How to get funding for
an e-learning startup in 2021

With COVID-19 changing the way we work and learn so much, it is obvious we must reassess the previous predictions and forecasts. To put it short, the numbers so far show a promising picture — the global EdTech. venture capital is going to triple in size over the next decade. A new generation of EdTech products, with rich features and advanced functionalities, is expected to rise to prominence in the EU and the USA, which are the global leaders in eLearning consumption.

We provide a more in-depth overview of the current EdTech industry trends:

• The EdTech industry received more than $32B in funding from 2010 to 2019 — and Global EdTech Funding forecasts the rise to $87B by 2030.
• According to 2020 stats from Crunchbase, there are 1,385 EdTech companies in the US, which constitutes nearly 43% of their number worldwide. The rest of the top 5 EdTech communities are located in India (327), Brazil (275), the UK (245) and China (101).
• Digital education is rapidly incorporating the latest technology — AR/VR are gaining traction and the global e-Learning investment is expected to reach $342B by 2025, a whopping 2.5x growth compared to $142B invested in 2018.
• The US EdTech market is the global leader, with $8.3B raised to date, according to a report. China follows with $5.9B less in investments, and the EU has invested more than $1B in various e-learning initiatives.
• The first half of 2020 has seen $4.1B invested in EdTech, which is $1.5B more than the previous year, a Crunchbase report says.

The numbers look promising, but to succeed you need to have the money at hand. Thus, we must explore how to fund a startup in the e-Learning field in 2021.

As you can see, there is a wide field to apply your skills and ideas. Between K12 education, career development platforms, MOOCs and corporate Learning Management Systems, you are sure to get the niche that suits your expectations best.

Once you select the future field of growth, your USPs and differentiators, it's time to think about how to get funding for a startup in EdTech.

There are four main types of securing investments for a startup:

• Crowdfunding
  
  
• Angel investors
  
  
• Venture capitalists
  
  
• Institutional investors

Let's take a closer look at every one of them.

Crowdfunding

It's much easier to secure a bunch of smaller investments than to land one big pile of cash. Thus, if you have an email list of potential one-time donations from educational institutions or state funding programs, or have gained some media following — you might try reaching out and asking for help to create your e-Learning product.

Alternatively, you can register at Kickstarter or Indiegogo, which are huge platforms for securing investments. They allow you to promote your product to large strata of enthusiasts, who can donate various sums in exchange for future rewards within your product.

Angel Investors

There are various investment portals like AngelList, where startups can pitch investors. You can try to persuade companies and individuals to provide startup funding for your endeavor there. You can reach out to investors and even if they are not interested in the venture, they might refer you to someone who might like the idea. Connections bring cash.

There still are traditional investment firms, and you might look around to see who is investing, and what they are interested in. The investors you will meet will roughly fall into three major groups:

1. Those perceiving the COVID-19 pandemic as an accelerator for e-Learning trends
   
   
2. Those concerned that global supply chain distractions caused by lockdowns force the businesses to release products faster
   
   
3. Those uncertain about the outcomes and not willing to risk it for the biscuit at the moment.
   
   

Prepare 3 different decks and pitches and adjust your approach accordingly. This might seem like a lot of legwork, but it will pay off when an investment fund wants to come aboard your project.

Venture Capitalists

VCs or Venture Capital firms can be picky regarding the projects they invest in, as they can fund literally any EdTech venture singlehandedly. However, they are interested in funding future unicorns to reap benefits, so the problems you solve or the approach you take to solving them must be really unique and important. The other downside is that you have to give up a large portion of your equity and they might request a say in decision-making.

The VC fund will evaluate various factors, like whether your product idea:

• Solves the existing market challenge and meets customer requirements,
  
  
• Will attract and retain talents,
  
  
• Will be useful for small ideation-level teams and larger businesses,
  
  
• Provides USPs able to beat the competition,
  
  
• Is designed with scalability in mind and will grow smoothly,
  
  
• Offers any innovative business models,
  
  
• Promises steady cash flow,
  
  
• Will deliver value, cross-sell and upsell in borderline cases, etc.

Most importantly, VCs prefer to work with startup founders who have a proven record of successfully delivered EdTech products (or have engaged a technology partner with this expertise). This is an additional security measure to ensure the startup avoids the underwater reefs of EdTech development.

Institutional investors

There are large companies and institutional investors (global corporations, educational systems, universities, etc.) who are willing to support innovative ideas — but are afraid to rely on untested products. Therefore, many of such institutional investors either purchase startups with the know-how they need — or try to breed them in internal startup incubators.

While such partnerships do grant access to financial resources and brand recognition required to develop and promote a new product, to get the most value out of such approach, startups must be aware of certain precautions:

1. Company partnerships are about two-way value transfers. A startup must not be a pet that follows every whim of the company to gain access to its finances or partners. The value delivery chain of the startup should be clearly defined — implementation of new technology, the launch of new products, closing service portfolio gaps, helping to acquire new clients, etc.
   
   
2. Don't partner with just any company. Some companies might seem a good fit to partner with but might have little successful experience working with startups. Vet the companies based on publicly available reports, try to contact their previous customers and contractors. Assess if the company is planning a merger, acquisition, or takeover and whether it will affect the terms of your partnership with it.
   
   
3. Pay attention to exclusivity. Make the exclusivity arrangement explicit by negotiating non-exclusivity rights or limitations — like a single product, time period, geographical location, market segment, or product.
   
   
4. Sometimes termination is the best choice. If you see that decisions are bogged down in internal bureaucracy, the timing becomes off or the partners begin to request services outside of the scope of the agreement, it's best to terminate such partnerships. You'd better have termination terms and details printed out in the contract clearly.

There are various aspects of working with large institutional investors, but knowing these underwater reefs in advance helps avoid many pitfalls from the start.

By no means, don't limit yourself to a single way of securing funding for a small business startup. Work with angel investors to secure seed funding, pitch to VCs and institutional investors, run crowdfunding campaigns, partake in startup accelerators and incubators. The core challenge is not to find the money — it's to obtain the technical expertise required to bring your big e-Learning idea to fruition.

Do you need funding for your startup? With diligent work and a little luck, you will be able to become a part of EdTech investment galore. What's more important, with our help you will be able to invest that money right and release a great e-Learning product!

Book a call and let's see how we can help you!