EdTech Thoughts 3/27 - 4/2
Hello!
This week I published my first report on the public EdTech companies - you can find it here. It covers the 2022 fiscal year earnings calls of 2U, Coursera, Udemy, Chegg, Duolingo, and Pearson that occurred over the course of February and March.
The report is my first paid subscription product. I’m looking forward to updating it every quarter, as well as writing deep dives on each of the companies. Subscribers will also receive access to the database of EdTech funding rounds that I use to write about trends in this newsletter.
I hope you enjoy reading it as much as I enjoyed writing it! On to the news.
Funding / M&A
Coursedog raises $90M: New York-based Coursedog made its name as a course scheduling software for US universities, though the company now leverages the data gleaned from course scheduling to support broader institutional analytics. Backed by Y Combinator, First Round Capital, Coatue, and now JMI Equity, Coursedog is one of relatively few EdTech startups to reach the growth equity stage without an announced EdTech specialist investor on their cap table.1
UpGrad raises ~$40M: Mumbai-based Upgrad’s core business is providing test preparation for graduate-level exams in India, but the company raised $225M and bought 6 companies last year to expand that definition. Upgrad’s founder, Ronnie Screwvala, contributed about 70% of the money for this round. Later-stage founder-led financing is, generally, a red flag to me, particularly when the founder uses their shares in the company as collateral for the financing (as was the case with Byju’s last year). Whether to read into Screwvala’s financing here is a little more opaque. He was already wealthy prior to founding UpGrad, so funding this round would be less financially precarious, but the company also conducted layoffs alongside this funding announcement.
Maqsad raises $2.8M: Karachi-based Maqsad provides an online homework question-and-answer service to students in Pakistan. Of note for a seed stage company, Maqsad’s app has already been downloaded over one million times.
Voxy acquires Fluentify: London-based Fluentify offers 1:1 language-learning services to companies across Europe. New York-based Voxy offers an English-language learning platform. It sounds like the acquisition will be used to help Voxy grow their presence in Italy, where Fluentify’s founders and many of their clients are from.
Looking for a full list of companies that have raised venture funding this year? Upgrade to paid for access to the EdTech Funding and M&A database
Story
University of Arkansas deal to buy University of Phoenix draws scrutiny
At the end of January, I wrote about the rumor that the Arkansas University System would acquire the University of Phoenix. The Washington Post reported this week that the two parties "are close and are fleshing out the terms." The terms include the creation of a new non-profit called Transformative Education Services whose specific purpose is to "shield [Arkansas'] state schools from the debt and liabilities of the for-profit giant." Arkansas is also using nondisclosed "international banks" to finance the deal "so that no public or university funds would be used in the transaction."
Here is my position on this topic: If you are a US state university system financed by federal dollars, and someone offers you a deal that requires you to set up a new, separate organization and to finance the deal with “international banks” - run. I don’t really care what their rationale is, that deal is probably not a good deal for you and it almost certainly will not go over well with your constituents.
To be clear, this is not a moral judgment of the University of Phoenix or for-profit universities. I believe Phoenix is a great option for many students and you could convince me that the University of Phoenix is a great asset when placed in the right hands.2
It is a moral judgment on transactions that include a specific intent to obfuscate details. The nationality of your bank has nothing to do with what funds are used in a transaction, that justification makes no sense.3
It is frustrating to read about deals designed to be opaque and/or to avoid specific liabilities, especially when those liabilities are current/former students. If someone wants to buy the University of Phoenix, they should probably have to buy the whole thing.
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Links
School-voucher schemes are spreading across America
The word “schemes” in the title makes this article sound more sinister than it actually is - schemes is a more commonly-used term used in the British-english writing of The Economist. That the article was written by someone from outside the US is actually a big part of the reason I’m linking to it. I wanted to read an international perspective on an issue that seems to be growing in political importance as we approach the 2024 US elections.4
Speaking of, Florida Governor Ron DeSantis signed Florida bill HB 1 into law this week, which gives every student in the state access to an annual voucher or educational savings account worth $7,600.
Interstate Teacher Mobility Compact making it easier for teachers to work across US
One of the potential “gotchas” to solving the teacher shortage is that many states have their own requirements for licensure, making it complicated for teachers to take jobs across state lines. Without going too deep into the details, the goal of this compact is to make that task easier.
This is an issue I’d | been | passively | watching, but hadn’t thought much about until I read that it was one of the causes for the firing of Temple University President Jason Wingard this week.5 That made me think the issue may be coming to a head.
To simplify a complex issue, there are two core problems here:
Graduate students are paid poorly. At Michigan (the headline link), graduate students currently make $24,000 per year. That wage is directionally representative of what these students make across the US
Universities depend on low-paid graduate student labor to make their instructional unit economics work. As the Chronicle’s Lee Gardner illustrates, we’ve been waiting for the straw that breaks the university-financial camel’s back for 10 years. A 60% wage increase (as the Michigan graduate students are advocating for) to mission-critical labor seems almost certain to imperil some number of institutions.
Neither side has much room to give on this issue, I’m not sure where it goes from here.
Question of the Week
Note: Votes are anonymous
Results of last week’s poll: Seems like Duolingo and Trala might be on to something!
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!
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Disclosure
It is quite possible that one of the EdTech specialists is on their cap table, but I have not seen it mentioned in any of Coursedog’s public statements.
That said, I feel obligated to note that none of these students live in Arkansas. Phoenix shut down their 1 campus in the state in 2018 and the in-state student population has hovered around 0 ever since.
It is quite possible that this quote is a mischaracterization (either by the Post or by UA Chancellor Bobbit) of who is doing the financing. I suspect that some foreign entity is providing the upfront capital for this deal and taking a revenue-share on the back end. The explanation would be better (though my assessment of whether the deal is any good for Arkansas would probably be worse) if that were explained.
Last week I called this issue “divergent.” I don’t think that was the right word for it. Divisive may not be the right word for it either - work with me on it!
Wingard is also being blamed for campus security issues, but, as a resident of Philadelphia, it feels unfair to blame him for a citywide problem.
Nice work Matthew!
Great read with insightful information that enlightens the mind. Recently I tried my hand at some tech writing, AI is coming and I thought I’d put together a rounded article—would love your eyes and insights 😊 https://tumbleweedwords.substack.com/p/ai-enters-our-everyday-reflections