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EdTech Thoughts 8/15 - 8/21
it's hard to make money in edtech
No announcements this week, on to the news!
Funding / M&A
Sunstone raises $35M: Somewhat famously, 2U’s initial growth plan targeted only Top 100 US universities, with several other OPM players establishing their base outside of this market segment.1 New Delhi-based Sunstone is betting on a similar bi-furcation of OPM-like vendors in the Indian university market, with the Sunstone team targeting the non-elite segment of the market. The company currently works with 40+ institutions, supplying generalized content modules that they claim are higher-quality than any of their partners could produce on their own
GrowthSpace raises $25M: New York-based GrowthSpace offers a corporate upskilling platform that matches employees with internal and/or external experts that mentor/train/coach the employee, depending on the client’s use case
Microverse raises $4M: After almost five years without a significant funding event in the peer-to-peer learning space, we may finally have a new company to root for. Barcelona-based Microverse offers remote bootcamp programs where students supply the bulk of the training feedback. The company, whose student population hails mostly from Africa and Latin America, claims 90%+ post-graduate employment. Unfortunately, the startup did not disclose enrollment numbers or the rationale for this smaller extension round a year after raising a $12.5M Series A
Anno raises $2.5M: San Francisco-based Anno offers a browser extension that allows for web site and document annotation. Anno built their business on the back of a university research use case, which helped them grow to one million users and two hundred university customers. The tool allows users to segment their annotations as public, private, or semi-private, bringing the potential for more social use cases as adoption grows. As someone who reads and shares a lot of links, this is intriguing to me!
Nerdy acquires Codeverse: Chicago-based Codeverse offers coding classes to K12 students in the US. Publicly-traded Nerdy is best known for their Varsity Tutors tutoring marketplace. Codeverse fits neatly into the larger investments in programmatic offerings that Nerdy is making to compete against providers like Paper in selling large-scale tutoring packages to schools and districts
It’s hard to make money in edtech
Earlier this week, Alberto Arenaza wrote about the limited number of business models that have succeeded in the EdTech world. Alberto comes up with five, but I would forgive you if you got stuck after “tutoring/test prep” and “searching the internet for prospective students”.
I agree with what Alberto says, and conforming to one of these business models is a tough reality that many startups face to get to long-term sustainability. Just this week, we saw Edmodo, a platform with 100M+ users, collapse because they never picked a business model (more on that below).
Unfortunately, the problems do not stop once a company takes one of the established models. They must then navigate - the sometimes fair, sometimes not - accusations of enabling “cheating” and utilizing “gimmicky sales tactics”.2
There are a few companies attempting to buck this trend. The combination of Learn Platform’s affordable efficacy studies and Mainstay’s steady path to scaling an evidence-based sales strategy provide some hope that impact can be a repeatable path into the EdTech market. However, it is still unclear whether they are the exceptions that prove the rule or a sign of things to come.
This leaves startups between a rock and a hard place - fight to bring a new model into the mix or fight to find just enough wiggle room in an existing one to get roasted by the press. Either way, the journey is hard.
Edmodo shuts down: The company announced, via Twitter, on August 15 that it was not just shutting down, but permanently deleting all user data on September 22. EdSurge and Phil Hill provide a number of reasonable potential explanations, but the whole thing smells funny
K12 enrollment down for second year in a row, budget concerns ahead: Public school enrollment remains about five million students short of where it was in 2019. Emergency Relief (ESSER) money helped reduce the financial shock of this decline over the past two years, but runs out during the next school year
“I didn’t really learn anything”: A very human story of what high school was like for at least some students during the pandemic, and how ill-prepared they are for post-secondary studies or vocational training now
The Shrinking of Higher Ed: A sad, but well-reported history of previously predicted enrollments cliffs in higher ed. In short, most of the prospective student pools targeted for growth in the past (including adult learners) are pretty much tapped out. On the more positive side, I’m interested in fundamentally new enrollment models starting to be proposed that meet students where they really are
IRS raises tax deduction limit on school supplies from $250 to $300 for teachers: Hooray! Well, almost. Almost, as in “almost halfway there.” Teachers spent an average of $750 on school supplies last year
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
This is not a commentary on whether either 2U or 2U’s competitors made the right/wrong choices! I would love to explore this in more detail some day, but that day is not today
I’m not linking to new Chronicle article in the main body because, while a great headline, we had this argument in 2019! 2U CEO Chip Paucek did respond to the Gimmicky Sales Tactics piece this week though. I sympathize with Chip’s position - the debate around the role of OPMs is important and nuanced, but getting drowned out by the for-profit vs. non-profit positioning