While 2017 was an amazing year for edtech with $3.5bn raised (and even $9.5bn according to Metaari taking a very broad definition of edtech), 2018 is starting off to be even better. As of today we have seen 3 major exits in the edtech space, Chinese investments continuing to spike and Europe picking up the pace!
1. Three major exits in lifelong learning (General Assembly), Corporate training (Pluralsight) & K12 (Edmodo)
Adecco, the Swiss temp staffing firm acquired General Assembly (GA) for $412.5m: Created in 2011, GA is probably the first bootcamp to scale: $120m raised, $100m of revenue in 2017 with a 30% yoy growth (said to be break even), 20 campus, 33 Fortune 100 clients, 10k hiring partners, 50k graduates, 40k current students. Pioneer in the mass market bootcamp, GA is the 2nd of its kind to exit after Wework acquired Flatiron in 2017 to offer new services to its customer. With 10x more students in 2017 than in 2012, the bootcamp market (online, mixed & offline) is gaining maturity:
- More and more expectations from students and corporates (quality, certification & falsifiability, alumni placement, exit salary, financing options…)
- Traditional universities are entering the market
- Competition over territories and quality has led to consolidations and closings (6 in 2017 counting IronYard & Dev Bootcamp)
Pluralsight, the iconic tech training company filed for IPO. Created in 2004, bootstrapped until 2013, the company has raised $238m and generated $167m of revenue in 2017 (vs. $132m in 2016). After Dropbox, Spotify or Zuora the unicorn should go public in May according to TC.
NetDragon, a Chinese gaming and education company, acquired Edmodo for $137.5m. Created in 2008, the teacher/parent/student communication app with a free to use model was a “flagship” edtech company with over $100m raised, 90m users, 400k schools and… $1m in revenue in 2017 for c. $20m of losses. They conquered the K12 market in the US and abroad but failed to monetize their audience: the operation valued an Edmodo user at $1.50. Some even ask whether it meant the end of the freemium model for edtech companies but a few companies like ClassDojo seem to be succeeding (selling content to parent for off school learning).
2. Consolidation continues in the US K12 market driven by PE firms
Edtech software companies (mainly financed by private equity funds) are leading build up operations to win the K12 market and offer a full suite of software products to schools and districts. They are building all in one products for the K12 markets from administrative, and pedagogical tools to content and it’s not unlike what the Talent Suites did a few years ago in the HR industry.
The most recent example is Vista Equity Partners which is merging PowerSchool and PeopleAdmin following an investment from Onex Corp. The two companies combined are valued close to $3bn according to Reuters. This is a continuing trend in the US: Vista Equity has acquired 8 edtech companies for $1bn total since 2015 (including Chalkable in 2016). Others follow similar build up strategies like Thomas Bravo with Frontline Education (9 acquisitions since 2014) or BV Investment with Hero K12 which raised $150m in 2017 for external growth (1 acquisition as of today)
3. Massive Chinese investments in edtech
With 260m students, 15m teachers, 300m people learning English and an estimated $40bn tutoring market in 2021, China is bound to be a major edtech hub. In Q1 2018, the top 3 edtech investments worldwide ($420m total) were 100% Chinese:
17zouye (tutoring): $200 million
Zhangmen (tutoring): $120 million
DadaABC (English language learning): $100 million
Mostly focusing on tutoring and English learning, 7 Chinese edtech company went public (outside China) in 2017 raising more than $1.1bn and 7 Chinese edtech startups have raised more than $30m rounds.
4. France is picking up the pace
In Q1 2018, the French edtech startups have raised $31m vs. €11m in Q1 2017! France is off to a good start.
The French edtech startup scene as well as the European one is still relatively small compared to the US or China but we are confident that European leaders will emerge in the coming years and we will be there to support them.
Jeremy Nahum - Investment Manager