Investors Betting Big on AI in Education

The Covid-19 pandemic may have led to a boom in online learning and tutoring startups, but now that the pandemic is subsiding and students are returning to classrooms, venture capitalists have turned their attention to other areas of education technology such as virtual reality, short form video, and, most notably, artificial intelligence (AI).

According to Tony Wan, head of platform at Reach Capital, a venture capital (VC) firm that invests in many edtech companies, investors are “going gaga over artificial intelligence.” He notes that the education industry has been experimenting with AI for the past few years, but now, the relationship between the two has become much more serious.

Michael Moe, founder and CEO of GSV Holdings, a VC firm focused on the education and workforce skills sectors, echoes this sentiment, stating that “every business in ed tech—if it’s not an AI business—needs to have an AI component.”

The recent buzz around AI in the education sector has primarily centered on OpenAI’s latest language model, ChatGPT, and the underlying model that OpenAI used to train the program, GPT-3. While some in the education community have expressed concerns that GPT-3 could disrupt traditional education by helping students cheat on homework, others see the potential for AI to help teachers create grading tools, rubrics, and syllabi, and for students to use the technology as a study aid.

One example is Edgi Learning, which offers Edgi Bot, an AI that uses GPT-3 to answer students’ homework questions. According to Edgi Learning CEO Josh Shapiro, high school and college students have moved from using it as a novelty app to relying on it for study help.

Shapiro believes that tools like Edgi Bot are the first step towards an education system that relies on educational content creators that students already seek out, such as science and engineering YouTubers or educational YouTube channels.

Another company in this space is Koalluh, which uses AI to write books tailored to children’s individual interests in an effort to encourage reading. Katelyn Donnelly, founder and managing director of Avalanche VC, which is considering investing in the company, sees AI as a way to bridge the lag that historically exists between the emergence of new technology and its recognition and adoption in education.

While funding for edtech startups may be decreasing compared to the early days of the pandemic, venture capitalists are still investing in AI-powered education companies such as Mainstay, an AI-powered chatbot that colleges and companies use to support and retain students and employees, and Derivata, an AI math courseware and assessment platform. Other edtech startups are using AI to turn textbooks into narrated video lectures or provide teachers with feedback on their instructional style.

Overall, while funding for edtech is expected to fall further this year to pre-pandemic levels, the use of AI in the education sector is on the rise and expected to continue growing in the future.