VC investments in LAC edtechs have more than tripled between 2020 and 2021

HolonIQ and IDB Lab new report indicates that investors have finally woke up to the region's opportunities, but there's much to be done.

Marco Fisbhen, CEO of Descomplica. Photo: Courtesy/Descomplica

A new report by HolonIQ, a market-intelligence firm that monitors the global education industry, and IDB Lab, Inter-American Development Bank’s innovation laboratory, shows that the Latin America and the Caribbean ecosystem has grown to more than 1,500 edtech companies over the last ten years, attracting $1.07 billion in investments through 500 fundraising rounds. The report not only paints a comprehensive portrait of the edtech landscape in LAC but brings 24 case studies showing how the startups are overcoming the challenges in the region, including the Colombia-based UBITS, the Brazilian Descomplica, and the Mexican Platzi, among others.

The pandemic has aggravated LAC’s learning crisis and ‘access gap’ while also accelerating the ecosystem development — the need is huge, hence the opportunities. VC investments in LAC edtechs have more than tripled between 2020 and 2021. Only last year, investors poured $500 million into the region’s edtechs (six times the average registered in the previous five years).

Although impressive for the region’s trajectory so far, the volume of venture capital investments is still a tiny part (about 2%) of the investments flowing globally to edtechs. Also according to HolonIQ, this volume reached $20.8 bln last year worldwide in 2021, and India became the number one market for edtechs.

READ ALSO: Brazilian edtech Medway raises its first round: a $15 million Series A from Softbank and seven other funds

“Our momentum funding scenario suggests we could see up to $150 billion of VC deployed this decade, with the assumption that the ‘COVID- fuelled’ investment surge moderates and the underlying momentum continues at sustainable investment rates,” says the report.

In the last five years, the more significant portion of the investments went to the workforce category (55%) — something in line with global trends in education since companies are more inclined to invest in fulfilling the skills gap. On the other hand, there is little attention to edtech startups in the Pre-K (early childhood) segment — they attracted only 6% of the rounds in the last five years, while 26% went to K12-focused edtechs, 12.5% to higher education startups.

In HolonIQ and IDB Lab evaluation, K12 will be the next fastest-growing category of edtechs in LAC. “However investment in EdTech in K12 is not consistent across geographies and is particularly difficult for those countries or regions with lower internet connectivity,” says the report, highlighting that 51% of children in the region can’t read proficiently by late primary age.

READ ALSO: Latin American edtech UBITS closes Series B round led by Riverwood Capital

The majority (70%) of all edtech startups in the LAC region are headquartered in Brazil and Mexico. However, smaller nations, such as Peru and Argentina, have also attracted the attention of investors in the last ten years.

“Peru is a specific example with Crehana (in 2021, it received the largest Series B round for an edtech in Latin America). For us, this shows that there is talent and amazing teams everywhere in LatAm and not just in the region’s major economies. It also shows us that Latin American edtech companies can reach regional scale and hopefully global scale,” Thiago Payva, vice president of education at HolonIQ, told LABS.

In the report, HolonIQ and IDB LAB also stress the need for solutions to be student-centered — which is curious because a few years ago, the focus of innovation was on teachers. This shift in focus has been a turning point in the growth of the Latin American ecosystem. “The shift toward the learner has been key; that’s what teachers have always been trying to do as well. Focus on the learner. But this shift has allowed the growth of the B2C segment and also supported the learner through the COVID pandemic,” added Pavya.

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