Funding Collapse Hits Edtech Sector
Funding for Indian edtech startups collapsed by 56% year-on-year to $249 million in 2024, hitting an eight-year low according to Inc42’s Annual Indian Startup Trends Report. The sector, once a darling of venture capital, saw deal counts slide 35% to just 31 in the same period. This drastic drop follows a period of immense boom in 2021, when 172 deals were closed.
Lingering Impact of Funding Winter
The decline signals the ecosystem’s struggle to recover from the 2022 funding winter and the subsequent troubles faced by major players like BYJU’S, Unacademy, and Vedantu. Acquisitions remained minimal, with only five M&A deals in 2024, mirroring the previous year.
Investor Apprehension and New Mandates
Early-stage edtech startup Dalvoy AI cofounder Ritik Agrawal noted significant investor apprehension, citing past failures and flawed business models at highly valued companies. Investors are now prioritizing clear revenue models, profitability, strong retention, and sustainable unit economics over rapid growth.
AI and Niche Focus Drive Revival Hopes
VC firm IvyCap Ventures founder Vikram Gupta indicated that funding opportunities might reopen in 2026 for startups demonstrating sustainable growth, learner outcomes, and operational efficiency. AI is identified as a key enabler for building smarter products and leaner business models. While K-12 segment funding declined, test prep, professional upskilling, and vocational courses are attracting investment. Startups focusing on niche subjects or learner profiles, powered by AI for personalization and adaptive learning, are expected to lead any potential revival.
Cautious Optimism for 2026
Despite the current slump, founders and investors are looking towards 2026 with cautious optimism, expecting a comeback driven by AI integration, lean operations, and a clearer focus on sustainable business metrics. VC firm 247VC’s founder Shashank Randev added that investors are looking for product stickiness rather than growth at any cost.
