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Why Investors Are Bullish on EdTech in 2023 EdTech enables educators to reach more students than ever before with the ability to deliver content beyond the limitations of a language barrier or timezone.

By Karl Eshwer Edited by Micah Zimmerman

Opinions expressed by Entrepreneur contributors are their own.

2022 closed with 30 EdTech Unicorns collectively valued just south of $100 billion. For context, these companies combined are biting at the heels of economically critical Fortune 500s like General Electric and American Express that command over $100B valuations.

With consistent growth expected into the next decade, EdTech — along with its leaders, operators and mission that continue to grow into more verticals and geographies — is back in the race towards a more equitable future.

Related: 5 EdTech Trends That Will Change Learning Between Now and 2030

AI in EdTech

It's hard to find an industry that Artificial Intelligence hasn't yet graced. While most implementations of AI are still experimental, its effects on education actively drive tangible results. Personalized learning driven by AI is at the epicenter, with research and data in the field reinforcing the benefits students are experiencing.

Educators at the Institute for Innovative Learning suggest that "students who followed the self-regulated online learning guided by the personalized learning approach out-performed and gained more knowledge than those who followed the conventional self-regulated online learning activities after finishing the learning process."

The ever-widening student-teacher ratio in class sizes has historically limited traditional learning across the value chain of K-12 through to professional upskilling. AI-driven personalized learning tailored to the individual helps bridge this divide while still just scratching the surface of what's possible.

Related: Rise Of EdTech And Effect on Generational Learning Curve

Achieving scale in EdTech

A large horizontal (e.g., K-12) and vertical (e.g., content, experience, assessment etc.) value chain makes LMS or Learning Management Systems essential to achieving scale in EdTech. As classrooms grow larger and personalized learning more prominent, platforms that house these resources become mission-critical.

As important as having a harbor to harness and leverage the vast amounts of data generated by personalized learning platforms. Extracting this data in an actionable format allows educators to develop better content while allowing technologists to understand best how key stakeholders use their products.

While LMS have been around for the last few years, it continues to be a cornerstone of development for the industry as operators find new ways to implement bleeding edge technology (natural language processing, data mining and analytics etc.) and create outsized value.

Extending reach and relevance beyond traditional education

The shift to work from home has evolved how the world does business today and how companies support their workforce's growth and professional development. Automating the identification of skill gaps in employees and making intelligent suggestions for resources that help fill them creates immense value for businesses and their employees.

The ability to track unique skill sets and skill levels opens up the opportunity to staff resources more efficiently or suggest positions internally that could better leverage talent. While beneficial to HR resources, an automated approach to upskilling also adds to a Firm's retention incentive for current and future employees.

Venture Capital funding mirrored the above trends in 2022

Data from HolonIQ suggests that, of "$10.6B and 1,400+ deals of EdTech Venture funding for 2022, nearly half focused on management systems and learner/teacher support."

Unsurprisingly, investing in EdTech is projected to slow in 2023 amid the overall macroeconomic environment. However, consistent results from adoption over the last few years should sustain a strong appetite from investors into 2023 and beyond.

The level of investment into LMS suggests a conviction to scale in EdTech. It is a strong indicator that the key infrastructure needed is actively refined for the current suite of EdTech to leverage and built for future technology stacks to be based on.

ChatGPT helped educate the world on the power of AI and will make the conversation easier for operators building AI-driven learning technology to gain the support of traditional educators. Lastly, the upside potential for businesses to develop talent at better unit economics (i.e., cheaper to support HR resources with AI-based professional development tools) while leveraging data to create predictive analysis, and better understand resource allocation on a granular level is exciting.

Related: Microsoft Invests Billions in OpenAI, Creator of ChatGPT

Government funding in EdTech

As a bonus, the $30B in government funding available to educators in the US is an opportunity for EdTech to continue growing into school districts nationally and prove value while continuing to scale over the next few years. Although an allocation towards technology from this bucket isn't clear yet, the shifting trends towards augmented support in teaching and managing a growing student population could warrant a sizable contribution towards EdTech from this pool of funding and those deployed in the future.

Related: Will Edtech See a Paradigm Shift In 2023?

Education is the greatest equalizer

EdTech enables educators to reach more students than ever before with the ability to deliver content beyond the limitations of a language barrier or timezone. As more of the world's populous go online daily, EdTech is actively creating a positive feedback loop of forward momentum for all– on all fronts.

Karl Eshwer

Investor at BDev Ventures

Karl is a venture capitalist based in New York City with BDev Ventures, the venture investing arm of BairesDev. Karl previously helped build Triple Peak Capital, a search fund, and most recently worked in management consulting at McKinsey & Co.

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