Edtech exits are dropping out

Prior to 2021, Edtech was characterized by a lack of exits. In 2021, we witnessed a flurry of sizeable Edtech exits. A sector once renowned for sluggish exit opportunities appeared to have opened the floodgates.

To put things into perspective, 63% of Edtech exits (M&As and IPOs) since 2010 happened in the last five years alone. 2021 standout as the strongest period for exits, with edtech exits reaching $40.7B in value,  up 7.9x compared to 2020.

While some markets saw a change in investment(?) halfway through the year, (most notably China), others including the US saw an increase in the number and value of exits. Notable successful public debuts of several US edtech companies also took place last year, including IPOs by PowerSchool, Duolingo, Coursera, and Udemy, and even the first edtech SPACs (Nerdy, Skillsoft and SoFi).

However, the first half of 2022 tells a different story. The market downturn that has hit all tech stocks is also reflected in the performance of edtech public companies. The price per share of the cohort of companies that went public in 2021 is down on average -59%.

Fewer edtech companies are choosing IPO as an exit route compared to last year – only two companies IPO’ed in H1 2022, compared to 8 the same period in 2021.

Number of total edtech exits 2017 – 2022 YTD

Facing challenges in public markets, acquisition appears a more common exit route. In H1 2022, the number of M&As is slightly slower than previous periods. The combined exit value has also declined, which means M&As in edtech are happening at a lower value.

Another trend we’re observing is market consolidation. The sector has started to show signs of maturity expressed by major M&A activity led by the sector’s biggest successes. Notably, Byju’s has been on an acquisition spree, acquiring 11 edtech startups since 2019. Consolidation means that bigger companies are choosing to buy in instead of building as a way to expand geography and launch new products.