LAVCA surveyed 32 edtech startups in Latin America on the impact of the Covid-19 pandemic on their businesses, the adoption of education technology and access to education by the broader population.

Sponsored by the IDB Lab, the 2021 LAVCA Survey of Latin American Edtech Startups is a continuation of our 2019 Inaugural Survey of Latin American Startups, and is a companion to our 2021 Survey of Latin American Healthtech Startups.

Edtech has been an under-capitalized but promising area of tech innovation in Latin America in recent years representing only 4% of VC investment (by number of deals) in 2019. Entrepreneurs are innovating to drive increased access to education across the diverse markets and constituents they serve. This survey highlights their progress.

>> LAVCA Members can log into their accounts to access the list of participating startups and disclosed transactions.

KEY STATS

Covid-19 Effect on Growth: Half of participating startups said the pandemic had a positive effect on their business growth and their cash runway. Most of these startups are planning to raise capital in 2021.

Job Creation: Edtech startups surveyed have created over 3,000 full-time jobs in the region. (avg: 97 employees per startup; median: 60).

Workforce Gender Diversity: 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.

Access to Education: The edtechs we surveyed are producing solutions for constituents across the education spectrum, serving public and private schools alike, and providing training for a range of audiences, including young children, primary education students, university and graduate students, professionals seeking upskilling and businesses seeking corporate training for their workforce.

PARTICIPATING STARTUPS

LAVCA thanks the following startups for participating in our survey of edtechs during the pandemic. Of 32 respondents, 12 (38%) are women-led and six (19%) are registered B-Corps.

*= B-Corp
# = Women-Led (CEO or Founder/Co-Founder)

RESPONDENT BREAKDOWN

Who Responded: All responses were from C-level executives and 88% (28 of 32) were from CEOs.

Repeat Founders: 63% of respondents (20 of 32) had previously founded a startup.

FUNDING

Almost all of the startups surveyed (29 of 32) have raised third party capital. Early stage dominates: Among respondents who provided further details, 25 of 30 have raised a pre-seed, seed or Series A round. Only one responding startup, Brazilian edtech Descomplica, has raised over USD10m. Descomplica raised ~USD11m in 2018, and another USD84.5m in 2021 in the largest known round in a Latin American edtech startup, according to LAVCA Data.

Capital Mix: Responding startups have raised a mix of capital from investors including Latin American VC funds (66%), family offices (33%), angels (70%), accelerators (27%) and the founders themselves (43%).

BARRIERS TO GROWTH

Most responding edtech startups (24 of 29) are planning to raise capital in 2021. Despite the global boom in edtech adoption and distance learning during the pandemic, the education sector itself, and its regulations, continue to present the most significant barrier to growing and raising capital for these startups.

Regulatory Challenges: When asked about regulatory barriers to growth, respondents said that education sector regulations, taxation and payroll were the top three concerns.

Barriers to Raising Capital: When asked about raising capital, most respondents (21 of 29) said the education sector itself presented the largest challenge. Limited access to investors was a significant challenge for most respondents.

Agenda Edu: “I understand this as a challenge: The social disparity between public and private schools may increase even more, due to the lack of coordination of the public sector’s efforts to guarantee equal conditions of adaptation to the new teaching format.”

Descomplica: “In Brazil, the provision of quality internet in more distant areas may be another obstacle.”

LAB4U: “The #1 key growth driver for edtech is funding. The entrepreneurs are out there, there is just not enough public or private funding for K-12 [innovation]. The funding that exists is going to higher-ed and up-skilling or bootcamps, not K-12, which is the base of our educational system.”

EXPANDING ACCESS TO EDUCATION

The edtechs LAVCA surveyed are producing solutions for constituents across the education spectrum, serving public and private schools alike, and providing training for audiences including young children, primary education students, university and graduate students, professionals seeking upskilling and businesses seeking corporate training for their workforce.

Measuring Impact: Most responding edtech startups (22 of 30) are measuring their company’s impact on access to education. But due in part to the range of edtech startups, go-to-market strategies and audiences, there is not a consistent set of KPIs.

