How are EdTech Startups in Latin America funding their projects?

EdTech Startups in Latin America are living a momentum, according to a LAVCA's survey to the sector. How are they funding their educational projects?

In 2019, EdTech startups just accounted for 4% of the VC deals. However, for several EdTech Startups, COVID-19 led a period of growth. The 2021 LAVCA Survey of Latin American Edtech Startups provides insights related to the EdTech industry in Latin America and how founders are financing their enterprises. IDB Lab sponsored the research, that surveyed 32 EdTech startups of Latin America, giving a landscape of this trendy sector.

Where are Latin American EdTechs operating?

Brazil, Mexico, and Colombia are the most attractive markets for Latin American EdTechs. According to the LAVCA’s survey, of 32 respondents, almost half of them are operating in these countries. Chile and Argentina are following them.

Related to the Headquarters, Brazil is the clear favorite for EdTechs. Twelve of 32 startups are located in this South American country, which is a high contrast compared with the second most popular location, Mexico, which held four of them. 

How are EdTech Startups in Latin America getting funds?

Most of the surveyed startups are getting third-party capital. Commonly, raised capital is between $500 K and $1 M. In the survey, Brazilian startup Descomplica is the top performer talking about raising capital. In February 2021, the EdTech company raised $84.5 M in a round co-led by Grupo Invus and SoftBank.

Angel capital is the most common source of financing for EdTech startups, followed by Latin American VC funds. Around a third of the startups are in their seeding round, and just two startups are in the Serie C round. 

Most of the companies are planning to raise capital in the current year. However, they are also facing barriers to achieving their goals. The education sector itself, and its regulations are the most significant barrier to growing and raising capital for these startups, according to the survey.

The education sector is a challenging sector, according to the startups, and this is the main barrier for most of them. Almost half of them point to the limited access to investors as a barrier for raising capital.

Key points in the LAVCA’s survey

According to the survey, half of the responding companies assured that the consequences of the COVID-19 pandemic had a positive effect on their business growth and their cash runway. 

EdTech startups are also a good source of job creation. The startups surveyed helped to create over 3,000 full-time jobs in the region. Diversity is also at the heart of the sector. According to the survey, 12 of 32 responding EdTech startups (38%) are women-led (woman CEO or co-founder). While 76% of responding startups are near (or have surpassed) gender parity in their workforce, women account for 40-60% of full-time employees at 16 of the 30 responding startups. Women account for 60%+ of full-time employees at an additional seven startups.

Finally, the EdTechs are helping to find solutions for access to education. They are helping all the stakeholders of the education spectrum, from public and private schools to students of all levels.

Leveling-up EdTechs Startups in Latin America

Current players in the EdTech ecosystem of LatAm are showing the path to follow for developing tech-based solutions for education. However, the trust of VCs in Latin American EdTechs is still not clear. The region needs success stories in this sector for demonstrating that the LatAm EdTech industry is mature enough for returning profits to investors.