half of the year.
That said, the sector has proven to be more resilient in Europe than in other major regions. It’s worth pointing out that the region saw more edtech deals happen in the second half of the year than in the first half of 2022, but these were just smaller, earlier rounds at lower valuations.
Europe, however, fared well relative to the rest of the world: Edtech VC funding was down only 28% in Europe, compared to a 64% drop in the US, a 46% contraction in India and a 32% drop in the rest of the world. world.
Funding fell the least in Europe and the rest of the world, with again the biggest drop in China
In Europe, we see the UK retaining the top spot in financing and commercial activity. Edtech companies in the UK secured the most funding – $583m across 81 deals, over $200m ahead of the next market, Germany, where startups raised $363m across 34 transactions.
France slipped from the podium as funding and deal activity fell sharply from previous years
Italy was one of the few European markets to see an increase in funding and the number of transactions. Italy’s tech ecosystem has grown steadily as momentum has grown relatively steadily since 2010. It’s also promising to see the capital raised spread across a range of sectors, with some of the biggest rounds of table raised by fintech, healthcare and real estate companies.
When it comes to edtech, the market has been on a strong upward trend since 2020. Although edtech in Italy had a banner year in 2019, largely driven by the big round raised by Talent Garden, it is quite promising to see the uptrend in 2022 be driven by smaller, early rounds under $15 million.