Why Investors Are Optimistic About EdTech in 2023

by Ana Lopez

Opinions of contributing entrepreneurs are their own.

Closed 2022 with 30 EdTech Unicorns collectively correctly valued south of $100 billion. For context, these companies collectively bite the heels of economically critical Fortune 500s like General Electric and American Express, which are worth more than $100 billion.

Of constant growth expected in the next decade, EdTech — along with its leaders, operators, and mission that continue to expand into more industries and geographies — is back in the race for a more equitable future.

Related: 5 EdTech trends that will change learning between now and 2030

AI in EdTech

It’s hard to find an industry that hasn’t graced artificial intelligence yet. While most AI implementations are still experimental, its effects on education are actively leading to tangible results. Personalized learning powered by AI is at the epicenter, with research and data in the field amplifying the benefits students experience.

Teachers at the Institute for Innovative Learning suggests that “Students who followed the self-regulated online learning guided by the personalized learning approach performed better and acquired more knowledge than those who followed the conventional self-regulated online learning activities after completing the learning process.”

The ever-growing student-teacher relationship in class sizes, traditional learning has limited the value chain from K-12 through professional upskilling. AI-driven personalized learning tailored to the individual helps bridge this gap while still scratching the surface of what’s possible.

Related: Emergence of EdTech and effect on generational learning curve

Achieving scale in EdTech

A large horizontal (e.g. K-12) and vertical (e.g. content, experience, assessment etc.) value chain makes LMS or Learning Management Systems essential for achieving scale in EdTech. As classrooms grow larger and personalized learning becomes more prominent, platforms that house these assets become mission critical.

Just as important as having a haven to harness and leverage the vast amounts of data generated by personalized learning platforms. By extracting this data into a usable format, educators can develop better content while technologists can understand the best how key stakeholders use their products.

Although LMS has been around for the past few years, it remains a cornerstone of the industry’s development as operators find new ways to implement breakthrough technology (natural language processing, data mining and analytics, etc.) and create outsized value.

Expand reach and relevance beyond traditional education

The shift to working from home has changed the way the world does business today and how companies support the growth and professional development of their workforce. Automating the identification of employee skill gaps and intelligently suggesting resources to fill them creates tremendous value for companies and their employees.

The ability to track unique skills and skill levels opens up the ability to use resources more efficiently or suggest positions internally that can better leverage talent. While beneficial to HR resources, an automated approach to upskilling also adds to the incentive for retaining a company’s current and future employees.

Venture capital financing mirrored the above trends in 2022

Data from HolonIQ stiltof “$10.6 billion and more than 1,400 EdTech Venture funding deals for 2022, nearly half of which focused on management systems and student/teacher support.”

Unsurprisingly, investing in EdTech is expected to decline in 2023 in light of the overall macroeconomic environment. However, consistent underwriting results over the past few years should support a strong investor appetite in 2023 and beyond.

The level of investment in LMS suggests a commitment to scale in EdTech. It is a strong indication that the key infrastructure needed is being actively refined so that EdTech’s current suite can be used and built upon to base future technology stacks.

ChatGPT helped educate the world about the power of AI and will make the conversation easier for operators building AI-driven learning technology to gain the support of traditional educators. Finally, the upside is for companies to develop talent at better unit economics (i.e. cheaper to support HR resources with AI-based professional development tools) while using data to make predictive analytics and manage resource allocation at a granular level easier to understand.

Related: Microsoft is investing billions in OpenAI, maker of ChatGPT

Government funding in EdTech

As a bonus, the $30 billion in government funding available to educators in the US is an opportunity for EdTech to grow into national-level school districts and prove value as it continues to scale in the coming years. While an allocation to technology from this bucket is not yet clear, the shifting trends toward improved teaching and administration support for a growing student population could warrant significant contribution to EdTech from this pool of funding and those in the be used in the future.

Related: Will Edtech See a Paradigm Shift in 2023?

Education is the greatest equalizer

EdTech enables educators to reach more students than ever before with the ability to deliver content beyond the constraints of a language barrier or time zone. As more of the world’s population goes online every day, EdTech is actively creating a positive feedback loop of forward momentum for everyone – on all fronts.

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