Virtual Education Pushes Beyond Zoom—and Beyond the Classroom

But in a report last year, the U.S. Department of Education’s Office of Educational Technology called for closing a digital divide in edtech, noting the pandemic caused schools to deploy “so much technology on an emergency basis without the benefit of thoughtful planning, change management, or in the service of shared goals” such that “many school systems are struggling to make the most of these new technologies.”

Jay Schnoor, cofounder and CEO of VEDX Solutions—an edtech company providing immersive learning and virtual reality (VR) education solutions in classrooms and workplaces—says educators are “just burnt out” over the growing volume of edtech solutions. Changing administrative requirements have added to adoption pain points and higher costs, he notes.

The current paradigm demands a rethink of not only which edtech solutions are used by educators and employers, but how technology can support a change in our approach to education and training overall. “There’s this idea that we have this traditional way of teaching, and we’re trying to snap on technology to it,” says Schnoor. “But the technology itself has now reached the point where we need a whole new way of thinking about teaching.”

For middle-market dealmakers, investing in edtech means identifying the targets that can overcome adoption hurdles, meet the multifaceted needs of both students and educators, and position themselves for a paradigm shift in the role technology plays within the learning experience.

Inside a Virtual Education

VEDX, which stands for Virtual Education Deployment and Exploration, was founded in 2020 to support school systems’ deployment of VR technologies that could facilitate virtual connections and learning better than lengthy Zoom lectures, as Schnoor explains.

The company, which has been bootstrapped since its launch facilitated by $90,000 in friends-and-family funding, uses immersive VR headsets and software to enable learning and workforce training. Software offerings span biology and chemistry, to construction and logistics.

Made up of about 10 full time staff, VEDX has so far driven expansion through strategic partnerships. The company works with Meta to provide VR headsets, and contracts with a development team on a project-by-project basis, as well as with other third parties to support clients’ data privacy requirements, technology deployment, and customer service calls.

According to Schnoor, while the pandemic heavily influenced educators’ approach to technology, students today are of a new generation in need of tools that exceed the capabilities of Zoom and tablet apps.

“Generation Alpha is digital expectant,” he says. “They’re the ones growing up with AI. They’re going to expect more interaction from their learning.”

Generation Alpha is digital expectant. They’re the ones growing up with AI. They’re going to expect more interaction from their learning.

Jay Schnoor

VEDX Solutions

At the same time, he continues, the growing volume of screens and short-form media have lowered attention spans for all generations, especially Gen Z and Gen Alpha. Learning in a three-dimensional, entirely isolated virtual environment via VR headset can promote attention and engagement, free from external distractions like cellphones. “Traditional learning has been made a little more difficult, but we have to meet (the students) where they’re at,” adds Schnoor.

According to Schnoor, shorter attention spans aren’t the only differentiator among younger generations of students and professionals. He says Gen Alpha learning habits are highlighting the need for a broader shift in the approach to education, one that edtech solutions have the opportunity to address.

“In traditional education, you learn math, chemistry, history—you’re tested on these things at the end of the year, but the kids say they don’t understand how they are going to apply this,” notes Schnoor. But through VR, a child can have the opportunity to operate as a shopkeeper, deliver a public speech, or explore a foreign city to converse with locals in a different language—virtual scenarios that younger learners more clearly see applicable within the real world.

And with artificial intelligence quickly making inroads into the edtech space (86% of students already use AI in their studies, according to a 2024 survey by the Digital Education Council), Schnoor notes that immersive technology like VR can be augmented through AI-powered, dynamic, and personalized lessons, with AI agents able to facilitate learning and tutoring.

A Broad Edtech Spectrum

AI teachers may seem far-fetched, but it’s a reality that already exists. This fall, Northern Virginia will welcome the Alpha School, an AI-powered K-3 private school where students have AI “guides” instead of human teachers.

It’s the extreme end of the AI edtech spectrum, but experts say AI is the future of edtech. As the Washington Post reported last month, the Trump administration signed an executive order to integrate AI into K-12 education.

