Dear Startup Investor,
Once again, angel investors have landed on the right side of the market… And this time, it’s all about education technology, or edtech.
I’m extremely bullish on the future of edtech. It quickly became a vital part of the learning landscape at the beginning of COVID-19, and I firmly believe that it will continue to define education for years to come.
The startup world agrees with me. Early stage US edtech companies raised a whopping $2.2 billion in 2020. And in 2021, edtech startups around the world raised more than $20 billion, more than the combined totals from 2017-2019.
To put it simply, VC dollars are pouring in. As a result, we saw a whopping 17 different edtech startups achieve Unicorn status in 2021 alone.
But the public markets tell a different story.
Edtech stocks are stumbling as pandemic restrictions begin to ease up and the possibility of going back to school full time, and in-person, in 2022 appears to be gaining momentum.
Chegg is trading at just more than a quarter of its peak in February 2021. And Coursera, which went public in March 2021, is now down more than 60% from its April 2021 peak.
That’s a sore loss for the companies’ post-IPO investors. But for angel investors, the news isn’t bad. In fact, I’m still confident in the future of edtech… for a couple of reasons.
First, let’s dig into Coursera. Despite the company’s post-IPO losses, its early-stage investors still have a massive reason to celebrate.
Even investors who got in on Coursera’s Series B round, when the company was worth $367 million, are likely sitting pretty on a sweet exit. The company was worth $7 billion on IPO day, giving those investors around a 1807% return. That’s not something you see on the regular stock market every day.
Coursera is just one of many examples. This narrative is a familiar one in the world of angel investing, and it’s one I’ve told often. Getting in early is the best way to beat the stock market, especially in industries like edtech that aren’t seeing too much luck in the public sector today.
Second, as we are currently well aware, the stock market is volatile. It’s oftentimes reactive, and it can ebb and flow dramatically based on both sentiment and reaction to world events. In the case of edtech, it’s not surprising to me that people are selling off their shares as COVID-related regulations begin to be lifted.
But here’s where the value of angel investing comes in. As angel investors, we’re trained to look into the future and make our investment decisions based on what’s going to make us money years down the line.
It’s only natural. You’re not going to see an overnight return on an angel investment. It’s going to take anywhere from three to 10 years for that investment to mature. But if you bet on the right horse, that wait could be well worth it in the end.
That’s exactly how I feel about edtech. Edtech stocks might be faltering right now, but I still see edtech as something that’s going to permeate our lives, whether we’re in the middle of a pandemic or not.
The types of paradigm shifts we’ve witnessed over the last couple of years alone are enough to keep me bullish on this sector for years to come (for one, the entire edtech market is expected to hit a whopping $404 billion by just 2025).
And also, COVID-19 has only accelerated a trend that was going to happen anyway. There’s a growing demand for innovative ways to train America’s workers with brand-new skills to keep them competitive in our constantly shifting job market. Edtech startups (think MasterClass, Duolingo, and even Coursera before it went public) have made accessing these resources even easier, cheaper, and more accessible than ever before.
So ultimately, while “right-now” confidence in edtech may be struggling in the stock markets… I believe it’s only a matter of time before it corrects itself. And years down the line, today’s edtech startups may very well be tomorrow’s biggest exits… potentially handing angel investors a massive check along the way.
Here at Angels & Entrepreneurs, we’ve featured several edtech startups that I believe have a serious shot at making it big. It’s one of many sectors that I believe are about to explode (sooner rather than later).
Another one? Cleantech. And I’ve got a pick that could put you on the path to millionaire status, if you act fast enough.
This startup is worth $37.5 million right now, but its potential for growth is really impressive. It’s turning one of the country’s least recycled sources of waste into some of the most highly demanded resources in the world.
Better yet, you can get in with a starting stake of just $500.
Just click here to check out my interview with the founding team, and I’ll be back soon with another update.
Until next time,