What do VCs Look for in an Edtech Solution?

Sudeep Srivastava March 23, 2023
What do VCs Look for in an Edtech Solution

“A Learning management software, Illumnus raised USD 100K from angel investors.”

“Amsterdam-based Tribe, with an intent to boost digital skills, raised €3 Mn.”

“India-based top edTech startups, BYJU’s and Unacademy raised $400M and $100M in a round led by Facebook, one of the largest edTech venture capitalists of the world.”

All such news has taken the world by storm and has made all of us ask the same questions in sync – 

“How come VCs have suddenly started taking an interest in the Edtech startup world?”

 “Is this a sign that one must invest in the Edtech startup ideas?”

Read the article below to understand the Edtech market and figure out answers to many more questions. 

Reasons Behind Growing Interest in EdTech Venture Capital Segment

Reasons Behind Growing Interest of VCs in EdTech Segment

1.  Untapped opportunities

Even today, various regions and communities do not have access to educational resources. They are not able to have even the primary learning experience. Likewise, various people are eager to learn something new or polish their skills but cannot do so within the traditional educational ecosystem.

All such instances highlight a myriad of unexplored opportunities in the marketplace, which assures edTech venture capitalists that investment in education startup funding ideas will be profitable to them.

2.  Wider acceptance

Edtech platforms bridge the gap between those who wish to learn and those who offer the same service by virtually bringing them on the same platform. They enable them to learn anything, anytime, and anywhere at their own pace. Also, these platforms operate using the finest of technologies like artificial intelligence and IoT

The above reasons garnered not only the interest of consumers but also of investors. 

3.  Need for a lifelong learning experience 

By the time one learns a skill for a particular job, they get to know that another skill is also essential. It makes the scenario imperative to embrace the idea of lifelong learning. And eventually encourage investors and developers to invest their time and money into developing mobile apps that are expected to be the future of the education industry.

4.  Lower competition

Low competition and high market scope are two contributing factors for investors to support the idea of a profitable education investment fund. 

5.  Higher ROI

Various factors such as exponential growth of the Edtech industry, minimal competition, and widely accepted solutions indicate that the profit over investment, i.e., ROI is exponentially higher in the online education domain, and it can be regretful for EdTech venture capitalists to overlook this opportunity.

While this clears the reasons why the Edtech domain is becoming a favorite of both educational investors and entrepreneurs, let’s take a look at the second important question –

Should one invest in the idea of launching their online education and Edtech startup?

Well, it’s not as easy as it sounds. Investors look at different factors before deciding whether to go for the edtech investment or not. We can take a glance at the next section of this article.

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Essential Factors EdTech VCs Consider Before Investing

Essential Factors EdTech VCs Consider Before Investing

1.  Core Problem & Its Impact

Currently, various edtech startups are looking ahead to step into the education segment. However, the problems they are focusing on are either too small to consider or have already been solved. Because of this, Edtech venture capital firms have become too selective about the projects they fund. They have started asking different questions to the entrepreneurs to see if the problem-focused is on ‘must-solve’ or ‘nice-to-solve..

In simpler terms, the venture capitalists give a ‘green’ signal to only those Edtech startup ideas that – 

  1. Fit the market needs and customer demands
  2. Attract and retain talents
  3. Steers both small ideation level teams to substantial large companies
  4. Accomplish goals in extreme situations

2.  Robust Cash Flow

Various edtech startups operate with the business model that brings millions of dollars into their bank account for a particular time and then suddenly brings it to the verge of shutting down. To overcome the loss of educational investment fund for any organization, educational investors pay attention to this factor while investing in any educational startup idea.

3.  Competitive Landscape 

The competitive landscape is another factor that edTech venture capitalists (VCs) check before investing in any educational startup idea. They examine carefully if the edtech startups are progressively working on the problem they proposed to solve and whether they are finding it easy to beat the competition or not. The method helps to forecast the future of any startup to decide whether or not to invest in further.

