EdTech investment is evolving. Growth is no longer enough. Investors are scrutinizing profitability, strategic positioning, and the ability to navigate the complexities of the education market. EdTech companies that don’t have a clear path to revenue or struggle to adapt to shifting funding models will have a hard time raising capital.
The era of throwing money at the next flashy platform is over—today’s investors want sustainable growth, real impact, and founders who understand the financial realities of scaling in education, learning, and development. So, how does investment actually work in EdTech, and what should entrepreneurs focus on to guide their companies through a sustainable lifecycle?
To break it down, Phill Miller, seasoned EdTech leader with deep expertise in acquisitions, investment strategy, and executive leadership—and a 27zero board member—, sat down with Laureano Díaz, Chief Strategy Officer at 27zero, for a candid conversation about demystifying how funding flows in the EdTech industry, which is the ultimate goal of the EdTech Investor series.
Drawing from their conversation, this article unpacks the key players in EdTech investment, what makes a company fundable, and why so few EdTech startups successfully transition to the public markets.
If there’s one thing Phill and Laureano know, it’s how money moves in EdTech. Having spent years navigating the industry's ups and downs, they’ve seen firsthand what it takes for an EdTech company to secure funding, scale successfully, and, in some cases, struggle under the weight of misplaced financial expectations. Investment is a make-or-break factor in this space—it fuels innovation, drives expansion, and sometimes even dictates the very survival of companies. But for those unfamiliar with how EdTech investment works, it can seem like a confusing mix of financial jargon, unpredictable markets, and a tug-of-war between impact and profitability.
In this chapter, we break down what EdTech investment actually is, the key financial concepts every founder should know, and why external funding plays such a crucial role in EdTech’s growth story.
At its core, EdTech investment is the financial backing that allows education technology companies to develop, scale, and sustain their products. It can come in many forms—venture capital, private equity, angel investments, and even philanthropic funding. But no matter the source, the goal is generally the same: to fuel the growth of companies building solutions for learning, teaching, and educational administration.
Unlike in other industries, EdTech investment operates at the intersection of three worlds:
The tricky part? These three forces don’t always align. Education moves cautiously—it values stability and proven effectiveness. Venture capital, on the other hand, thrives on speed, iteration, and high-risk bets. The challenge for EdTech founders is to balance these competing expectations while convincing investors that their startup can achieve both impact and profitability.
EdTech investment comes with a language of its own—one that founders must understand if they want to secure funding. Here are some of the key financial terms that shape how investors evaluate opportunities:
Equity funding refers to the process of raising capital by selling shares of a company. Investors receive ownership stakes in exchange for their investment, meaning they’re betting on the company’s future success. Many EdTech startups go through multiple funding rounds, from seed stage to Series A, B, and beyond.
A company’s valuation is the estimated worth of the business, typically assessed before and after an investment round. High valuations can attract more investors, but they also set expectations for future growth.
Burn rate refers to how quickly a company spends its available cash, while runway is the amount of time the company has before it runs out of money. In EdTech, where sales cycles can be slow (especially in the K-12 and higher ed sectors), keeping a close eye on burn rate is crucial.
This is one of the fundamental tensions in EdTech investment. Should a company focus on rapid expansion, even if it means losing money in the short term? Or should it aim for steady, sustainable profits? Investors often push for aggressive growth, but in EdTech—where trust, adoption cycles, and institutional purchasing power matter—profitability can’t be ignored.
Some EdTech startups choose to bootstrap, meaning they rely on their own revenue rather than external investment. While this approach gives founders more control, it also limits how fast they can grow. Others opt for venture funding, gaining access to more capital but also taking on investor expectations and potential dilution of ownership.
The reality is that most EdTech startups can’t grow solely through self-generated revenue—at least not in the early years. Unlike consumer apps, where viral adoption can drive immediate revenue, EdTech products often face long sales cycles, complex procurement processes, and the challenge of integrating into existing institutional systems.
Phill and Laureano emphasize that funding isn’t just about survival—it’s about momentum. Without investment, many EdTech companies struggle to scale their impact, expand their product offerings, or enter new markets. The capital raised isn’t just for hiring or marketing; it’s for staying relevant in a highly competitive industry where new innovations emerge constantly.
