EdTech Thoughts 3/20 - 3/26
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Hello!
This is a family-friendly newsletter, so I will not be doing a “10 Things Educators Can Learn From Logan Roy” post. But I would enjoy it if someone else did.
More seriously, you will see an extra email from me later this week! It is something I am very excited about, and also a little nervous for. I hope you all will send feedback on whether or not it hits the mark.
On to the news!
Funding / M&A
Workera raises $23.5M: We last talked about Palo Alto-based upskilling platform Workera in August 2021. The venture funding market looks quite different now than it did then, but the timing of this announcement is pretty consistent with the standard ~24 months between funding rounds. The company did not provide much in the way of growth numbers, but does appear to have more than doubled the size of its skills database and expanded its client roster.
Trala raises $8M: Chicago-based Trala provides both 1:1 lessons and AI-driven feedback to adults who want to learn the violin. The company claims to be one of very few music schools to target adults and attracted an impressive roster of investors in this round. Including Duolingo’s CEO, Luis von Ahn, and Chief Business Officer, Bob Meese, who may or may not be using the app for inspiration for their own music app. This round’s funding will be used to expand Trala’s catalog to additional instruments.
Kognity raises $5M: Stockholm-based Kognity provides digital curriculum materials for science classes aligned with IB, IGSCE, and US high school standards. The funding from this round will be used to help scale the company’s US operations.
RiseKit raises $4.75M: Chicago-based RiseKit helps governments and employers find and place workers from under-resourced communities. The funding from this round will be used to personalize the candidate side of the platform.
Pivot raises $1.4M: Melbourne-based Pivot offers a student survey platform that helps provide teachers with actionable feedback on their classroom instruction. The platform currently counts 1,500 schools and over 50,000 teachers among its users. Also of note, this funding round was led by the Catholic Diocese of Maitland-Newcastle, marking the first time I’ve ever seen a religious organization directly participate in a venture round.1
Vitalsource acquires Akademos: Norwalk-based Akademos provides online storefronts for university bookstores. Founded in 1999, the company made its name building online storefronts and continues to work with many universities, and university bookstores today (though the storefronts now sell more digital materials than textbooks). The company joins Raleigh-based Vitalsource, which was one of the first e-book platforms in EdTech and now provides a variety digital services to schools and publishers. This acquisition comes almost exactly two years after Francisco Partners purchased Vitalsource, which makes me think we might see a few more strategic acquisitions like this over the next 12-24 months.
PhysicsWallah acquires Knowledge Planet: Dubai-based Knowledge Planet operates a chain of test-prep centers across Abu Dhabi, Dubai, and Jordan. The company joins Noida-based PhysicsWallah, who continues to put last summer’s $100M funding round to use in M&A opportunities. The combined entity will continue to scale Knowledge Planet’s operations across the Gulf Coast Country (GCC) region.
Parchment acquires Quottly: Gainesville-based Quottly helps US universities share courses and programs with each other. The company joins Scottsdale-based Parchment, which is (probably) the US market leader in secondary and post-secondary transcript services.2 It sounds like Quottly’s technology will be incorporated in Parchment to help students recover course credits that might otherwise be lost
Regent acquires Pearson’s OPM business: See “Story” below for more thoughts
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Story
Pearson sells OPM business to private equity firm Regent
Last spring, Pearson announced that it had lost Arizona State University as an Online Program Management (OPM) client. This contract was worth $118M per year, making it one of the largest (possibly the largest) contract in the entire industry, and represented at least one-third of company’s OPM revenue.
Why Pearson lost this contract remains relatively under-discussed, but the company has pivoted quickly since that moment. Last summer, Pearson announced that it would be putting its OPM business, Pearson Online Learning Services (POLS), up for sale. And that the had company re-structured around the $300M+ in workforce development acquisitions it had picked up between September 2021 and August 2022.3
This week, Pearson finally found a buyer for the POLS business. The terms of the deal are as follows:
Each year, for a period of 6-years from completion of the transaction, 27.5% of POLS positive Adjusted EBITDA in each calendar year (pro-rated where only a portion of a calendar year falls within the period). Pearson will not share in any loss making periods
A further contingent payment equal to 27.5% of the proceeds received by Regent in relation to any monetisation event of POLS following completion of the transaction.
