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Education Technology Startups Capture The Attention Of VCs

Written by Tim Morral
Published: 11/16/2012

EdTech startups raised $1.37 billion in VC funding from Q2 2011 to Q2 2012, according to a new report by CB insights.

Education technology is one of the most promising sectors in the U.S. economy. Eager to cash in on rising demand, scores of entrepreneurs are entering the field and launching companies to bring educational software, tools and other resources to a marketplace with an insatiable desire for the latest technologies.

VC Funding for Educational Technology Startups

But a recent CB Insights report shows that entrepreneurs aren't the only ones interested in cashing in on the opportunities in EdTech. Venture capitalists, it turns out, are just as passionate about EdTech as entrepreneurs -- sinking $1.37 billion in education technology startups over the twelve-month period from Q2 2011 to Q2 2012.

Referencing CB Insights data, Patrick Hoge of the San Francisco Business Times notes that since 2010, VCs have made an average of 53 funding commitments to education-based startups, with an average deal volume of $294 million per quarter.

Q2 2012 was the strongest quarter for VC EdTech investments in ten quarters, with the average deal size increasing to $9.2 million -- much higher than the 10-quarter average of $5.5 million.

Although venture capital isn't the only funding stream available to EdTechs and other startups, the right venture capital firm can play an important role in helping young companies acquire the capital they need to seriously compete and achieve meaningful growth targets.

But obtaining funding from a venture capitalist isn't necessarily the right approach for every startup. In addition to handing over an ownership share in the company, startup entrepreneurs must be willing to allow the VC firm to play an active role in the business.

So for EdTech companies and other startup businesses, the best advice is to research the options and fully understand the process before committing to VC funding.

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