How Investment Enables Product Development and Expansion
Investment allows EdTech companies to:
For EdTech entrepreneurs, understanding the role of investment isn’t just about securing funding—it’s about knowing how to use that funding wisely. As Phill puts it,
“Raising money is just the start. What you do with it is what really matters.”
When it comes to investing in EdTech, not all money is created equal. Just like students choose between different learning paths—some opting for hands-on apprenticeships, others going the research-heavy academic route—EdTech companies have different types of investors to turn to, each with its own priorities, expectations, and risk tolerance.
Phill highlights the fact that, while investment is a crucial growth driver, understanding who is investing (and at what stage) can make or break an EdTech company’s trajectory. Some investors bet on raw potential, others fund proven winners, and a few are looking for more than just financial returns. This chapter explores the key players in EdTech investment and how funding rounds shape the industry's landscape.
Not all investors are in it for the same reasons—or with the same expectations. In EdTech, five primary types of investors dominate the space, each playing a unique role in the industry’s evolution.
What they do: Angel investors are typically wealthy individuals who provide early-stage funding to startups in exchange for equity. They invest based on the potential of the founding team and the problem the company is solving.
Why they matter in EdTech: Unlike tech startups in other industries, many EdTech companies take time to validate their model and gain traction. Angel investors can provide the early capital needed for product development, initial customer acquisition, and—importantly—mentorship and strategic networking. They’re often former founders or industry veterans who can offer guidance beyond just writing a check.
What they do: VCs invest in startups with high growth potential, often taking significant equity stakes. They operate in multiple rounds (Seed, Series A, B, C, etc.), progressively injecting more money as a company proves its ability to scale.
Why they matter in EdTech: The sector has historically struggled to attract the same level of VC enthusiasm as SaaS or fintech due to long sales cycles and slower revenue growth. However, in recent years, EdTech has become more attractive as digital learning platforms, AI-driven solutions, and alternative education models show strong market demand. VCs now see EdTech as a space where the right company can achieve unicorn status—but they expect rapid growth and clear exit strategies.
What they do: Search funds are investment vehicles that allow entrepreneurs to find, acquire, and grow a single company, often with the backing of experienced investors. Unlike VCs or PEs that invest in multiple businesses, searchers focus on acquiring one promising company—typically a profitable, small-to-mid-sized firm—that has growth potential but may lack a clear succession plan.
Why they matter in EdTech and LearnTech: Many EdTech companies, especially smaller or founder-led businesses, may not fit the traditional VC or PE mold. Search funds provide an alternative pathway for these companies to scale, professionalize operations, and achieve long-term sustainability under new leadership. By bringing in operators with a strategic vision, search funds can help EdTech firms accelerate growth without the pressure of rapid exits. A notable example is Phill himself, who, although not an official searcher, was appointed CEO of ETU through a search fund.
What they do: Private equity firms acquire or invest in mature companies with the aim of improving operations, scaling profitability, and eventually selling for a return. PE firms focus on later-stage companies that have proven market fit but need operational or financial structuring to scale further.
Why they matter in EdTech: Many established EdTech companies look to PE funding when they need capital to expand globally, acquire competitors, or prepare for a sale or IPO. Unlike VCs, PEs expect a clear pathway to profitability before investing, making them an option for companies looking to optimize efficiency rather than burn cash on hypergrowth.
What they do: Companies that reach a certain scale may choose to go public through an Initial Public Offering (IPO), allowing them to raise large amounts of capital from public investors.
Why they matter in EdTech: The reality is that going public is tough for EdTech companies. Unlike consumer tech companies with broad user bases and predictable revenue, EdTech firms face inconsistent adoption cycles, reliance on institutional sales, and economic fluctuations in education spending. The mixed success of public EdTech companies (think Coursera vs. 2U) highlights the sector’s challenges in maintaining investor confidence after an IPO.
What they do: Some investors prioritize social impact over financial returns, funding projects that align with education accessibility, equity, and long-term learning outcomes.
Why they matter in EdTech: Traditional VC models don’t always work for EdTech companies focused on low-income students, non-traditional learners, or markets with limited purchasing power. Impact investors bridge the gap by funding businesses that might not be immediately profitable but serve a critical social purpose.
