Venture capital investments in ed-tech companies worldwide plummeted in the first quarter of 2025, a new report shows, as the industry continues to face a contraction in funding, slow deal activity, and a softening global economy.
A new report by data intelligence firm HolonIQ found that venture funding for education was only $410 million in the first quarter, a drop of 35% from Q1 of 2024, which already represented a drastic drop from the pandemic-era highs.
The continued trend of decreased venture capital funding for ed-tech coincides with a similar decline in early-stage activity and volume in mergers and acquisitions.
The deals that are taking place now are larger, with the average funding amount rising, the report said, hitting $7.8 million.
Three deals alone represented nearly half of the capital raised, the report said — LeapScholar’s $65 million funding round in January, MagicSchool AI’s $45 million raise in February, and Campus’ $46 million Series B in March.
Overall, the past year was the leanest in a decade for ed-tech funding, with $2.4 billion of venture capital being invested in ed-tech companies throughout all of 2024. The figure represented the lowest funding level on record since 2014 when the space saw $1.8 billion in investment globally, and a drop of 89% from the pandemic-era high of $20.8 billion.
There are some standouts, with Physics Wallah, an India-based company, raising $210 million in September 2024. The company is now preparing for an initial public offering in India, according to reports in The Economic Times.
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It’s possible that growth capital may come back into the market in the second half of the year, the HolonIQ report said, but “venture investors are holding back large sums, waiting to see outcomes of their pandemic-era bets.”
During and after COVID-19, the hunger for ed-tech devices, tools, and academic resources greatly increased as school systems raced to find new ways to deliver instruction in virtual environments. Some of those products found a permanent place in school districts. But many did not, as parents and teachers eventually sought to return to a balanced approach to print and tech-based delivery.
Investors who were both new and veterans to investing in the education space saw some of their bets on ed-tech companies during the pandemic stagnate or turn sour as the market shifted following the pandemic and funding to support schools during it dried up.
A major global example is the fall of Indian ed-tech company Byju’s, which went from being the most valuable startup in India and raising more than $4.5 billion to being written off as a loss on its investors’ balance sheets, with a reported valuation of zero.
Globally, the International Monetary Fund said the worldwide economic system is entering “a new era” amid U.S. tariffs and that a depreciation in value of the U.S. dollar — which could spur markets to “react negatively to the diminished growth prospects and increased uncertainty,” according to an April report by the organization.
Much of the growth in the global ed-tech industry is in emerging markets, according to the report, with an increase in deals from the Middle East and North Africa region, and a steady deal flow in Europe and Southeast Asia.
M&A activity in ed tech slowed in Q1 as well, falling 32% year-over-year, with buyers seemingly turning away from the turbulent K-12 and higher education markets and instead focusing on corporate training and reskilling.
Companies focused on workplace learning represented a third of all M&A transactions in the quarter, according to the HolonIQ report.
Some deals in K-12 did play out in Q1, such as Newsela’s acquisition of Generation Genius, and zSpace — which recently went public with a $10.8 million IPO in December — buying BlocksCAD in March. zSpace’s M&A activity continued into the second quarter, as the company reported acquiring Second Avenue Learning, makers of custom educational software and games, in April.
“Education investment is down, but not out,” the HolonIQ report stated, noting that capital is “concentrating in categories with clearer ROI and long-term resilience.”