Pathfounders Interview: EdTech investment is changing fast

0:00Rhys Spence:Hello and welcome to Path Founders with me, Mike Butcher. This is about code, capital and consequences, where we look at the entrepreneurs and startups behind the code, the people and funds who give them capital and the consequences that result. EdTech was pretty so-so prior to the pandemic, but took off with the shift to remote working. And a lot of it was HR oriented, all those kind of boring courses you had to do, productivity software etc but obviously remote working supercharged it and Europe produced more startups than ever but as usual with far less capital than the US. So is Europe still behind or building something structurally different?

0:44Rhys Spence:Today I'm joined by Rhys Spence, Head of Platform and Research at Bright Eye Ventures and author of the new report European Learning and Work Funding 2026. Rhys, welcome to Path Founders. So give us the headline findings from your report. Sure, thanks, Mike. And thanks very much for having us on. So the headlines. The main one that we point to is that funding into European learning and work companies doubled from 2024 to 2025, from around 710 million euros to over 1.6 billion euros. And they're still below the frothy 2021 levels that you mentioned a second ago, where it breached 2 billion for the first time.

1:27But it's still a pretty promising trend that obviously we're excited about and also excited about the types of companies that we're starting to see coming through. I guess the other thing I'd mention is that the number of deals done in Europe increased markedly as well, up to 21%. So again, sort of a real broadening set of companies raising capital at the moment. The other thing I would draw out was we also look at the global figures for the markets that we're interested in to see how Europe's comparing. And we were very pleased and interested to see that Y Combinator is currently the most active global investor in learning and work.

2:02That's not a huge surprise, given that we saw how frequently learning and work companies were being requested in their calls for startups. But it's still very exciting for us to see a fund of their stature, you know, an accelerator of their stature taking an interest in the spaces that we like. And obviously, I guess linked to that, it's less surprising to think that general or to see the general catalyst, Sequoia, Andreessen, are all also occupying spaces in the top 10. The final one of the three, the top three findings that I've mentioned, I think, is the rise of Germany, both in participation of the mega deals or in being the host country for many of the companies that raise the mega deals.

2:47And also seeing a significant increase in their activity levels as well. They've conventionally, as you know, always done very well in the regulated industries and where companies are selling into government. and I think that that's proven the case again. You know, the companies that raise the largest rounds are Amboss, which sells directly into hospitals and into clinics, and then Stewie, which is a Brightside portfolio company, which sells directly into schools. And I think some of that is driven by, some of that sort of activity is driven by the fact that there are large regional contracts that are available in the German market, and so it's easier to sort of prove that scalability.

3:21So some super interesting stuff.

3:23Rhys Spence:Right, okay, great. Let's unpack that a bit. So you mentioned Y Combinator, General Catalyst. I agree with you. That's a very interesting early signal. Just let's declare your own interest. You're an EdTech fund. So this is obviously of interest to you, this report. But obviously, you've done the report and it's very interesting unpacking those kind of broader figures. Tell us a little bit more about the kinds of companies that would be funded by the YSEES, the General Catalyst, and of course, you yourselves. Sure. So Bright Eye is a specialist investor. We've been interested in learning and work in edtech for a number of years.

3:58This is the seventh time that we've written this report, but it's the first time that we framed it with a lens of learning and work as opposed to edtech out and out. And that's partially because of the way that we see the market shifting. There are three key spaces that we draw out in the report. There is conventional edtech, which is K-12, higher education, lifelong learning. The biggest categories within there are typically sort of B2C products that are selling school age products to parents. The second space is corporate and workplace learning. Now that's sort of typically sort of white collar products relating to on the job effectiveness and accelerating credentialing within those environments.

4:41and then the third space is the more sort of leading edge one which is where we're moving into now which is productivity and talent platforms now that looks like in practice learning in the flow of work and so that can be relevant to all sectors it could be how you learn and work in construction how you learn and work in manufacturing etc and I think that's generally the direction that we're seeing things head in and that's a new sort of category an area of the industry that we're taking more of an interest in as the fund.

5:10Rhys Spence:So it's interesting because I think a lot of people would immediately think when they hear ed tech or learning that they would think of remote working. But what you're saying is that there's been a rise in learning software and services, cloud services and learning services that are oriented towards things that you wouldn't consider to be remote at all, such as construction. Yes, exactly. Exactly. And so I think, you know, you think about how you build the skills that allow you to enter a career in construction. You then look about the credentialing, the maintenance of credentialing that you need to work within the construction sector.

5:48You look at solutions that enable you to make better decisions as you construct things that give you advice as you go to reduce your risk, improve your profitability in the business, help all of your employees effectively do an even better job than they're currently doing. And so, yeah, we take a real interest in those sectors. I think our thesis generally is applicable to more or less all sectors because, of course, learning and work happens across everything. And so it's an exciting range of businesses. And it's also one of the reasons that I think it's viable and likely that we'll see even more of these top tier global investors taking an interest in areas that align with our interests.