Funding in EdTech follows a different trajectory than in other tech sectors, and investors in this space are often looking for a mix of business potential and educational impact. Unlike SaaS companies that might prioritize rapid growth at all costs, EdTech firms must navigate long sales cycles, institutional buyers, and sector-specific challenges like regulatory requirements and pedagogical effectiveness.
In the initial phases, EdTech startups must carefully select their funding path. Many begin with bootstrapping—relying on personal funds, grants, or small angel investments to get started. The reason? EdTech often requires a longer runway to develop a product that fits both pedagogical and commercial needs. Unlike consumer apps that can go viral, an EdTech solution must integrate into complex educational systems, which can slow adoption.
Startups that do seek external funding at an early stage often turn to angel investors or small venture capital (VC) firms with expertise in education technology. These investors are typically more patient than those in other sectors, recognizing that EdTech success isn’t just about exponential user growth but also about proving educational efficacy and navigating institutional decision-making.
When EdTech companies reach the point where they need significant capital to scale operations, expand internationally, or develop enterprise-level solutions, they often look to venture capital. But this comes with a challenge:
The growth vs. profitability paradox
Investors typically want rapid growth, but many EdTech products require relationship-building and long adoption cycles, especially if they sell to schools or universities. Investors who don’t understand these dynamics might push for unrealistic scaling.
Many EdTech companies struggle to secure funding because their metrics don’t fit the standard high-growth expectations of VCs. Unlike SaaS startups that can showcase rapid customer acquisition, EdTech firms may still be proving their model at this stage. This often results in a ‘funding valley’—where early-stage investors are willing to take a chance, but mid-stage investors hesitate.
EdTech companies that survive the early hurdles often reach a point where private equity firms or later-stage VCs come in with a different focus: operational efficiency, market consolidation, and profitability.
Since the EdTech market can be fragmented, investors may push for acquisitions that consolidate multiple solutions into a single platform. This is why many smaller EdTech startups ultimately get acquired by larger players rather than going public.
Going public is rare in EdTech, and Phill highlights that only a handful of companies have successfully navigated this route. The reason? Public markets demand predictability, and education spending—especially in government or institutional settings—is often unpredictable. Many EdTech companies instead look for strategic acquisitions as their exit strategy.
EdTech investment isn’t just about throwing money at the next big learning platform and hoping it sticks. Investors in this space evaluate companies through a highly specific lens—one that balances financial potential, market dynamics, and the complexities of the education industry. As recognized by Phill and Laureano, the companies that secure investment aren’t always the flashiest or fastest-growing, but the ones that truly understand how to align education, technology, and business strategy.
Investors don’t back companies just because they look promising on paper—they follow an investment thesis, a strategic framework that defines what types of businesses they consider worth funding. In EdTech, that thesis often revolves around three key factors: market size, business model, and long-term growth potential.
Investors want to know how big the opportunity is. If a company is solving a niche problem for a small subset of schools, it’s a tough sell. But if the problem exists across multiple segments—K-12, higher education, corporate learning, global markets—it becomes a lot more attractive.
Is the company selling directly to consumers (B2C), to institutions (B2B), or through hybrid models? Understanding how revenue flows in EdTech is critical, because long sales cycles and bureaucratic procurement processes can make institutional sales challenging.
Investors aren’t just looking for profitability—they’re looking for scalability. Can this EdTech solution grow beyond its initial market? Can it expand internationally? Is there potential for upselling additional products or services?
While every investor has different preferences, some characteristics make an EdTech company far more attractive to funders. Phill points out that successful companies tend to have three essential traits:
A great product isn’t enough—it has to solve an urgent, clearly defined problem. Investors look at whether customers are actively searching for a solution or if they need to be convinced that a problem even exists.
For example, a tool that streamlines administrative processes in universities might be more fundable than a platform that “improves student engagement”—because the former has a clear cost-saving benefit, while the latter might be harder to quantify.
Investors want businesses that can scale efficiently. That means low customer acquisition costs, high retention, and the ability to expand without massive increases in operational complexity.
Phill points out that EdTech companies often struggle with scalability because of how different education systems function across geographies. A company that succeeds in the U.S. might struggle to enter European or Asian markets due to curriculum differences, regulatory barriers, and cultural variations. Investors consider this before writing a check.
The biggest question investors ask: Why can’t someone else build this tomorrow?
