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EdTech Thoughts 8/1 - 8/7
I wanted to spend some time writing about public company earnings season, but don’t yet feel like I have a unique angle on it. If I don’t have something by next week I’ll just do a roundup of the best coverage from other folks (feel free to send me stuff you like).
On to the news!
Funding / M&A
Territorium raises $4.4M: Mexico City-based Territorium joins Velocity Career Labs (VCL) as Parchment-challengers receiving funding this year. However, where VCL is working on a custom blockchain to house traditional learner data, Territorium is building their Comprehensive Learner Record (CLR) with more traditional software tools and custom assessments. Though ETS’ venture arm does not appear to have participated in this funding round, the company has licensed at least one of Territorium’s assessments, a positive indicator for Territorium
Kide Science raises $1M: Helsinki-based Kide Science is a Science-focused early childhood curriculum provider. Already partnered with the team behind Gabby’s Dollhouse (a popular animated series on Netflix), Kide will use the cash from this round to expand their presence in the US
Achievable raises $650K: San Francisco-based Achievable is a digital-only test preparation company that focuses on high-stakes, graduate-level exams in the US. This is a sector that has seen significant investment internationally (see Upgrad’s acquisition below), but has not generated as many recent funding headlines in the US
UpGrad acquires Exampur: Mumbai-based UpGrad is one of a small number of EdTech companies that appear to be growing amidst the broader downturn, having already raised $225M this year and purchasing Harappa Education just a couple weeks ago. Exampur, which provides graduate-level and government test preparation services, provides Upgrad with a userbase of 10M learners and a network of physical teaching facilities in India
The tricky thing with selling a physical object, like a textbook, is that the purchaser can resell the object to someone else and the original owner receives none of the proceeds. Not only that, the resale of the object reduces the number of people who would be interested in purchasing other copies of the object from original owner. To maintain revenue in a smaller market, the original owner must then raises prices for their remaining customers.1
~13 years ago, bitcoin was invented. It brought a whole new way of thinking about digital asset ownership to the world that may have been helpful in solving this problem. Unfortunately, the number of people conversant in both book publishing and bitcoin hovered around zero until 2017.
However, the big educational publishers still found a way to solve their resale problem. They did this by selling digital (often time-bound) versions of their textbooks tied to individual user accounts or one-time product codes to their customers.
You cannot, today, resell a digital textbook. There is no resale market for digital publisher products, nor has there ever been one.2 This has worked out pretty well for the student; able to assume that a much higher percentage of learners would buy their materials, publishers lowered prices from $300+/unit to < $100/unit and invested in the increasingly-sophisticated courseware platforms we know today.3
All of this is a long way of saying I’m not sure what Pearson is doing here. Even if we take what they are saying at face value and magic a resale market for ebooks into existence, this would lead to a worse business outcome than status quo. They would be exchanging a business line where they currently take all revenues for one where they must share a TBD percentage of revenues with, literally, millions of college student NFT-holder middlemen.
Increased Childcare spending nixed from “Manchin Compromise” bill, but employers are still increasing care benefits: For a while it seemed like childcare coverage for children aged three to five (pre-kindergarten) was going to be one of President Biden’s key policy wins, but it increasingly looks like that ship has sailed. I’m curious to see if major employers, watching both employee productivity and childcare coverage spend increase, will provide a broader base of support for policy change in this area in the future
ED estimates of student loan portfolio value off by $300B+: The US Government Accountability Office (GAO) released a report revising estimates on the US Education Department’s (ED) student loan portfolio performance from 1994 to 2021. Previously, ED expected this portfolio to generate $114B in income. Instead, the portfolio cost ED $197B. Those numbers are not typos. $107B of the change is due to the pandemic-driven loan payments pause of the past two years. We can debate whether the payments pause was “worth it”, but I can understand why it has been a tough number to track. What is more alarming to me is the other unaccounted-for $200B - which comes mostly from higher-than-expected student default rates and adjustments to the Public Service Loan Forgiveness (PSLF) program. Again, I’ll let others debate the specific policy choices that led to this swing in loan values; I’m just confused how we allow these choices to be made with such poor accounting
Update on EdTech in China: It is hard to know what is really going on in the Chinese EdTech market, the largest individual EdTech market in the world prior to last year’s for-profit crackdown. This report from Yahoo paints the most believable picture I’ve read, of a market that is adjusting to a new regulatory environment, but still has significant demand (and spend) associated with it
Average full-time US college student has fallen off of 4-year graduation track by end of first year: We already knew that ~40% of US HED students attended school part-time, often so that they could continue working or fulfilling other responsibilities. Now, we know that even among more “traditional” full-time students, the 4-year degree path is not working. The complicating factor here is that while the data shows this is a national problem, the decentralized nature of the US HED systems seems to preclude a national solution to it
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
For some companies and products, like Apple and the iPhone, this is only a minor drag on growth because the overall market is so big. In the education publishing world, where you have a relatively fixed number of students year-to-year, this is a much bigger deal
There is piracy problem with digital materials, but that was not mentioned in Pearson’s announcement. It also wouldn’t be solved by NFTs, which can still be copied, even if they would not then be verified
I’m dramatically over-simplifying here. There were times, particularly at the start of this transition where physical textbook prices remained high and the digital versions were…bad. In the long run, I believe this worked out well for students though