Investing in EdTech: the next stage

We sponsored the London Business School's Private Capital Symposium which took place on 19 May 2026. This year, our panel focused on education as an asset class and investment opportunities for private capital.

Following on from our analysis of private capital trends for 2026, our experts take a deeper dive into the opportunities and challenges of investment in EdTech.

What is EdTech, and how has it evolved?

EdTech, in its broadest sense, means any technology used for teaching and learning, as well as the digital infrastructure underpinning the education sector. Initially, the digital shift was merely imitative, repackaging traditional methods for a screen. However, in the last 12 months, the emergence of generative artificial intelligence (AI) has powered EdTech further, and more significantly.

EdTech is often now differentiated into:

• EdTech 1.0 (pre-LLM learning), which focuses on putting textbooks and other content on screens; and
• EdTech 2.0, which represents a move to tailored, personalised learning informed by 'cognitive engineering' – the science of designing tools that work in harmony with how the human brain actually learns.

This era of EdTech uses cognitive science to improve information retention. It also means that the commercial model of an EdTech product can be adapted to exist both within and outside an education environment. In turn this should provide greater adaptability for users' individual approach to learning and, for investors, point to stronger recurring revenue performance as the sector becomes more expansive in the use of EdTech.

Recent commercial trends shaping the sector

Going back to the end of 2024, investment activity was at its lowest in the sector [1][2]. During 2020–21, investment valuations were inflated by remote learning and unusually strong demand, reflecting the impact of the pandemic. This was followed by the return to more traditional education models, greater emphasis on face-to-face delivery, and the raising of capital becoming more expensive.

Turning to more recent data on the sector, Fortune Business Insights [3] values the global EdTech market at US$189bn in 2025, rising to US$215bn in 2026, and projects US$588bn by 2034. Their commentary on the market points to the same conclusion: this is already a hundreds-of-billions dollar market that is still growing  and education providers are heading towards durable, regulatory-compliant infrastructure platforms that meet procurement requirements, integrate with existing systems, and can withstand safeguarding, cyber and data scrutiny.

Risks and opportunities in EdTech investment

Risks – investors' diligence priorities

Much of the focus around EdTech, understandably, is on products and services aimed at the schools sector. This brings considerable compliance and regulatory requirements, particularly in the spheres of data protection, data security, safeguarding, and child-facing design.

In the UK, any online service likely to be accessed by children on a direct-to-consumer basis is expected to meet the ICO’s Children’s Code (15 standards, with 'best interests of the child' as a design principle). In addition, there are statutory safeguarding requirements for schools and colleges (under Keeping children safe in education – and the latest draft places greater emphasis on digital safety and compliance issues). This will only add to the importance of effective product safety and compliance due diligence for schools when they are engaging with EdTech providers.

The secondary risk is also regulatory: the potential for AI legislation to diverge across jurisdictions into which products will be marketed and distributed. In particular, for EdTech businesses selling into Europe, the EU AI Act will need to be assessed to determine the level of governance, transparency, human oversight and risk management will need to be integrated into the EdTech platform. This reflects the extra-territorial reach of the legislation and the fact that certain education-related uses of AI are considered inherently high risk and subject to onerous compliance obligations.

As with other regulated sectors, this is likely to mean that established, well-governed providers will be better placed to manage the compliance requirements, while less mature competitors may not yet have the necessary compliance infrastructure in place.

Opportunities for EdTech

There is a strong structural opportunity in the way learning and work are converging. Employers are focusing on continuous training and skills-based mobility, and governments are looking at how productivity of the workforce can be improved.   

The part of the EdTech sector that links learning, assessment, qualification and, ultimately employability in a way that operates within one model, and is measurable and auditable, sits in a strong position.

In addition to more direct educational uses, there is also considerable potential for technology to assist with more 'behind-the-scenes' functions (eg timetabling, data analytics, curriculum resource generation and other administrative functions). These models free up teaching time and drive efficiencies.

Another important opportunity is consolidation. Again, as with other technology led-markets, consolidation makes commercial sense in this current market. Private equity and strategic buyers are increasingly acquiring smaller EdTech specialists to bolt on to their existing products to create one integrated offering that is more appealing for education institutions.

What the future holds for EdTech

Two key factors are likely to dominate the debate:

• government policy and regulation; and
• AI innovation and utilisation.

Policy and regulation

• Europe: as noted above, the EU AI Act (coming into full effect in August) seeks to establish a unified regulatory framework for AI. This technology will inevitably be central to the further development of EdTech tools;
• UK: the UK government is arguably seeking to leverage a position somewhere between the EU and US, holding off on any overarching AI-specific law and balancing a pro-innovation, principles-based approach with continued emphasis on online safety and data protection compliance; and
• USA: with no comprehensive federal AI law, governance is fragmented. Some states are moving towards regulation (often around tangible harms like child safety, deepfakes and non-consensual imagery), while at a national, political level, the emphasis is on innovation and economic growth through AI.

Innovation

Against that regulatory backdrop, the adoption of agentic AI – where integrated agents that can diagnose gaps, build a plan, schedule spaced practice, set and mark work, and escalate to a (human) teacher – opens up new questions about the automation of the learning process and the role of automated processing versus human oversight, moving the focus rapidly on from just generating content for education providers.

In fact, the UK government’s own 'AI Insights: Agentic AI' briefing frames agentic AI as intelligent agents that can act to achieve goals. If that happens, the winners will be the platforms that can make this autonomy auditable and controllable/subject to human oversight and governance (eg clear logs, permissions and safety defaults), because, after all, that is what educators, parents and students (as well as regulators) will increasingly demand.

Outlook for EdTech investment

As with all AI and technology facing sectors, EdTech investors and their advisers will need to be clear on the business case, on the market generally and then the specific investment opportunity – from revenue generation and platform functionality through to regulatory compliance and governance.

We look forward to discussing this, and investment in the wider education sector, at the London Business School next month.

Many thanks to trainee Noaman Malik for his help in writing this article.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2026

[1] Financial Times: EdTech’s commercial outlook appears gloomy

[2] Holon IQ: HolonIQ estimates global EdTech VC at roughly US$2.4bn in 2024

[3] Fortune Business Insights: Fortune Business Insights