If a product is easily replicable, it’s not an attractive investment. Investors look for strong intellectual property, network effects, or deep integrations into institutional workflows that make it difficult for competitors to copy.
Just as there are traits that make an EdTech startup fundable, there are also warning signs that send investors running in the opposite direction. Phill and Laureano point out three common red flags:
The number one killer of EdTech startups? Building something that educators, students, or institutions don’t actually want.
Phill warns that many EdTech founders assume their solution is needed just because they think education is broken—but that doesn’t mean customers will pay for it.
For example, a company might build a flashy AI-powered tutoring tool, but if schools don’t have the budget for it (or teachers don’t trust AI), the product is dead on arrival. Investors watch for companies that have validated demand before scaling.
Many EdTech startups rely too heavily on one-time sales or government funding, which makes them risky for investors.
Investors prefer businesses with recurring revenue (like SaaS subscriptions) because they provide financial stability and predictability. If a company is only profitable when grant funding is available or if each sale requires months of negotiations, it’s a red flag.
Companies should be mindful of their pricing strategy—too cheap, and they struggle to be sustainable; too expensive, and they limit their addressable market. Finding the right balance is crucial.
A common mistake EdTech founders make? Thinking they need to raise millions in VC funding just because they can.
Not every EdTech company should be a venture-backed business. Some might be better off growing sustainably through bootstrapping or strategic partnerships rather than taking on aggressive growth expectations from investors.
Additionally, investors look for founders who are coachable. A CEO who isn’t open to feedback, pivots, or industry insights is a major red flag—especially in a field as complex as EdTech.
EdTech investment has never been a smooth ride, but the last few years have brought shifts that no one could have predicted. The strategies, expectations, and realities of investing in education technology have dramatically evolved, and founders today must navigate an increasingly complex and dynamic landscape.
From the pandemic boom and bust to the distinct challenges of different education segments and the ongoing tug-of-war between growth and profitability, this chapter unpacks the realities of EdTech investment today—where it’s thriving, where it’s struggling, and what investors are really looking for.
If there’s one defining moment in EdTech investment history, it’s the pandemic.
Before COVID-19, EdTech investment was growing steadily but cautiously. The industry wasn’t exactly a high-growth darling, and investors often viewed it as slow-moving compared to sectors like fintech or SaaS. Then, 2020 changed everything.
Massive demand for digital learning solutions drove an unprecedented funding frenzy. Investors who had never touched EdTech before suddenly poured billions into the sector, betting on rapid digital transformation. Valuations soared, companies expanded aggressively, and many startups locked in funding rounds they could have only dreamed of a year earlier.
But as Phill and Laureano recognize, what goes up must come down.
Once in-person learning resumed, many of the pandemic-fueled growth assumptions didn’t hold. Investors realized that EdTech’s adoption cycles are still long, institutions are still bureaucratic, and school budgets still move at glacial speeds. The market corrected itself, leading to a stark contrast between the optimism of 2020-2021 and the more measured reality of 2023-2024.
Despite the post-pandemic cooldown, EdTech is still an attractive investment—just in a more selective way. Investors are now:
The funding is still there—it just requires a sharper pitch, stronger fundamentals, and a clear path to market sustainability.
Unlike traditional software markets, EdTech is deeply fragmented. A tool that works well in K-12 might be completely irrelevant in Higher Ed or corporate learning. This makes scaling an EdTech business far trickier than it appears.
Phill and Laureano highlight that each education segment operates on vastly different economic models, sales cycles, and decision-making structures.
For investors, understanding these differences is crucial.
Many EdTech companies struggle because they assume what works in one segment will work in another. Phill points out that cross-selling between K-12, Higher Ed, and corporate learning isn’t always straightforward, and investors are wary of companies that fail to recognize the distinct challenges of each market.
One of the biggest misconceptions in EdTech investment is that a product that succeeds in one area will easily translate into another.
Investors have seen too many companies struggle with this. An EdTech startup might do well in Higher Ed but fail in K-12 because school districts operate on completely different timelines and funding cycles. Similarly, a corporate learning tool might not adapt well to university settings because of different pedagogical needs.
For investors, this means they’re less likely to back a company just because it claims it can “expand into new segments”—they need to see real, validated strategies for doing so.
The dream of many startups is to eventually go public. But in EdTech, that path is not as straightforward—and, as Phill and Laureano note, it often comes with significant challenges.