6:32So I think they're both gravitating towards learning and work. And we're also expanding our understanding of what it means and the directions of the market that we're seeing.

6:41Rhys Spence:And were there, did you notice any particular kinds of technological trends which flipped the switch in some way, such as snackable content on mobile apps or, I don't know, VR or something like that? Yeah, I think it's an interesting observation. I think there are certainly, you know, it's been a trend for a little while that we're seeing lots of more gamified solutions, making learning a lot more accessible in terms of learning on the go, but also making sure that it's addressing the motivation issue, which I think is a real sort of key thing that lots of companies are focused on at the moment, where they're trying to basically encourage people to spend more time learning.

7:19and so if you can hold people's interest and help them learn things along the way there's certainly something that we see sort of happening across a number of industries again obviously duolingo has been the master of that in the language learning space but then you look at fields where there's mandatory training requirements again like construction like manufacturing where there's safety standards that need to be upheld where there are you know professional accreditations that need to be maintained as well and a lot of that content can really accessibly be delivered if it's delivered in a mobile-first environment.

7:51So that is certainly something that we continue to see.

7:55Rhys Spence:It sounds like what you're saying is that the products have got better. Instead of sitting in front of a laptop trying to watch a video about something, the gamification, the apps, the mobile-first experience have basically improved the whole market. And presumably also there's productivity issues here which are driving this. You know, it's much easier to scale a company when you can teach a thousand workers via gamified learning than, you know, sitting them down in a classroom or something. Yeah, absolutely. And I think I think the other sort of potentially very interesting use case comes from where there is where careers or roles are very high stakes, where there are significant safety risks, where there are very specific sort of technical training requirements that need to be, you know, fulfilled through a training process.

8:40And, you know, we've worked with companies in the past that have been, you know, helping people in high risk scenarios to better improve the level of training and their ability to do the job, for example, on oil rigs. If it's particularly, you know, dangerous construction related activity, you know, if it's potentially helping surgeons to practice in more detail what their sort of surgery practice looks like. And obviously, this is VR and AR related stuff, but it's certainly something we expect to see on the rise.

9:14Rhys Spence:Right. And you mentioned geography as well. So I think from the report you said there were five core markets, UK, Germany, France, Spain and the Netherlands. Much of this is sort of city led big hubs. Tell us a little bit more about that sort of geographical aspect, because you mentioned Germany, which is obviously quite a regulated country and the DAC market generally. Tell us a little bit more about that sort of geography and the opportunities in Europe. Sure, absolutely. So yeah, as you rightly say, five markets occupying or taking up 80 % of the deals done in Europe. Those markets, UK has been at the top for a number of years.

9:54Germany has always been sort of top three or four. The Netherlands has been sort of further down in the top 10. So it's interesting to see them kind of on the rise. And I think one of the reasons for that is, you know, improving ecosystem support within specific cities. And I look to, for example, Milan, which has seen a ton of learning and work activities. We've recently started doing a number of Italian deals. We're about to close another one. And I think the reason for that increasing role in the ecosystem, and I think something that's being replicated in lots of other cities, is there's increasing government funding available to accelerators.

10:32There's increasing government-aligned funding for VC funds in those markets that are targeting sectors that the government perceives as being of national benefit and of national priority. And then the third thing is government-aligned funds taking more of a role with VC funds, international VC funds like BrightEye. and often what that means in practice is that you know if we if we take funding and other VCs take funding from these nationally aligned organizations we commit to invest a certain amount in that specific market and so it's a really interesting model that I think is being replicated in Italy in Spain in the Netherlands less so in the UK but historically you know the UK's had London as a as a center of tech funding for years.

11:19Rhys Spence:I see so the you're talking about national governments getting involved? Was there anything that made them flip that way in that direction? Maybe it was a pandemic, perhaps. I think it's realizing that there's huge opportunity for the new wave of entrepreneurs to be value generating and value creating for the country. I mean, you look at Stockholm and the Swedish ecosystem, you look at the massive tech success they've had across a number of sectors. you look at where those companies are based and they maintain their hqs nationally they seem to be incentivized and or you know committed to to supporting the next generation of founders in those ecosystems and and look at how successful it's proving i think i think countries are realizing particularly european countries are realizing that that's something they can look to replicate um that's not a trend that we see outside of europe so much i mean if you look at i mean you i wouldn't put that down to well i guess europe's kind of slightly paying catch up Yes, exactly.

