[StartupRecipe] Reasons Behind Edutech Funding Decline

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#Weekly Funding Overview

[Aug. 14 ~ Aug. 18]

The total funds raised by Korean startups of this week is KRW 132.3 billion.

Company	Industry	Amount	Round	Investors
Beeble	Virtual production	-	Grant	Deeptech TIPS
Pairy	Marketing solution	-	Grant	Deeptech TIPS
Bolta	Tax SaaS	-	Grant	TIPS
Covering	Waste treatment	-	Pre-Series A	New Paradigm Investment
Safe Kitchen	Kitchen Cleaning	-		VNTG, Moonlight Partners
BVMT	Beauty brand	-	Grant	TIPS
3J	Healthcare	-	Grant	TIPS
Devunlimit	Interactive media	-	Grant	TIPS
Future medicine	Bio	6.3 billion	Pre-IPO	LSK Investment, Magna Investment, Dreamstone Private Equity, Wooshin Venture Investment
Korea Credit Data	B2B management	100 billion		Morgan Stanley Tactical Value
Elevenliter	Pettech	-	Seed Bridge	Star Ventures, SK Securities, IPS Ventures
Big Uncle company	B2B Retail	-	Grant	TIPS
SANTA	Edutech	-	Series A bridge	Accentri Ventures, Gyeongnam Venture Investment, Samsung Securities
True golf	Golf platform	-	Seed	Lotte Ventures
Ellect	EXCAVATOR	-	Seed	Busan Technology Holdings
Webling	POD	-		Hibe, YG Plus, YG Investment, JYP Entertainment
Pribit technology	Security	4 billion	Pre-Series A	DSC Investments, Stick Ventures, KODIT, SW Investment
Pillyze	Nutritional supplements	12 billion	Series A	Capstone Partners, Samsung Next, KB Investment, KDB Development Bank, Strong Ventures, Primer, NexTrans
Motiva Korea	Healthcare	7 billion	Series B	J&M Partners
binblur	Logistics solution	-	Seed	Series Ventures
Speser		-		Rsquare
ADUS	Mobility	-	Seed	Anda Asia Ventures, Future play
Oligongene	Bio	-	Seed	Genaxis
DR.tail	Pettech	3 billion	Pre-Series A	Stassets Investment

Major Funding

• Korea Credit Data has secured an investment of KRW 1000 billion. Their flagship service, ‘CashNote,’ provides functionalities like bookkeeping, customized financial solutions for businesses, an exclusive marketplace for entrepreneurs, information on small business support policies, and a dedicated community for business owners.
• Pillyze, a personalized nutrition and diet management platform, has attracted an investment of KRW 120 billion . Using highly personalized AI (Artificial Intelligence) technology, they specialize in individualized health analysis, including body composition analysis and genetic testing. They plan to expand their team of healthcare professionals.

#Trend Analysis

In recent times, a noticeable decline has gripped the world of startup investments, touching virtually every sector. Yet, one area that has felt this contraction acutely is the realm of edtech startups. According to data from Startup Recipe, in the current year, investments flowing into the edtech sector have barely managed to breach the KWR 40 billion mark, with the largest investment size falling conspicuously short of KRW 10 billion.

The heyday for edtech startups, it seems, was in the year 2021. This was a time when they gleamed in the limelight, benefitting immensely from the rapid transition to digital education brought about by the relentless sweep of the COVID-19 pandemic. Those startups boasting robust digital offerings became the darlings of investors, seizing significant attention and a bounty of investment opportunities as the education arena underwent a seismic shift towards the online realm. However, in more recent years, many of these startups, despite their initial success in attracting substantial investments, have found themselves struggling to secure follow-up funding, all against the backdrop of a broader investment downturn. Furthermore, the emergence of novel startups introducing innovative models has become increasingly rare, further perpetuating the downturn. Adding to the woes, the lofty corporate valuations achieved during the golden era have been eroding at an alarming pace. Certainly, funding for edtech startups has been steadily declining year by year, dropping significantly from its peak at KRW 5.162 billion in 2021 to just KRW 2.53 billion in 2022. If the present trend continues, reaching a modest KRW 20 billion this year could appear to be an exceedingly challenging endeavor. The reasons behind this slump can be traced to the overall reduction in investments, largely attributable to economic headwinds. However, it is also entangled with the waning appetite for online learning as the pandemic’s grip loosens, coupled with lingering doubts about the profitability of these ventures. The conspicuous absence of edtech startups that can demonstrate a profitable track record stands out as a major deterrent to prospective investors.

Amid these formidable challenges, the downturn in hobby-centric online education platforms, which were the beneficiaries of substantial funding during the investment frenzy, casts a long shadow over the entire edtech market. For instance, Classes101, once aspiring to unicorn status, has been compelled to undergo significant restructuring and recently faced public censure for unpaid rent. On the other side of the spectrum, Taling reported profits but had to embark on a substantial downsizing of its workforce. The exorbitant costs associated with user acquisition, with a substantial portion of investments siphoned into advertising, have proved to be a formidable obstacle in the path to profitability. Consequently, tales of edtech platforms achieving positive profitability remain as elusive as the proverbial needle in a haystack, particularly within the realms of adult education, childcare, coding instruction, and similar domains.

Nevertheless, there exists a glimmer of hope in the form of AI-based edtech companies. These enterprises have harnessed the power of artificial intelligence to revolutionize learning paradigms or provide cutting-edge educational support tools, thereby enhancing the efficacy of the educational process. They harbor ambitions of showcasing their growth potential on a global stage, setting their sights beyond domestic boundaries.

The edtech slump, it should be noted, is not confined to domestic markets alone. According to insights from CBInsights, investments in edtech startups during the first half of this year have seen a precipitous decline of 23%. Furthermore, even in the international arena, edtech companies find themselves in a lackluster performance rut, with unicorn companies grappling with dwindling valuations and a conspicuous dearth of successful initial public offerings. While investment downturns continue their inexorable march globally, the sheer magnitude of the education market and the relentless march of technological progress suggest that growth prospects are still within reach. Nevertheless, the precise moment when this recovery will materialize remains shrouded in uncertainty, particularly in light of the ongoing economic convulsions that define our times.