It says something that this was the best deal Pearson felt it could get. While the company did not explicitly cite February’s Dear Colleague Letter (DCL) in their press release, it almost certainly played a role in the final terms. They were happier effectively wiping their hands clean of an $189M business rather than trying to navigate the regulatory environment.4
Phil Hill has helpfully been tracking the public comment period following the DCL’s publication. I’m not sure which way the regulatory winds will blow, but the comments have been overwhelmingly in support of continuing to allow revenue sharing.5 Based on the terms of this deal, it seems like investors are applying a substantial risk discount to affected companies until there is further regulatory guidance.
Asks
Gemma is looking for mentors and startups for a new accelerator focused on economic mobility, including education and workforce development. You can DM her on LinkedIn with any questions or ideas.
Tyler and I are looking for friends to join us in NYC on April 3, at Columbia’s “The Business Case for Second Chance Employment,” which will bring together business folks to discuss second chance employment programs. It is a great program for a great cause. (one that has spurred multiple | successful EdTech companies.)
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Links
Divergent | trends in US K12 Education
This may become a “Story,” or even a full-fledged essay, at some point soon, but I need some help workshopping it. I see two trends emerging in US K12 education:
School choice is one of the fastest-growing policy issues in the country: At least 32 states proposed legislation to create or expand school choice options this winter.
Public schools are taking on a greater and greater “community” role: the concepts are much older, but I started tracking California’s Community Schools movement and the national debate over free school lunches last summer. This week, the USDA put forward a renewed proposal for the expansion of the school lunch program.
I’m still working out what these two trends mean. They seem divergent at first pass, but perhaps they don’t have to be. I welcome thoughts on the issue.
I’m worried that we’re starting to lose the plot here. I am 100% behind the effort to get rid of degree requirements in jobs where they are superfluous. I am also supportive of the efforts to make degrees more stackable, particularly with industry credentials woven in to the *start* of the degree path to increase earnings up front. And I recognize that college degrees are available to everyone.
But I’m not sure the on-the-ground takeaway from those efforts should be that degrees are unnecessary. In aggregate, the college degree remains the single-best way to improve expected career earnings. I am also concerned about the hidden effects - both mental and financial - of the en masse encouragement of freelancing as a *career path.*
AI Is About to Transform Childhood. Are We Ready?
I would love to think that George Mason Economist Tyler Cowen read my blurb on “Learning to read from an AI robot” from a few weeks ago, but I’m 99% sure he did not. All the same, it seems we both believe that a personalized but non-human learning path is closer than you might think.
Question of the Week
Note: votes are anonymous
I couldn’t quite justify putting this in the Funding / M&A section, but an organization called Huupe did raise $11M for its Smart Basketball Hoop this week. However, the eye-wateringly expensive device does offer AI-based feedback on your basketball skills, which got me thinking:
Results of last week’s poll:
Ed Tech Thoughts is a short ( ~ 5 mins), weekly overview of the top stories in EdTech, with a few (hopefully interesting) gut reactions attached. If you enjoyed this edition, I hope you will subscribe and/or forward to your friends!
If I missed something, or there is a topic you’d like to learn more about, I encourage you to submit a story! Submissions can be named or anonymous
Disclosure
Extremely tangentially: While very stylish, the Pope did not actually wear the puffer. An AI made it.
This is an educated guess, I do not have the data to confirm it. For the blockchain enthusiasts, I usually hold up Parchment as the incumbent to beat.
In their FY 2022 report, Pearson declared that they had spent £149M for Credly, £135M for Mondly, and £65M for Faethm. I don’t have access to the exact exchange rate on the dates of these transactions, but the total is probably closer to $400M than $300M.
Admittedly, Pearson lost $32M on this $189M in revenue. And retained some upside potential. But the decision still feels drastic and like it was made to consolidate the company’s focus around the much less regulated workforce market, not maximize the value of the OPM business.
I can understand why folks might quibble with using volume of comments supporting/against, but I actually think it does a good job showing how activated each side’s base is. If there were more organizations publicly against revenue sharing, I would probably adjust my perspective.
EdTech Thoughts 3/20 - 3/26
Great roundup as usual. On the divergent trends question in k12 - my quick take is that universal lunch and choice are divergent are it's one size fits all thinking vs more choice for parents. But you could argue both are more funds regardless of means as well for different school elements I suppose. In terms of the community schools trend and choice -- I see that as just one of the responses schools may have to make to be able to keep students in the wake of more options so I see how you can argue it's divergent but I'm not sure that's my take.