According to venture capital database CB Insights there are currently 1686 tech startups at risk of becoming “seed orphans” in the United States. Over 60 of these startups are in the education and training sector, scoring the vertical a spot in the top 5.
CB Insights put those startups at risk that did raise angel or seed funding in the past 13 months but did not manage to raise a seed extension or Series A yet. 13 months is the usual timeframe in which this follow-on funding takes place based on research by the analytics firm.
Of course, this does not necessarily mean that all of the 60+ edtech startups will eventually crash and burn. Some will manage to raise additional funds, some will find a business model and grow off revenue, some will be acquired and some will find another incubator to join.
To me incubators and accelerators play a big role in this and I wouldn’t be surprised when in upcoming lists edtech didn’t rank even higher. Last year I wrote about the era of the flipped edtech startup, startups that are created with a fast exit in mind. Solve a small problem, get traction and sell to a bigger player in the space.
This also seems to be part of the game plan of the investors. In an interview about the acquisition of Socrative by fellow imagine K12 alumnus MasteryConnect for Venturewire, Jennifer Carolan of NewSchools Venture Fund stated that the deal could be a harbinger of more consolidation to come for early-stage education tech ventures and that
“We see this in other sectors all the time–acquisitions or acqui-hires are a sign of a more robust and healthy ecosystem that has more dollars flowing in at all stages.”
Socrative raised a $750k Seed Round in August 2013 and was acquired eleven months later.
For Edshelf, another imagine K12 participant, the future looks less bright. Having only received a $20k investment from the incubator, Edshelf announced that it has to shut down. There is currently a crowdfunding campaign going on to save the startup, or to keep it alive a bit longer, but overall shutting down will be the consequence for many of those seed orphaned edtech startups.
- Seed Venture Casualties? 1686 Pre-Series A Companies at Risk of Being Orphaned (Have Raised a Total of $1.06 Billion) | CB Insights
- Ed-Tech Startups Socrative, MasteryConnect Join Forces in $5M Cash-and-Stock Deal | Venturewire
- Edshelf, a Review Directory for Education Apps, Closes Shop | EdSurge
- Are Investors Reluctant or do Edtech Startups not need the Money | EDUKWEST
- Incubating the Era of the Flipped Edtech Startup | EDUKWEST
- All is well in Edtech Land | EDUKWEST