COVID-led shift to remote learning brings tsunami of capital raises at high valuations in US educational technology.
In 2020, education technology companies raised more capital year to date than they raised in all of 2019 despite, or perhaps because of, the COVID-19 pandemic. According to Mergermarket analytics, at least 14 edtech companies raised over USD 569m in 2020, more than all funds raised by the industry in all of 2019. During that year, 15 edtech companies raised USD 480m.
A number of companies secured capital in response to heavy inbound interest. For example, in May, StraighterLine CEO Burck Smith told this news service that the Baltimore-based provider of affordable online college education solutions sold a majority stake to BV Investment Partners after receiving inbound interest from both strategic and financial suitors.
“We’ve had great performance, so it just seemed like a good time to do something."
The same was true of Coursera, which raised USD 130m after receiving an inbound approach, CFO Kenneth Hahn told this news service in late July.
According to a report by Lincoln Financial in Q1, online post-secondary edtech platforms will serve an increasingly high profile role in the struggling economy due to COVID-19, “as the newly unemployed seek the training and credentials to gain entry-level jobs in growth industries with long-term prospects. And moreover, the desire to enter programs as soon as possible [and not wait for social distancing orders to subside] will exacerbate the already growing demand for online programs.”
The report predicted higher education institutions or stand-alone training providers will be more competitive relative to traditional non-profit institutions due to their prior investments in technology, online delivery, sophisticated recruiting and enrollment processes and culture of innovation and agility. “We believe investors will find strong investment opportunities in this corner of the education ecosystem, especially with many other formerly strong subsectors now being deeply impacted by the COVID-19 crisis,” the Lincoln report said.
Nevertheless, Mary Jo Zandy, managing director of investment bank Berkery Noyes, said in light of the heightened attention to online learning, she was a bit surprised companies weren’t rushing to sell instead of raise capital ahead of a potential boost in capital gains taxes if there is a new administration after the presidential election in November.
“The only reason to raise more money as opposed to selling is if you’re pretty confident in your growth and the trends in education,” she said. But she cautioned that edtech platforms whose principal customers are state and local school districts may be in for a shock. Funding is “a big question mark” because budgets are going to be strapped due to the pandemic, she said.
|Date||Company||Participants||Amount Raised (USDm)|
|20-Jul-20||Coursera Inc.||Kleiner Perkins,Learn Capital, LLC,G Squared||130|
|15-Jul-20||CampusLogic, Inc.||Dragoneer Investment Group||120|
|20-May-20||Yanka Industries, Inc.|
|New Enterprise Associates,Fidelity Management & Research Company,Institutional Venture Partners,Atomico,Owl Ventures, LP,NextEquity Partners,01 Advisors 01, L.P.||100|
|30-Apr-19||Examity, Inc.||Great Hill Partners LLC||90|
|27-Jun-19||Degreed, Inc.||AllianceBernstein LP,Owl Ventures, LP,GSV AcceleraTE,Jump Capital,Signal Peak Ventures||75|
|10-Aug-20||Skillshare, Inc||OMERS Private Equity Inc,Union Square Ventures,Burda Principal Investments Gmbh & Co.,Spero Ventures LLC,Amasia Capital||66|
|11-Jul-19||Minerva Project, Inc.||Yongjin Group, Inc.,Kakao Ventures Corp.,Tan Tan Ventures,Lighthouse Combined Investment,TAL Education Group,ByteDance Ltd.,Pinpoint Ventures||57|
|4-Feb-20||Top Hat (Canada)||Union Square Ventures,Leaders Fund Inc.,Georgian Partners Growth LP,iNovia Capital Inc.,Emergence Capital Partners||55|
|19-Feb-20||Udemy, Inc.||Benesse Holdings, Inc.||50|
|13-Mar-19||Newsela, Inc.||Technology Crossover Ventures||50|
|5-May-20||eLearning Brothers, LLC.||HCAP Partners LLC ,RLG Capital, LLC,Eagle Marsh Holdings,Trinity Private Equity Group||38|
|28-Feb-19||ClassDojo, Inc.||General Catalyst Partners,Uncork Capital,SignalFire Management Services, L.L.C.,GSV Ventures||35|
|16-Jun-20||Degreed, Inc.||Owl Ventures, LP||32|
(aka SlideRule Labs, Inc.)
