Edtech startups gather 20% of overall VC investments in H1 2020

Despite the majority of businesses facing tough times due to the Covid-19 pandemic, edtech startups have witnessed extraordinary growth and emerged as a hot sector for venture capital firms to invest in.

Indian edtech startups have collectively raised over $795 million in the first half of 2020 as compared to $108 million in the previous year, said a Mint story quoting a Venture Intelligence report. 

One of the major reasons for edtech firms recording a 7X spike in fundraising is greater use and adoption of online learning due to the restrictions on the opening of schools and educational institutions. 

Other sectors like e-commerce, hospitality, mobility, and travel remained the worst affected recording 30-70% fall in the deal sizes. Indian startups have borne a huge brunt, as evidenced by its drop-in deals dipped by 31% to 272, as compared to 393 deals during the first half of  2019, the story said. 

The total capital raised by the startups collectively has also reduced by 11% to $4.1 billion in 2020 till 26 June from $4.6 billion during the first half of 2019. Overall, edtech startups have contributed around 20% of the total venture capital investments in H1 2020, the Mint story added.

A TOI story too quoted the report which said that investors have started pulling back on early-stage bets as the deal of up to $2 billion was down by 43% to 98 and the transactions ranging from $2-25 million fell by 26%. 

During the ongoing pandemic, a majority of the mega deals are being sealed by the poster boys of edtech. While Byju’s recently became the second-highest valued startup in India - after Paytm - by securing an undisclosed amount from global investment firm BOND Capital, Unacademy had raked in $110 million in February.

Tiger Global-backed Vedantu had also received around $44 million in three tranches during the period.

Few edtech startups which are at their nascent stages such as Pedagogy, CampK12, Genius Corner, Entri, and Wiziclub have also drawn the interest of several VC firms and investors this year. 

Apart from edtech firms, SaaS-based Postman had also raked in $150 million at $2 billion valuations last month. Meanwhile, food tech major Swiggy and Indian budget hotel chain Oyo received their pending funding rounds of 2019, including Bounce closing a $97.5 million financing round in January, i.e before the onset of  Covid-19. 

Given the current status of the spread of coronavirus in India and globally, the future seems a bit grim for VC investments. So far, India has reported 5.48 lakh positive cases with 16,481 deaths. The number of positive COVID-19 cases worldwide has crept to over 1.02 crores. 

Many VCs and entrepreneurs have also cautioned that the next 6 months will be very critical for the Indian startup ecosystem and multiple consolidations in the ecosystem are expected to play out in the coming months.