A funding boom over 2021 and 2022 was the catalyst for the rise of unicorn edtech providers.

At its peak in 2021, venture firms invested $14.7bn in edtech startups, according to GlobalData. This compares to just $1.7bn invested so far in 2024. Byju’s, an Indian-based online tutoring platform was among the most highly funded ventures and serves as a cautionary tale for investors.

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Byju’s is currently undergoing a complex legal battle over capital mismanagement—almost half of a $1.2bn loan is missing. This follows a steep drop in the company’s valuation after issues with filing accounts led to key investors exiting. The Byju’s controversy has cast a shadow over the edtech sector, which now faces greater scrutiny from investors.

This raises the question of whether the downward trend will follow into 2025. Without continued investor interest, edtech providers face uncertain times. For a country like India, whose education sector is already competitive, publicly underfunded, and, in some areas, difficult to access, edtech providers are a critical learning instrument for all age levels. Despite the slight setback, the Indian-based edtech platform, PhysicsWallah, managed to secure a $210m investment earlier in 2024. This is promising news for not only India but for the wider sector as it could attract investors back to the sector.

Can AI spur an edtech revival?

To raise investment once again, increased AI integration could reignite faith and excitement in the market. There are four key areas of the edtech value chain: learning materials, tools and enablers, edtech platforms, and education providers. AI integration across these four areas will automate edtech processes like the distribution of educational materials and can assist with the collection of user data. This can free up time for edtech creators to channel ideas into improving products.

AI tools can take over multiple mundane admin tasks such as student orientation, transcript reviews, and prospect outreach. This can free up teachers’ time, so they can focus more on human-centric teaching, assist with testing and result analysis, and identify knowledge gaps between different groups of students. AI-powered learning can be highly personalised and can adapt instructions to every student’s learning pace and preferences. This could potentially revolutionise the way students synthesise information and create a more supportive learning experience.

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More specifically, generative AI is already being used to help design and organise course materials, syllabi, lesson plans, and assessments. A few key AI-powered edtech providers include Pearson, McGraw Hill, Cengage, and Knewton—who are set to design AI-based classrooms. We can expect a greater number of edtech providers to further embrace generative AI and feature it in their product sets.

AI challenges in Edtech

AI usage in the edtech sector brings a few challenges around generative AI. The edtech sector is still grappling with the effects of ChatGPT, which has been monumental for the entire value chain. 63% of K12 teachers admit to using the platform and 60–70% of students have admitted that they have used it to cheat on tasks and assignments.

According to a recent report from the World Economic Forum, AI-enabled edtech applications should be designed with equity in focus, ensuring that all students, teachers, and educational institutions collaborate to meet the demands of the classroom. Looking to the future, educators should continue to teach students about AI’s role in the wider technology space to enhance AI’s presence in the market.

With greater awareness, edtech providers can continue to enhance their products or services, which will inevitably increase their product’s value and future investment prospects.