Investment activity within the venture capital landscape is currently very strong, creating a challenge in tracking the numerous new funding rounds being publicized.

We have a substantial volume of deals to consider, and a high workload is preferable to inactivity, though investment levels vary across different industries. For instance, we aren't seeing a large number of funding rounds focused on consumer social platforms. Conversely, the education technology (edtech) sector appears to be experiencing a significant surge in investment.

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Fortunately, the TechCrunch team benefits from the expertise of Natasha Mascarenhas, who consistently reports on this specific area. However, with another substantial edtech funding round recently announced, I found myself questioning the overall trends within the sector.

I wanted to investigate further. Therefore, I analyzed data from Crunchbase and reviewed additional information to gain a clearer understanding. The aim is to determine whether the number of edtech funding rounds is genuinely higher than in the past, or if it simply feels that way.

Let's begin the analysis!

Edtech VC activity

One effective method for analyzing a specific industry involves examining its overall performance data and breaking it down into more manageable segments. Businesses utilize this approach with quarterly reports, which, while representing an arbitrary timeframe, provide valuable insights.

To understand the edtech landscape in 2020, I adopted a simplified approach by comparing the sector’s total funding in the first and second halves of the year.

According to Crunchbase’s “edtech” categorization, the data appears as follows:

• H1 2020: 211 rounds, $2.68 billion.
• H2 (YTD) 2020: 135 rounds, $5.25 billion.

This data indicates that, within this dataset, edtech funding rounds became larger in value but occurred less frequently. This observation aligns with broader trends in venture capital that TechCrunch reported during 2020. Specifically, the average round designated as “edtech” in the first half of 2020 was valued at $17.3 million. This figure increased to $53.5 million in the second half of 2020.

Crunchbase News, the news division of Crunchbase where I previously worked, conducted a similar analysis in August, expanding the data set to include rounds also tagged under the “education” category. Following their methodology over the same time period, the data presents a slightly different picture:

• H1 2020: 629 rounds, $4.92 billion.
• H2 (YTD) 2020: 387 rounds, $6.40 billion.

The difference in average round size is now less pronounced, decreasing from $10 million in the first half of 2020 to $21.5 million in the second half. As with the first dataset, we observe fewer rounds accompanied by greater dollar amounts in the latter half of the year, resulting in averages that are consistent with this trend.

The numbers clearly demonstrate that the second half of 2020 did not experience an unprecedented surge in edtech funding rounds; rather, it saw an increase in larger-scale rounds. This likely explains why it appears that there was a significant amount of edtech financing activity, as more notable rounds captured attention, even though the overall number of rounds declined.

A comparable pattern is unfolding across the venture capital and startup ecosystem, with a growing percentage of total VC investment concentrated in megarounds. Sectors like fintech are experiencing a decrease in round counts year-over-year, while simultaneously attracting a greater volume of capital.

Venture capital investments are occurring at later stages and in larger amounts, and edtech is not immune to this trend.

This shift is not a recent development. Crunchbase News highlighted in its August edtech report that U.S. edtech funding has fluctuated between $675 million and $775 million in each first half since 2015. The same data revealed that the number of rounds associated with this funding decreased from 147 in the first half of 2015 to 130 in the first half of 2018, ultimately reaching 85 in the first half of 2020.

Investments are happening later in a company’s lifecycle and are increasing in size. This may be the defining characteristic of 2020 venture capital, even more so than the recovery observed in early summer when venture capitalists recognized the viability of software sales as companies rapidly adopted digital and remote operations.

Further time is needed to refine these observations. Data for December and other months of the second half of 2020 is still becoming available, and a clearer picture will emerge over time. I plan to revisit this topic with additional analysis around the start of the new year.