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EdTech Funding Struggles Highlighted at Mastercard Foundation Conference

At the Mastercard Foundation’s EdTech Conference in Abuja, the alarming decline in funding for EdTech startups took center stage. In 2023, these startups secured just 1.4% of the continent’s Venture Capital (VC) funding, a stark drop from the peak in 2021. This decline has led to smaller deal sizes and fewer exits, creating a challenging environment for founders.

The broader venture capital landscape has seen investors becoming more cautious, with fewer large deals being made. Data from Disrupt Africa shows no EdTech company secured a $100 million or more venture round in 2023, a significant change from 2021.

“Securing exits for EdTech startups is practically non-existent,” said Isaac Nyangolo, Co-Founder and CEO of Zeraki. He emphasized that funding from angel networks often comes at lower valuations compared to more mature sectors.

Despite the presence of over 200 startups, Africa’s EdTech sector remains underdeveloped, with funding being a major hurdle. The sector has seen only one exit so far, with the acquisition of Egyptian EdTech Orcas by Baim, a Middle Eastern EdTech startup, for an undisclosed amount. With VC funding dwindling, many startups now depend on grants.

The challenges hindering EdTech funding in Africa include inadequate infrastructure, low internet speeds, high data costs, and limited smartphone penetration, as noted in a 2023 UNESCO report.

“Broadband, mobile penetration, and power are major challenges to increasing EdTech funding,” said Tochukwu Ezeukwu, Regional Director of African Venture Philanthropy Alliance (AVPA). He highlighted the disparity in power access between countries, citing Nigeria’s 53% compared to Ghana’s 72%.

EdTech startups also face smaller deal sizes compared to FinTech peers, who attract more investments. Ezeukwu and other panelists agreed that EdTech requires “patient capital,” with investors focusing on long-term impact rather than immediate returns.

The Mastercard Foundation is addressing the funding issue by providing equity-free funding to growth-stage startups in Africa. So far, 144 EdTech startups have benefited from this initiative.

“Sustainable business models are crucial,” said Ruth Wairimu, Investment Manager at Acumen Fund. She noted that B2B models offer better scalability compared to B2C, particularly given the limited disposable income across much of Africa.

The panelists concluded that foundations, family offices, and grants will play a vital role in bridging the funding gap. While EdTech has the potential to transform education in Africa, significant funding increases are necessary to realize this potential fully.

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