The Indian EdTech space saw a 48 percent dip in funding from 1 January to 7 August 2023 compared to the corresponding period in the previous year.
Bengaluru, however, took the lead in terms of total funds raised in the sector to date. The details were released in a report by market intelligence platform Tracxn.
The EdTech India - Feed Geo Report noted that EdTech start-ups in Bengaluru raised a total of over $8 billion as of August 7, 2023, followed by Mumbai ($2.5 billion) and Gurgaon ($497 million).
Total funding dips
The total funding this year for the period stood at $971 million as against $1.87 billion for the period last year as per the report. The number of funding rounds also experienced a drop of 77 percent and 82 percent compared to the same period in 2022 and 2021 respectively.
The Indian start-up ecosystem is one of the top three funded geographies in the 2023 Year Date (YTD) in the EdTech space, next to the U.S. Despite this, this space has experienced a declining trend in funding, similar to its global counterparts.
The global EdTech market has been facing challenges attributed to decreasing demand for online education, ongoing funding constraints, rising interest rates aimed at controlling inflation, and economic uncertainties.
Nevertheless, the report notes that Indian EdTech sector shows promise due to a demand-supply gap between teachers and course availability in offline education, which might fuel the sector’s growth in the coming years.
Boost in the second quarter
Most of the funding into Indian EdTech start-ups in 2023 so far was secured in the second quarter. The space observed funding worth $713 million in Q2 2023, accounting for 73.43 percent of the total funding raised this year. This is also an increase of 37 per cent compared with the corresponding quarter last year.
K-12 EdTech, Test Preparation Tech, and Higher Education Tech were the top-performing segments in the EdTech sector based on funding so far. K-12 EdTech start-ups have raised a total of $711 million in 2023 YTD, a fall of 45 percent and 56 percent compared with the same period in 2022 and 2021 respectively.
No new Unicorns have so far emerged in this sector this year, as against two new Unicorns in the same period last year. 2023 YTD witnessed seven acquisitions, a 70 per cent decline compared with 23 acquisitions in the same period in 2022 and 19 acquisitions in the same period in 2021.
We Founder Circle, Peak XV Partners and MMPL Trust, were the most active investors in the EdTech space in the last two years.
We Founder Circle, IPV, and LetsVenture were the top seed investors, while Peak XV Partners, Better Capital, and AngelList were the top early-stage investors. The top late-stage investors included MMPL Trust, WestBridge Capital, and The Chan Zuckerberg Initiative.
The Indian EdTech sector emerged strong during the pandemic riding the online education wave following the school closures during the period. It leveraged rising internet and mobile device penetration in rural areas.
The report notes that despite the current challenges, there are reasons to remain optimistic about the EdTech sector’s role in transforming education in the country.