4.  Scalability

Edtech venture partners also focus on the scalability factor when funding any startup. That implies the possibility of the Edtech idea growing over the next 2 to 3 years while remaining in the limelight and ensuring regular financequote by blume ventures

5.  Business Model 

Consumer demands and market needs are changing with a passage of time. It makes educational investors curious about the startups that come up with unique and innovative business models and ensure better returns. It means that the business model you pick is yet another factor that can make your Edtech startup idea get the attention of the investors.

6.  Alignment To VC Mission

When it comes to funding,  edTech venture capitalists are not solely interested in Edtech startups that add to their profits but also provide them with a plethora of opportunities in the marketplace. It is again another reason why venture capitalists become choosy about Edtech startups.

7.  Experience 

Lastly, some Edtech VCs prefer startups whose founders have substantial experience in this segment, are familiar with the education space’s hidden challenges and can use their knowledge and expertise in crafting better ideas.

We have seen what made investors turn towards the educational market and the set of factors they focus upon before investing in any Edtech idea.

However, one major question that comes to mind here, even if you avoid making all the reasons that edtech businesses fail, is – What are the different Edtech startup ideas that one can forth?

To tackle this question, let’s uncover the different Edtech categories or the types of Edtech app ideas that are changing the education landscape.

Types of Edtech ideas to invest in 2022

What do VCs Look for in an Edtech Solution

1.  K12 Education Apps

The major type of EdTech application you can create is the K12 education app. These web and mobile solutions provide school students and tutor kids with high-quality videos designed primarily on the academic curriculum. 

BYJU’S, PlanetSpark, and Blackboard Radio are the top Edtech startups to refer when entering this category. They come laden with all the functionalities counted as the newgen must-have features of on-demand tutoring apps.

[Also Read: Why Kid’s Educational Apps are a Good Investment for Startups?]

2.  Test Preparation Platform

These Edtech platforms are capable of bagging the interest of edTech venture capitalists while enabling students to prepare for entrance exams like LNAT, USPC, Mensa, IELTS, Gaokao, and CFA. These software and mobile apps empower them to remain updated with the latest information, track their progress, gain confidence, and prepare for the exams at their own pace and convenience.

When talking about subdomain of the education industry, the top startups to get inspired from are NeoStencil, Classplus, Examify, and Top Rankers.

3.  MOOC Portals

MOOC (Massive Open Online Course) portals are distance learning courses offered online by top universities across the globe. They let students register into any university worldwide, complete any course they want, and connect with other people enrolled for the same course. In other words, these platforms enable students to boost their knowledge and get ready to step into the real world smartly.

Know here

4.  Tech Learning Solution 

Like online learning portals that help students study any particular topic or subject, these platforms empower them to excel in coding and programming. The three best Edtech startups present in this app category are Coding Labs, Aeon Learning, and Edureka.

5.  Gamified Learning Apps  

These applications enable learners to study and test their knowledge while playing a quiz or participating in any activity. The best examples of these EdTech apps are Moose Math, Masha and the Bear, Shifu, and Vismory.

6.  Language Learning Platform  

These platforms help users learn a new language or practice any already known language in a highly gamified and interactive manner.

Know more

7.  Career Development Apps  

While they seem much like MOOC platforms, they serve a different purpose and are capable of bagging the interest of major edTech venture capitalists. Career Development Apps facilitate graduates and other professionals to understand the basics of their dream job and prepare for the same faster and more effectively.

8.  Learning Management System

Learning Management System (LMS) is another type of online education startup funding idea that you must consider this year. It refers to a software or platform that works like a corporation and provides the facility to administer, track, report, and deliver the learning resources, along with other products like discussion boards. 

As reported by Fortune Business Insights, the global learning management system (LMS) market size was valued at USD 14.43 billion in 2021 and is projected to grow from $16.19 billion in 2022 to $40.95 billion by 2029, at a CAGR of 14.2%. 

9.   School Administration   

Last but not the least, school administration applications are the type of education ideas that teachers and school administrators highly use to manage schedules, organize special events, calculate payroll, invoicing, etc. Examples: Asana, Gibbon, Fedena, and Evernote.  