Bedu, a Mexico-based provider of technical skills training, looks at salary growth post-completion of its coursework: “Our main benchmark is that we are able to double the salary of a professional after just taking a five-month course.”

Brazil-based Descomplica, which focuses on preparing students for Brazil’s national college entrance exam, measures its students’ grades on the ENEM, in comparison to students who did not prepare with Descomplica: “There are five million kids taking the ENEM to compete for only 200,000 spots in top-tier public institutions. It’s a brutal funnel.” 

Science-focused Lab4U (Chile) partnered with the IDB to measure the impact of its tools on participating students: “The report showed that students who run more than three experiments with Lab4U increase their interest in pursuing a STEM related career.”

Writing-focused Letrus (Brazil) ran an impact assessment led by JPAL/MIT and Fundação Getulio Vargas: “It showed an unprecedented positive impact on students’ engagement with writing activities, and most importantly, progression on their writing skills. In five months we were able to reduce by 9% the writing skill gap between the public school students from our research, and private school students, on Brazil’s national exam.”

THE COVID-19 EFFECT

Impact on Business: Despite initial concerns, the pandemic has had a generally positive effect on runway and usage among responding edtech startups, although a number of startups cited budget constraints in the public sector, and a number pivoted their products and offerings to adjust to the pandemic scenario.

Arvore: “We went from 200,000 students to one million.”

Agenda Edu: “The impact was super positive in terms of increased demand and number of users, but slightly negative in terms of billing… Even so, we closed the year with a growth of more than 50% compared to 2019 FY revenue.”

ClipEscola: “The impact on our platform was positive; it accelerated the development of several new features and projected our brand across the country. The impact financially? Not so much. As schools in Brazil have been badly affected, they have no capital to invest in technology.”

Handytec: “It was bad at first because our model was 100% B2B, and companies reduced their training budget by almost 60% during 2020. We had to pivot to a B2C model, and that turned out pretty good in the end and allowed us to grow. We now have a distribution of our current revenue of 70% B2B and 30% B2C.”

Kinedu: “It was mixed — lots of interest from parents, which meant increased demand on the surface, but the pandemic also meant less disposable income. Daycares closed down so we had to pivot to provide new services.”

LAB4U: “Usage increased, teachers’ interest in our products increased, webinar attendees increased, but funding was a challenge in the public sector. We had to pivot to 100% private schools and corporations funding public schools; with the latter model, our sales increased 162% for 2021.”

Slang: “We saw the largest negative impact in Q2 2020. Once that initial frantic period passed, we saw a recovery to pre-pandemic levels in Q3, and closed Q4 2020 as our best quarter to date.”

Pandemic Relief: A number of responding startups also shared information on pandemic relief efforts they supported.

Agenda Edu: “We ideated and operationalized the Movement for Digital Education, an alliance between some of the largest Brazilian startups to help Brazilian schools adapt to the new moment of education, providing content, training, and donating our solutions for free during the lockdown period so that they could enjoy the benefits at no cost.”

Descomplica: “We donated digital content to more than 1.5 million high school students from public schools in São Paulo. The donation, over a three-month partnership, was equivalent to BRL54m in services. Students were able to access videos, exercises and texts directly on Descomplica platforms.”

Letrus: “We have supported public schools from São Paulo e Espírito Santo states through the donations made by the Lemann Foundation, Península Participações and Imaginable Futures.”

Where Edtech is Heading: Edtech CEOs weighed in on what the pandemic has changed for the better for education innovation.

Crack The Code: “Parents now have more transparency in what schools teach and how their kids are learning. Parents will demand quality, and the benefactors will be the students. We need curriculums to be reassessed and improved; same with teacher preparation. This increase in transparency will force this to happen.”

Mettzer: “We see three stages of the edtech evolution in Brazil. In the short term, we see hybrid teaching and digital transformation. In the mid term, a culture of continuous innovation. And in the long term, the emergence of new models of education.”

Slang: “Our observation has been that even traditionally reluctant, established players are considering fully virtual edtech solutions in a way they never had before, which means there’s now greater opportunity. We believe all addressable markets for edtech are significantly larger post-COVID, and sales cycles are also shorter due to the greater adoption of digital solutions.”