While Gen Alpha may be ready for AI agents and VR headsets, Schnoor says teachers and administrators are less likely to feel comfortable embracing such tools. Making the edtech adoption landscape even more challenging is that some experts warn there is little evidence AI and other high-tech tools actually promote more effective education. Stanford University Graduate School of Education Associate Professor Victor Lee highlighted to the Washington Post, for example, that large gaps in the research remain as to whether AI is effective at its educational objectives.

Alexander “Alex” Hicks, managing director and head of education and tech-enabled services at middle-market investment bank Artemis Transaction Advisors, acknowledges uncertainty in the edtech market, noting that we are still in the early days of AI in education. But that doesn’t mean edtech innovators don’t have a path to adoption.

“Generally, the innovation that I’m seeing relates to technology providers offering solutions to better integrate AI into the workflows and learning pathways of teachers and students, respectively,” Hicks says.

“For a long time in pre-K-12 edtech, the buzzword was ‘personalized learning’, referencing technology that can understand where a student is in their learning development, and then shepherd that student in connection with the teacher towards a positive learning outcome,” he says. The most promising edtech solutions are those that are seamlessly integrated into existing learning flows, offer personalization, and can gather valuable data for teachers and administrators to track a students’ progress and identify learning gaps.

With AI coming into the mix, these solutions have the potential to gather data and provide the empirical evidence that critics say is currently lacking. “AI is going to have a better ability to assess, remediate, and/or advance the student in a compelling way in the future,” says Hicks.

Educating Dealmakers

With some edtech solutions still too new to prove themselves in the market, coupled with uncertainty over how budgetary constraints can facilitate adoption of cutting-edge tools, Hicks says M&A investor appetite as a whole is subdued.

A closer look reveals a rosier picture, however. While edtech investors in the pre-K-12 space may be taking a wait-and-see approach, Hicks says clarity around district funding post-Labor Day could entice some deals to get done. In K-12 as well as higher education, the edtech companies able to report solid growth and profitability will generate the most attention and strongest valuations from buyers.

The highest valuations, Hicks says, are seen among businesses operating with SaaS subscription models, tech-enabled services providers, and certification-related capabilities, making workplace training edtech a particularly bright spot for dealmaking. Hicks points to labor shortages in trades like mechanical or industrial services where hard skills-training technology can be especially valuable.

Even apart from the AI boom, edtech M&A has seen a strong year. U.S.-based private equity firm General Atlantic took educational training company Learning Technologies Group private for more than $1 billion late last year. Last month, publicly listed mobile learning platform Duolingo, in which General Atlantic holds a minority stake, acquired music education and gaming startup NextBeat. The deals reflect investor appetite for edtech products targeting older students, professionals, and users outside the K-12 classroom.

There is also evidence that investors see potential in K-12 edtech innovators looking to capitalize on the need for a paradigm shift in how Gen Alpha learns. In Europe, Paris-based Revyze, known as the “Tiktok of education” that offers a social learning app for Gen Z and Gen Alpha, raised a seed round of about $6.3 million, for instance.

Private equity dealmaking in the space remains nascent. Middle-market search engine Grata reveals 28,713 edtech businesses, 10,204 of which offer some component of AI in their offerings. Only 112 of them are private equity-backed.

As the edtech space looks to address dramatic swings in how a younger generation of students and professionals seeks to learn in the classroom and be trained on the job, innovators have plenty to work with. Virtual and augmented reality headsets, gamified learning apps, tablets, and social media platforms may all find their place in the future of education.

VEDX’s Schnoor acknowledges there are plenty of unknowns in the space. But from his vantage point, what is certain is that as technologies like AI and avatars grow more sophisticated, their role in dynamic learning and training will increase. Educators and employers will need solution providers that can not only offer the hardware and software required to facilitate an enhanced learning experience, but the resources and partners necessary to support adoption and integration.

“It’s going to take a company like ours to work with Meta, to work with organizations, and to make all of this scale,” he says.

Carolyn Vallejo is Middle Market Growth’s senior editor.

Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.