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EdTech News Roundup - Week of 7/12
A Game of MOOCs
Getting ready for my first in-person conference since the start of COVID August 9-11 at ASU GSV. We (SEI) are tentatively scheduled for a happy hour at GSV on Monday night (8/9). If you are planning to be at GSV and want to come, send me a note for details.
On to the news!
Funding / M&A
EdTech funding is blowing up this year, but early-stage financing was a little slow over the holiday. Larger-scale financings did not get the memo:
2U acquires EdX for $800M: See “stories” below for more thoughts!
2U acquires EdX (same link as above)
2U, the publicly traded Online Program Manager, bought the MOOC platform edX for $800M in cash.2 There’s already a lot of content on this - I encourage you to read Classcentral, Techcrunch, Josh Kim, and Michael Feldstein on the topic in addition to the press release linked to above.
The headline here is, of course, competing with Coursera. Beyond that, there are 3 things I’d like to call out about this deal:
$3500 is still greater than $2000: 2U projects that adding edX’s ~40M users will lower their blended CAC (degrees, short courses, and bootcamps) from $3900 to $3500.3 This would be sunshine and roses for 2U investors except that Coursera disclosed their degree-program CAC was $2000 back in March.
A Consumer brand for 2U: Back in April, I wrote about 2U “putting their toes in the water” of direct consumer interaction with the launch of their Career Engagement Network. They’ve now got a much bigger name to attach to that effort. I’m curious how 2U will manage their growing collection of brands - while everyone reading this newsletter knows 2U, edX has FAR more brand recognition in the general populace.
80% of edX’s users are international: The rationale for this deal appears to be more international than domestic. 2U doesn’t disclose international revenue right now, but does have at least 19 international partners. How the geography of edX’s users matches up against 2U’s client roster must have been a fun discovery data science project!
I have a fraught relationship with Duolingo. I spent a lot of time studying Russian and Russian history in college, but struggled with the language. Duolingo’s little green owl has been goading me to get better ever since…
The pandemic inspired many others to this path as well - Duolingo’s revenues grew by almost $100M last year, or 129%. Most of this growth came via B2C subscriptions, which is now a $118M business.
However, Duolingo’s english-language proficiency testing business has also grown to almost $17M. This would place Duolingo at ~20% of the TOEFL’s revenue (estimated at ~$80M4) in < 5 years in the market.
As a side note, I recommend NPR’s “How I Built This” with Duolingo’s CEO, Luis von Ahn. He has led a fascinating life. I would normally tuck this into a footnote, but it is that good of an interview.
Byju’s is coming in HOT to the US market. Disney is about the best partner you can have in the children’s IP space, giving Byju’s immediate brand recognition.
I briefly wondered about margins, figuring Disney extracted their pound of flesh in this deal. Then I remembered that Byju’s built and scaled their name in India, one of the most competitive education markets in the world. If anything, margins may go up with higher US price points.
What’s more curious to me is that Disney agreed to the deal. Disney is so protective of their IP that there is literally a “Mickey Mouse Curve” associated with Copyright law. This also comes on the heels of Disney+ accumulating 100M+ subscribers in their first ~15 months of operation, one of the greatest “we’ll build it ourselves” launches in business history!
Problems with Grad student loan debt: We can debate the how and who, but I think it is safe to say students need to be better-educated on what outcomes to expect coming out of a degree program.
The “core” qualities of the MBA experience: a who’s who of fancy business schools are bringing all students to campus this Fall, citing “the in-person networking, socializing and overseas trips that students say make the expensive management degrees worthwhile.” :rock-on-emoji:
Georgia Tech quietly killing the MOOC —> Degree game: 11K students and profitable, GT is a model for partnering (with Udacity) to get a degree program off the ground and then managing it internally
Both Techcrunch and Venturebeat (above link) had this labelled as a “Series A”, which makes absolutely no sense to me. Articulate is 20 years old, not a startup, and this was a traditional private equity round led by traditional private equity investors
Dhawal at Class Central correctly notes that it is a significant use of 2U’s cash, but I don’t read too much into how this was financed. I suspect 2U had little option given the complexity of a for-profit buying a non-profit and the strategic rationale was strong enough that it didn’t matter.
Unpacking this shift is deserving of it’s own line item, but 2U does not provide specifics. My inner nerd is stoked that Coursera disclosed their CAC and marketing channel numbers, as it will (hopefully) drive the other major players to disclose their own numbers.
Take this revenue estimate with a grain of salt - I’d like to confirm via ETS’ 990 before using this number beyond this newsletter