The pandemic’s biggest bet on online learning has gone bust.

Global edtech investment peaked at $16.7 billion in 2021, fueled by lockdowns that kept millions of children out of classrooms. By 2025, venture capital had plummeted to less than $3 billion, according to Tracxn, a Bengaluru-based platform that tracks global startup funding.

The majority of global edtech funding comes from U.S.-based venture firms, Tracxn data shows.

The edtech downturn mirrors a wider shift in startup funding, where investors are choosing products built on ideas that simply sound big. HolonIQ, a research firm that advises governments and investors on education sectors, noted in a February analysis that money is flowing toward AI tools and training platforms that help companies hire, cut costs, and teach workers new skills.

Startup funding is prioritizing efficiency over hype, and edtech is no exception.

“Venture capital flows reflected a shift from volume to intention,” HolonIQ wrote in a February 6 post on its website, reflecting back on 2025. “Investors concentrated capital in AI-enabled products, workforce-aligned platforms, and K–12 operations solutions that address cost or operational pressures, staffing challenges, and learning support at scale.”

Along with investments, the pool of founders has also dried up, with just 645 companies launched in 2025, compared with almost 10,500 in 2020.

For-profit startups have struggled to differentiate from rivals and fix weak unit economics. High customer acquisition costs, long institutional sales cycles, and low retention rates due to murky learning outcomes have plagued the sector, according to an analysis by Loot Drop, a curated database of more than 1,700 startup closures.

Indian edtech company Byju’s, once the world’s most valuable education startup at $22 billion, crumbled under a financial crisis and aggressive sales tactics for expensive courses. Prominent Nigerian startup Edukoya shut down in 2025 because of weak profitability and waning investor support. Where online schooling remains essential, such as Afghanistan where girls cannot attend school or in war zones where buildings are destroyed, nonprofits like Khan Academy and local innovators have filled the gap rather than venture-backed startups.

In China, the government’s “double reduction” policy in July 2021 crushed the K-12 online education sector overnight. Yuanfudao — once valued at $15.5 billion and one of only two global edtech decacorns alongside Byju’s — ended its core tutoring services and pivoted to AI hardware, launching “learning machines.” 

Yuanfudao is now among the top six players in China’s fast-growing AI learning hardware market, alongside rival Zuoyebang. Other experiments in the space include AI-powered desk lamps and smart desks.

Across the sector, edtech is gravitating toward career-focused programs and B2B corporate learning. That model already dominates in wealthier markets such as Australia, New Zealand, and the Baltic states, according to HolonIQ data. “Corporate workforce development, professional certification prep, and specialized skill acquisition for high-income careers are more promising than K-12 general education,” Loot Drop’s analysis concluded. “The winners will likely be vertical-specific tools that integrate into existing workflows rather than platforms trying to replace entire educational institutions.”