While these Edtech app ideas will help you make real money on your investment, the journey is not a piece of cake. Various hurdles come in the way to entering the marketplace and enjoying the limelight.

So, to prepare you for the Edtech market, we will be throwing light on the obstacles that can hinder your path.

Challenges Your Startup Might Face in the EdTech Domain

Challenges Your Startup Might Face in the EdTech Domain

1.  The fragility of the outer ecosystem  

While the educational ecosystem might seem like a perfect environment to go with the ‘one-size-fits-all’ approach, it is not so.

If you wish to bag the funding from an edTech venture capitalist, you have to dive deeper into the education and learning segment which will make you realize that the social and cultural factors make a huge difference in the existence and success of every learning solution.

So, understanding the delicacy of the education environment and building your EdTech startup while considering all the language and cultural barriers is the foremost challenge to address.

2.  Need for technological infrastructure   

Even today, various regions are deprived of basic infrastructure and resources, including electricity and the internet. The network latency is much higher than expected, making the app pages take hours to load. And when it comes to video lessons, the buffering continues for years.

The scenarios make it nearly impossible for the students to reap the benefits of using the top Edtech solutions and contribute to the marketplace’s success. It implies that lack of proper technological infrastructure is also one of the challenges that turn Edtech startups into a failed attempt.

3.  The attitude of the targeted audience   

By offering real-time and personalized services, Edtech solutions add a sense of convenience to the environment. However, some students see this as a way to escape from a disciplined learning environment. It further makes it challenging for teachers and others to deal with unmotivated students. 

Making a balance between convenience and consumer engagement is yet another challenge that you need to focus upon.

4.  Lower monetization   

Since people are more interested in free courses and study material, most online education startups embrace the freemium model for scaling their business. Although it brings higher downloads to the brand, it does not provide them with a higher retention rate. 

A prime reason that people are ready to pay only for things that bring long-term success to them. Or better say, things that aid them in knowing and polishing the skills that are highly in demand in the business world. 

The absence of such business models that earn by informing and preparing users for the top employment opportunities is again why the investment from edtech venture capitalists in the education market is not growing.

Now, while these are the challenges in the education market, it is not wise to strive to handle them on your own. It is essential to take the help of the best education app development services providers like our team of Edtech software developers.

How Can Appinventiv Help in Launching Your EdTech Startup?

Apart from being a leading digital innovation partner, Appinventiv is also a reputed education mobile app development company that aids in shifting from the traditional classroom education system to a virtual learning world which can bag you major edtech venture capital for your business.

Our team of educational web and mobile app developers has served various online education startups and establishments with highly innovative and business-centric solutions to overcome the existing market challenges. Our experts keep themselves abreast with the changing consumer and market needs and have expertise in integrating the latest technologies like AI, Blockchain, AR/VR, Cloud Computing, and IoT in a digital solution – a glimpse of which can be taken from our ‘Nova learning’ platform case study.

And, in case you have any further queries, connect with our educational app experts today itself!

Final Note

When focusing on the future of the edTech space, the online learning market size is anticipated to grow exponentially. Many more startups are entering the market with the support of reputed education app development services providers to connect students, teachers, and administrators anytime, anywhere, and across the devices. They are looking for a massive upside potential of nearly USD 16 billion dollars by the end of 2022. 


Q. Why are VCs investing in edtech?

A. The edtech sector is growing at a rapid rate and possesses a lot of unexplored opportunities in this sector. In addition, there is lower competition and higher market scope, which turns out to be profitable for VCs looking to invest.

Q. What are VCs investing in?

A. VCs are investing in the online learning platforms and edtech sector because there are plenty of opportunities. Plus, ROI is exponentially higher in the case of the online education domain, so it’s a great place to invest.

Q. Why do venture capitalists invest in startups?

A. Venture capitalists love to invest in startups because they have a competitive edge in the market. VC invests in startups that provide solutions to burning problems that haven’t been solved before by other companies in the marketplace.

Sudeep Srivastava
Co-Founder and Director
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