|International Finance Corporation,Vulcan, Inc.,SJF Ventures,500 Startups,Learn Capital, LLC,Telstra Ventures Pty. Limited,Costanoa Ventures,Reach Capital,Pearson Ventures,Blue Fog Capital LLC||31|
|13-May-20||Quizlet Inc.||General Atlantic Service Company, L.P.||30|
|4-Dec-19||Duolingo, Inc.||Capital G||30|
|29-Jan-19||Epic! Creations Inc.||Evolution Media||30|
|9-Jan-19||Lambda School||GGV Capital,Y Combinator LLC,GV,Geoff Lewis (private investor),Vy Capital,Ashton Kutcher (Private Investor)||30|
|29-May-19||OpenSesame Inc.||FTV Management Company, L.P.||28|
|19-May-20||PresenceLearning||Catalyst Investors LP,Catamount Ventures LP,New Markets Venture Partners,Bain Capital Double Impact||27|
|15-Jan-19||BenchPrep, Inc.||Jump Capital,Owl Ventures, LP,NewView Capital Management,Revolution Ventures||20|
|27-Apr-20||Duolingo, Inc.||General Atlantic Service Company, L.P.||10|
Companies to follow
CampusLogic (20 July 2020)
CampusLogic, a Phoenix-based student financial aid software platform, is interested in acquiring a company focused on helping students repay their college loans, CEO Gregg Scoresby told this news service. The timing is likely to be in 2021 after it integrates the recent acquisition of RaiseMe, which was its third acquisition, he said. CampusLogic’s first acquisition was in February 2017 when it purchased Cegment in Boston, a financial aid calculator. It rebranded it as ClearCost. Its next acquisition was in April 2019 when it acquired Funderbolt, which enables student fundraising campaigns for tuition and other educational expenses.
ClassDojo (23 July 2020)
ClassDojo, a San Francisco-based, venture capital-backed provider of a communications app for students in grades pre K-8, is working on a capital raise, three sources familiar with the matter told this news service. The sources were not clear as to the size of the round. Two of the sources said edtech businesses are benefiting from the move to remote learning amid the COVID-19 pandemic, so this would be a good time to raise money. A fourth source familiar said, “With 800 million kids out of school and needing to stay connected to their classroom community, everything ClassDojo was doing went from important to completely essential.” He added that the company has seen more than 10x year-over-year growth in this school year alone.
Coursera (30 July 20202)
Coursera, a Mountain View, California-based provider of online education and certification courses, raised its most recent round of capital after a direct approach, new CFO Kenneth Hahn told this news service. The raise puts it in a position to pursue an IPO within one to two years, he said. Following the capital raise in July, the company has USD 300m in cash on its balance sheet and could pursue M&A if the right deal were to come along, Hahn said. However, it is mainly focused on being ready to pull the trigger on an IPO in as little as a year’s time, he said.
Degreed (7 July 2020)
Degreed, a workforce upskilling and talent management platform, will be “well-positioned for the IPO path [in] the next two years,” David Blake, co-founder and executive chairman, told this news service. Pleasonton, California-based Degreed will likely take on another round of private financing of undisclosed size prior to an initial public offering, Blake said. The company announced a USD 32m extension to its Series C in mid-June, bringing total funding to USD 182m. Degreed investors include Owl Ventures, Jump Capital, Signal Peak Ventures, GSV Accelerate and AllianceBernstein.
Skillshare (12 Aug 2020)
Skillshare, an online learning platform, is aiming for an initial public offering within 12 to 24 months after raising USD 66m in a Series D round led by OMERS Growth Equity, CEO Matt Cooper told this news service. New York City-based Skillshare has more than 12 million registered members, 8,000 teachers, and over 30,000 video-based classes in creative disciplines that include graphic design, photography, painting, illustration and interior design. Cooper said annual revenue is “several times” the USD 20m to USD 30m range he provided for a July 2018 report, although it is still below USD 100m. Skillshare, which uses a subscription-based pricing model, enjoyed nearly 100% growth year-over-year through July, he added.
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