EdTech Thoughts - Summer Vacation Special
Where there's smoke...
On to the news!
A few fundings and M&A
Great Minds raises $100M: Great Minds is a K12 curriculum company whose strongest offering is in math. They join Amplify as a digital-first provider bucking the trend of publisher consolidation via PE firm
Preply raises $50M: Preply joins a growing cohort of language-learning platforms chasing Duolingo’s growth path. In Preply’s case, they provide a marketplace of language tutors
Arist raises $12M: I am on the record as bearish on microlearning, which means I have to be extra vigilant in watching the companies that might prove me wrong! Arist, which provides corporate training modules via SMS/Slack/Teams, raised this round on the back of their growth to 1000+ enterprise customers
APDS raises $7M: APDS, which stands for American Prison Data Systems, is a startup focused on training incarcerated individuals for post-incarceration jobs. In addition to being a generally positive story, it is interesting to think about what other learner demographics might offer venture-scale opportunity
GoGuardian acquires TutorMe: see “The Future of Tutoring” below
African Leadership Group (ALG) acquires Holberton School: ALG, which includes The Room - a talent agency - and African Leadership University, is one of the more ambitious startup groups in Africa. They acquired Holberton primarily for their technology platform, which was used across 34 bootcamp campuses prior to the acquisition. An acquisition focused on leveraging their SAAS offering is consistent with the direction Holberton was turning when they raised last year
What is going on with Byju’s?
The TLDR, for those who want to get back to their summer spritzes and true crime podcasts: something is wrong with Byju’s, but we don’t yet know what.
I present to you a chronological list of Byju’s headlines:1
May 16: Bloomberg floats that Byju’s is thinking about acquiring Chegg or 2U (two very different companies)
June 7: A glowing report on Byju’s “blockbuster buying spree” from a Forbes contributor with (it seems) inside access to Byju’s
June 14: The Ken reports that inconsistencies stemming from poor financial integration of acquisitions are one of the reasons that Byju’s financial auditor, Deloitte, refuses to sign off on the company’s financial statements (intermingling hardware and software revenue is another)
June 28: Bloomberg reports that Byju’s pushed back payments on its largest acquisition to date, the test prep company Aakash. Interestingly, Aakash’s prior owner, Blackstone, took equity in Byju’s as part of the acquisition and was announced as a major investor in Byju’s March funding round
June 29: Techcrunch reports on layoffs at Byju’s
June 29: Seeking Alpha reports that Byju’s has narrowed its acquisition sights on 2U, valuing the company at a significant premium to its public market stock price
July 4: The Morning Context reports that one of the leads for Byju’s March fundraise, Sumeru Ventures, has not sent the money they promised to Byju’s bank accounts
July 4: The Deccan Herald reports that “the majority” of Byju’s March funding round had been received, final payments for their acquisition of Aakash would be made by August 2022, and their audited financial statements would be announced “in the next 10 days.” The Daily Pioneer corroborates that the financial statements could be expected by July 15
July 7: the same Forbes contributor who wrote the June 7 “blockbuster buying spree” article writes that Byju’s March funding round is “on track” to be received, payments for the Aakash acquistion are complete, the June 29 layoffs impacted < 1% of Byju’s workforce, their financial statements would be “out” by July 15, and that the company secured $2.4B to finance an acquisition of 2U
July 11: The Morning Context reports that another of the contributors to Byju’s March fundraise, Oxshott Ventures, has not sent the money they promised to Byju’s bank accounts
July 11: Techcrunch reports that $250M of the $400M in external funding announced in March has not hit Byju’s bank account. Further, they report that the additional $400M that Byju put in himself was cash borrowed against his own shares in Byju’s3
July 12: Byju’s announces, via The News Minute, that 11 of the 13 investors in their March fundraise had sent their promised capital to Byju’s. They further noted that, “Oxshott wasn't leading the round. In fact, they were one of the last investors to come in for that round.” Neither Byju’s nor the article mentions Sumeru Ventures
July 15 - July 20: no news emerges on Byju’s financial statements (remember, they were promised by July 15)
So, what are we to make of all these headlines?
At best, this is a PR mess. Regardless of whether any of the individual business decisions referenced in these articles are good or bad, I have never seen an EdTech company with this amount of conflicting information in a 3 month period. At this point, without access to any data beyond he-said/she-said, I don’t trust any of the headlines.
At worst, the only detail missing is the acquisition of a wave pool company.
HBCUv is the United Negro College Fund’s (UNCF) effort to create a unified online environment for all HBCUs to participate in. It is a massive undertaking, with a large number of both non-profit and for-profit stakeholders contributing to it, that will take years to truly come to fruition. It is one of the most ambitious collaborative initiatives in the higher ed world since the formation of Western Governor’s University in the late 1990s and deserves a close eye
The Future of Tutoring (same TutorMe link as above)
It’s been a weird few years in the tutoring world. Historically, tutoring was a fairly geography-dependent business with few large-scale players. Then, international players like TAL rose to prominence as some of the world’s most highly valued EdTech companies…until a Chinese government-led crackdown on for-profit education companies destroyed much of their value.
With COVID came the rapid scaling of tutoring players like Paper and GoStudent. TutorMe did not join the aforementioned in the fundraising bonanza, but they did grow their business “three-fold in the past two years.”4
A few weeks ago, a friend asked me “if a company had one growth trajectory pre-COVID, a large COVID growth spike, and then reverted to it’s pre-COVID growth, how would you look at it?”
Inconveniently for me, TutorMe did not raise much investor money and the press release did not disclose a valuation, so we can’t apply this question or tell whether this acquisition was a “good” financial outcome or not.5 But, I will be looking at EdTech verticals like tutoring and videoconferencing (Class and Engageli being the major pandemic risers) as harbingers for how this trend plays out.
Most of the companies mentioned in this article don’t actually directly compete with each other, but the article does highlight something I’m hoping to spend more time on in the second half of this year: there is just as much, if not more, Edtech funding activity happening internationally as there is in the US.
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
The capital for this round came in prior to the announcement. If you really dig in to these articles, you will see references to money arriving/not arriving in 2021, but we are going to call this a “March fundraise” to keep things simple
There is not enough room in this newsletter to explain the risks of this strategy. It probably made more sense when they began fundraising in (I assume) ~mid-2021, when the stock market was still up, but looks bad now
There is a whole other debate about whether this trend is good or not. That discussion deserves a longer and more nuanced take than this mid-July catch-up
Whether and how we should be judging the buying and selling of companies is a another debate entirely, but humor me here