During the darkest In the days of the pandemic, money was not a problem in many developed markets.
Governments, public sector organizations and many private companies have moved heaven and earth to ensure public safety and an adequate supply of core services. It is clear that spending has reached unsustainable levels.
But 2022 was the year when this “spend” slowed down and was instead more widely rebranded and accepted as actually “borrowing.” This realization justified the start of major cuts in government spending compared to before and during the pandemic.
Despite these cuts, which have always been implemented more slowly than communicated, inflation is rampant in Europe and beyond, partly due to supply chain issues related to the situation in Ukraine. Wages that have not kept pace with inflation and cuts in public services have led to a cost-of-living crisis in many markets.
These terms 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 background, we have put together our annual overview of European edtech activity for 2022. For the first time since 2014, venture capital funding to European edtech startups saw a year-on-year decline, with startups bringing in $1.8 billion by 2022 compared to $2.5 billion a year earlier.
The global ecosystem has been on an upward trajectory, albeit less consistently, but the decline in new investment in 2022 has been sharp, with global funding falling from $20.1 billion in 2021 to $9.1 billion last year. This is in line with macro trends in public markets as well as other technology sectors (both trends were highlighted in our October report with Dealroom).
Italy was the only European market where both financing and the number of deals increased.
Perceived declines in funding are felt more acutely as 2021 was a boom year. The optimism that the pandemic was ending and the world was opening up again extended to ambitious founders and early teams. This momentum continued into the first half of 2022 for European edtech. Indeed, as we reported in July, European funding for edtech was up 40% in the first six months of last year compared to a year earlier.
But as we now know, that momentum faltered in the second half of 2022. The optimism faded and European edtech startups only raised about $400 million in the last six months, compared to $1.4 billion in the other half of 2022. the year.
That said, the sector proved 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 2022 than the first half of 2022, but they were just smaller and more early phases at lower valuations.
However, Europe fared well compared to the rest of the world: Edtech VC funding fell just 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.
Financing fell the least in Europe and RoW, with the strongest decline again in China
In Europe, we see the UK retaining the top spot in financing and deal activity. Edtech companies in the UK raised the most funding – $583 million in 81 deals, more than $200 million ahead of the next market, Germany, where startups raised $363 million in 34 deals.
France slipped off the podium as financing and deal activity fell sharply from previous years
Italy was one of the few European markets with more financing and more deals. Italy’s tech ecosystem has grown gradually as momentum has built relatively consistently since 2010. It is also promising to see the insured capital spread across a range of sectors, with some of the largest rounds raised by companies in fintech, health tech and real estate.
As for edtech, the market has been in a strong upward trend since 2020. While edtech in Italy had a record year in 2019, largely driven by the grand tour picked up by Talent Garden, it is promising to see the upward trend fueled in 2022. through smaller early stage rounds of less than $15 million.