Unlike other tech sectors, very few EdTech companies have successfully navigated the IPO process. This can be attributed to several key challenges:
Because of these factors, many EdTech companies seek alternative exits—acquisitions, private equity buyouts, or long-term private ownership.
The biggest debate in EdTech investment today is growth vs. profitability. In the pandemic-era funding boom, growth was everything—investors encouraged companies to scale aggressively, capture market share, and worry about profits later. Now, the script has flipped.
Investors want to see:
The shift toward profitability-first investing means that EdTech startups must be more disciplined than ever. Simply raising money is no longer enough—companies must prove they can turn that funding into long-term, self-sustaining businesses.
Securing investment in EdTech isn’t just about convincing someone to write a check—it’s about finding the right investors, navigating a rigorous process, and making strategic decisions for the long haul.
Phill and Laureano have seen this play out across multiple companies, from startups securing their first major investment to founders navigating complex acquisitions. Their insight highlights a fundamental truth: not all money is good money, and not all investors will be the right fit for your company.
In this chapter, we break down how to find the right investors, how to successfully secure funding, and what the long-term journey of an EdTech founder often looks like.
Securing investment is about more than just capital—it’s about finding the right partner.
EdTech companies must align with investors who understand the sector’s unique challenges and timelines. Unlike traditional SaaS, EdTech usually doesn’t scale overnight, and funding cycles need to match the slow-moving nature of education markets.
Not all investors are created equal, and choosing the wrong type of investor can set a company up for failure.
Here’s what founders need to consider:
The wrong investor can push a company toward unrealistic targets, leading to bad strategic decisions. Founders need to ensure that they are on the same page with investors about growth expectations, market realities, and business model viability.
Phill and Laurano emphasize that funding isn’t just transactional—it’s a relationship.
EdTech founders should be asking:
The best investors are those who understand the EdTech landscape and can provide support beyond financial capital. Founders should prioritize investors who align with their mission, timeline, and strategic vision.
Securing investment is a process, not a one-time event. From crafting a compelling pitch to surviving due diligence and negotiating terms, founders must be prepared for a rigorous journey.
A great pitch isn’t just about storytelling—it’s about demonstrating a clear, fundable business. The best pitches answer three fundamental questions:
Many EdTech founders struggle with overcomplicating their pitch. Investors don’t need a lesson in pedagogy—they need a clear, compelling business case.
Once an investor is interested, the real work begins. Due diligence is where investors dig deep into a company’s financials, customer base, product traction, and leadership team. Phill notes that EdTech companies need to be especially prepared for scrutiny around:
Investors will look for signs of long-term viability—not just impressive growth numbers but proof that the business can sustain itself.
EdTech founders must be realistic about valuations. During the pandemic boom, many companies raised funding at sky-high valuations—only to face harsh corrections when growth slowed. Phill and Laureano agree that companies should prioritize sustainable valuations over inflated short-term wins.
Key considerations when negotiating investment terms:
The best deals align incentives between founders and investors—ensuring growth, sustainability, and long-term success.
Founders often start with a passion for education, but as Phill points out, the journey from idea to exit is rarely a straight line.
The reality is that most founders don’t stay with their company forever. Common reasons for exit include:
A well-structured company should be built to survive beyond its founders. If a company is too reliant on a single person, investors will see it as a risk.
Many EdTech companies end up being acquired rather than going public. Phill and Laureano have seen this firsthand—companies that thrive often do so by finding the right acquirer who shares their vision.
Ultimately, founders should think about their exit strategy early—not because they should rush toward the finish line, but because good planning ensures that the company continues to grow beyond their tenure.
EdTech investment isn’t a straight road—it’s a winding path shaped by market shifts, investor expectations, and the realities of education. As Phill and Laureano highlight, the industry is maturing, and the days of easy funding for unproven ideas are long gone.
Investors are now prioritizing sustainability over hypergrowth. Startups must show a clear path to profitability, real market traction, and disciplined financial management. AI is creating new opportunities, but hype alone won’t attract funding—companies need to prove real impact in classrooms and institutions.
Investors today are looking for partnerships, not just quick returns. Founders must be strategic, patient, and ready for reality checks. A strong business model will always attract capital—but investment is a tool, not a guarantee of success.
