EdTech News Roundup - Week of 9/20
SPAC! SPAC! SPAC! SPAC SPAC SPAC! ... Everybody!
Hello!
Nothing to note this week, on to the news!
Funding / M&A / IPOs
Raspberry Pi foundation raises $45M: this isn’t strictly EdTech, but Raspberry Pis are super cheap way to expose students (both young and old) to computer hardware. Now that 1:1 computing is table stakes in many (most?) classrooms, I’m curious to see if other devices (like VR headsets) proliferate
GrowthSpace raises $15M: backed by Microsoft and Vertex Ventures, GrowthSpace is a platform for employee development that builds a “skills matrix” of employee competencies and turns it into specific recommendations for mentorship and coaching
FrontRow raises $14M: FrontRow is an India-based platform for cohort-based courses. In 9 months since being founded, they’ve acquired 50K(!) paying customers who, collectively, have spent 1M+ hours on the platform. GSV, who just last week announced their investment in Apna, appears to be making good on their promise to put more resources toward the Indian and Southeast Asian markets
JP Morgan buys Frank: Terms undisclosed. Originally a portal for helping students navigate the FAFSA form, Frank expanded to become a general “college planning tool” for current college students and matriculating high schoolers, with a total reach of 5M+. JP Morgan (JPM) wants to turn each of those students (and their parents) into banking customers. JPM explicitly stated that this is not a signal of a return to a student loans business, which they exited in 2013
Nerdy (Varsity Tutors) agrees to go public via TPG SPAC: No new data has been disclosed, so this is a note about SPACs rather than Varsity Tutors. To this uninformed bystander, the SPAC boom of 2020 felt a little like the 2017 Crypto boom, but for bankers instead of anarchists. There are at least 6 SPACs on the market currently hunting for EdTech companies to take public
Stories
Pearson says “en garde” to Chegg
Pearson is suing Chegg for copyright infringement - alleging that Chegg’s Study tool, which makes up somewhere around half of their revenue, uses Pearson content without their permission.1
At base level, this lawsuit makes sense. If you take a Pearson textbook and type any of the homework questions into Google, there is a nearly 100% chance that Chegg will be the first result that pops up. Winning this SEO battle was one of Chegg’s explicit growth strategies.
However, Chegg has been around since 2005. Why file this lawsuit now?
Inside Higher Ed attributes the timing to a breakdown in a former partnership between Chegg and Pearson, but that partnership was for textbook rentals, not licensing of intellectual property. It seems more likely that this development is part of a larger effort by Pearson to increase their direct-to-consumer revenues, at the expense of other parties in the education ecosystem if needed.
Cengage introduced this trend towards increasing direct-to-consumer revenue in 2018 with the launch of their Unlimited product, which was a direct-to-consumer offering that took student spend from bookstores. Pearson launched their own, loosely competitive app this summer. Pearson does not currently offer a study guide replacement for Chegg, but it follows that they would see Chegg’s business success here as an area ripe for their participation in some way, shape, or form. In this case, it seems they’ve chosen to litigate for some portion of Chegg’s revenues.
The Consumer Financial Protection Bureau (CFPB) steps in on ISAs
The CFPB took regulatory action against Better Future Forward (BFF), requiring them to “provide disclosures required under federal consumer financial law, to change the way it calculates payment caps to avoid prepayment penalties, and to stop saying its ISAs aren't loans.”
The specific details of this case are less important to me than the fact that we are finally starting to see some regulatory frameworks for ISAs. That is a good thing!
To grossly overgeneralize, ISA providers have self-policed as they have risen in popularity over the past ~5-10 years. We have been fortunate that most of the first-movers in the space chose to use standards that many folks find reasonable.2
However, it has always felt unlikely that the industry would be permitted to continue with this strategy. Whether or not an ISA is a “loan” specifically, it is absolutely a way students pay for education. And every other type of student financing mechanism is regulated. Moreover, being un-regulated leaves the door open for more nefarious actors to take advantage of the market (and in doing so, take advantage of students).
I don’t know how all of this will play out, but I do feel that regulatory clarity (of any kind!) is net positive to the continued growth of ISAs.
Other Tabs
How to survive as a small school among the “Megas”: My back-pocket question for any/all of Paul LeBlanc, Scott Pulsipher, Michael Crow, and the rest of the Mega U gang - “What would your strategy be if tomorrow was your first day as President of the University of Rhode Island?”
Kaplan launches Career Services program with university consortium: last week I wrote about Pearson’s acquisition of Faethm as a harbinger of more investment by OPMs in the careers/workforce space. Facts that may only be interesting to me: Six universities and two…fraternities(?)…are in the consortium, but Wake Forest got the shared PR headline
Washington University St. Louis endowment returns 65%: Holy moly! This appears to be driven be a strategic re-allocation of endowment assets, with a specific emphasis on emerging markets
The casualties of China’s education crackdown: back in July, I wrote about China’s apparent crackdown on education companies. I’m still thinking about it! As I read more stories about the impact of this crackdown on global education, I will include them here
Thing(s) I’m Thinking About
Shane Parrish, author of the popular Farnam Street blog, thinks you should stop reading the news. With apologies for the upcoming double negative, I don’t disagree! I think back to last March, when we were all anxiously refreshing our timelines for the latest on how to disinfect our groceries, and how little of that information is helpful today.
I’d like to re-frame Shane’s argument: you should read less news, more actively. Frankly, that’s a big part of why I write this newsletter. Reflecting deeply on a few stories each week pushes me to think critically and commit to a point of view. And for those of you who are still reading, I hope that opening my emails gives you a moment to pause the obligatory scrolling and think a little harder about something that interests you.
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I work hard to stay neutral here, but it’s important to me that you all know my potential biases!
Chegg lumps their Study tool with Chegg Writing, Chegg Math Solver, Chegg Study Pack, Thinkful, and Mathway to get “Services” revenue that is ~80% of their total revenue. I believe Chegg Study makes up at least a plurality of this revenue, if not a majority, but it is an educated guess. This is not financial advice : )
Apologies to the ISA folks, I know there is a LOT more nuance to this, but I want to stay focused on my macro point, which is that this is an important validation of the hard work y’all have put in!