12:18I think that's probably about right. And I also think that there are structural complications around sort of starting and scaling a business in Europe that, granted, have decreased, but have historically perhaps dampened some of the levels of entrepreneurship that are in the ecosystem. And I think one final thing I'd mention on this is obviously, well, not obviously, but I know we're going to come on to AI stuff a little bit later. But one of the things that AI is likely to do to every sort of workforce is shrink the headcount. And so with companies getting smaller and smaller, you're going to need more and more entrepreneurs sort of starting businesses and, you know, being entrepreneurial from younger ages to be value creating for those ecosystems and creating the jobs that they want for themselves as well.

13:02Rhys Spence:Right. OK, well, we might as well do the AI piece. So tell us a little bit more about what this category of startup that you think is playing in this space. The AI kind of magical fairy dust that has been sprinkled on the sector, both in the sort of startups themselves and the products. Yeah, absolutely. I think the thing that we're most excited about, I mean, our team, for example, is not particularly technically minded. You know, there are, I mean, we work with a number of technical advisors now to give us advice internally on the quality of what's being built, the scalability, the architecture, et cetera.

13:40And also to verify that the quality of an AI-first product is as strong as, you know, we're being pitched that it is. And I think that's really, it reveals something quite exciting, which is both that building something that's AI first is a lot more accessible than it had been. And what that means ultimately is that companies are competing on more conventional things. It's no longer sort of so tech centric unless it's obviously a proprietary AI model and you're building a ton of data. It's more about quality of marketing, elegance of solution fit. And I think that's a really sort of interesting thing that's evolved in light of the particularly generative AI stuff.

14:28The other thing I guess that we notice is that lots of people and commentators suggest that AI is going to massively shrink the workforce or it's going to get rid of all X jobs within X type of company. But I don't think that's necessarily the case. So I think it changes the nature of jobs and that the people doing the jobs now aren't necessarily the type of people that are going to do the jobs next. For example, you look at HR specialists, you look at customer success specialists. I think it's likely that they're going to become, you know, the technical requirements of their role are getting more sophisticated over time.

15:03You know, they're becoming more product managers in some senses where they're picking solutions. They're implementing those solutions. They're sort of looking at the ROI of these solutions. It's a different set of skills than it used to than used to be the case when you were, you know, using recruitment agencies explicit exclusively and you were sourcing very traditionally either through traditionally being via LinkedIn, etc. Which, of course, is, you know, traditional as of five years ago.

15:29Rhys Spence:Tell us a little bit about what kinds of startups funds like you are looking for now. You know, the old fashioned ed tech would might well have seen its sell by date, but you're looking more at labor, more construct, you know, sort of verticals like construction. What kinds of things, what takeaways do you think entrepreneurs should take from this report? There's clearly VC takeaways from this report, but what are the takeaways for entrepreneurs and startups? How should they think now in these terms? It's an interesting question. I think I think there are there are takeaways for founders from a range.

16:06of parts of the report. For example, we haven't really touched on exits at all yet, and it's something we're going to be looking at in a lot more detail in the coming weeks. But we do look at exits. We look at what types of companies are securing exits. We come to conclusions that there is much more likelihood of securing the exit you want if you can make yourself strategically unavoidable rather than financially optimized across a number of different sectors. And what that means is having a sense of what type of company is going to be your acquirer from earlier on in your journey than perhaps you might have thought when you first started the company.

16:44And I think there's a number of takeaways within that section. I think if you look at the taxonomy work that we've done that looks at how we call it, well, the value chain of learning and work. I think one of our conclusions there is that being a learning only company probably isn't enough yet at the moment to raise big VC rounds. I think you probably need to be crossing over into placement, into careers. Potentially, you might be looking at becoming an embedded productivity solution as well as a learning solution. And so I think there's takeaways for founders on that. But I guess if you were to frame the question as, you know, where would we be starting a business now if you were looking to raise significant VC funding?

17:28I think we'd still be looking at the set of industries that have had relatively stagnant productivity levels for a number of years that are still reliant on relatively legacy, you know, operating systems that can be quite simply sort of brought into the AI age by running more efficiently in the admin side and supply chain side and that kind of thing. You can go on more about that if it's interesting, but that's kind of what we're thinking about.

17:55Rhys Spence:Well, that's fantastic. Great takeaways there. I think that it's quite clear there's some really interesting takeaways, both for VCs, for investors and for entrepreneurs, just to thinking, you know, as you said, making yourself indispensable, both to the nation and to the cities that are producing the next wave of companies and also these verticals, which really, you know, crawling out of the ocean in terms of education, technology and learning. And we're absolutely, we're really going to need these tools in the coming age of AI, especially as it has such lasting impacts on the world of work. Ladies and gentlemen, well, thanks very much for joining us.

18:37Rhys Spence:Rhys Spence, Head of Platform and Research at Bright Eye Ventures and the author of the new report, European Learning and Work Funding in 2026. Thanks for joining us on Path Founders. Thank you very much.

18:53We'll be right back.