EdTech Thoughts Weekly Update 5/1 - 5/7
Reports of Chegg's demise have been greatly exaggerated
Hello!
Last July I wrote that something was wrong with Byju’s. This week the company’s offices were raided by Indian money-laundering authorities.
I don’t bring this up to say “I told you so.” The Byju’s news sucks for EdTech and I am wrong quite often too.1 I bring the Byju’s prediction up as an example of the type of dialogue I hope this newsletter can build. That piece started with a series of links. On their own, each link was interesting but none stood out as particularly revelatory. Combined, they started to tell a story, albeit a bleak one, of potential distress at the world’s most highly-valued EdTech company.
Links to key stories with analysis. This is where I want to start making an impact on the EdTech ecosystem. Over time, I hope to do more.
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Funding / M&A
Uwill raises $30M: Boston-based Uwill provides supplementary and outsourced online mental health services to US colleges and universities. To say the company has the wind at its back is probably underselling it, at least on paper. Mental health | is about | as much of | a burning need as there is on college campuses right now, with the possible exception of proctoring. I say possible because Uwill’s founder, Michael London, has a pretty good sense for both markets. He spent 2013-2020 founding and running Examity, one of the leaders in the US proctoring market, before leaving to found Uwill.
Campus raises $29M: San Francisco-based Campus provides regionally accredited online and in-person associate’s degrees and certifications. See “Story” below for more thoughts.
Hackajob raises $25M: London-based Hackajob is sort of like Bumble (which was actually incorporated a month after Hackajob in 2014) for technical recruiting. Instead of having job applicants apply for roles on a job board, Hackajob employer clients pitch their roles to the platform’s job seekers. The platform also facilitates remote testing and interviewing of candidates. The funding from this round will go towards continued go-to-market expansion.
Hupso Academy raises $8M: Lyon-based Hupso Academy provides online training for in-demand jobs in France. Unlike many other providers, the company appears to serve a pretty broad spectrum of job functions, from more vocational construction and healthcare services to traditional office work like sales, accounting, and civil service. The company will use the funding from this round to build 40 new courses and build out a business-to-business go-to-market function.
EduFund raises $3.5M: Ahmedabad-based EduFund helps parents in India save for their children’s education. The market size for K12 private education in India is bigger than I expected - estimated at 50% of the student population, and higher in some geographies. The funding from this round will go towards the continued build-out of EduFund’s technology platform.
Looking for a full list of companies that have raised venture funding this year? Founding Members also receive access to the EdTech Funding and M&A database
Story
As a rule, I do not think that new, owned-brand (meaning, not leveraging an established university's brand), credential-granting institutions are a fit for venture funding.2 For better or for worse, US consumers equate longevity with quality in education. As a result, no owned-brand US credential-granting institution has scaled to 10,000 or more students in 10 years or less - a rough heuristic for the traditional venture IPO timeline.
As another rule, I work fairly hard to build my bull/bear cases for EdTech companies agnostic of their investors.
This fundraise by Campus is one of very few funding events that have tested my resolve regarding these rules. The round includes a who’s who of generalist investors I respect - Founders Fund, Bloomberg Beta, Lachy Groom, and Sam Altman, among others - AND EdTech specialist investors I respect - Reach Capital and Rethink Education.
Thus, I am torn. Campus’ team - both internal and external - looks quite credible. The funding announcement makes clear that they will be investing heavily in quality technology and curriculum, which is a good thing for students. Unfortunately, the problem with scaling new universities is not, generally, the product. It is the brand.
I want to be wrong here. We need more institutions challenging the status quo for post-secondary education, and Campus is making a lot of pro-student decisions to do exactly that. But I don’t see any details about the company’s go-to-market plan that would seem to give it a leg up in the brutally competitive post-secondary market.
Links
Indian money-laundering authorities raid Byju’s offices
Since we’re now below the paywall, I will admit that I do feel somewhat vindicated about my Byju’s prediction from last summer. However, this feeling is outweighed by my concern about what is going to happen to the EdTech ecosystem if Byju’s faces serious and prolonged government scrutiny. It would not surprise me to see many of the company’s investors avoid the EdTech market for a prolonged period of time.
Bezos Academy Montessori schools continue to grow
You can sort of tell that the writer of this article started their research on Bezos Academy with a healthy dose of skepticism and that the Bezos team was ready for it. It sounds like the Montessori school network is picking its spots wisely, building daycares where they are desperately needed rather than trying to compete with other childcare providers. They also are trying to raise wage and curriculum standards in a positive way.
The result is a project that is scaling slowly and is probably not sustainable if it were not for Jeff Bezos’ largesse, but making an impact on the students it reaches.
Chegg stock falls 50% due to ChatGPT threat
In April I said that I thought Chegg would be OK because of the company’s proprietary dataset, which would allow it to individualize OpenAI’s model for every one of their subscribers.
It would be easier to pile on to the negative narrative surrounding Chegg, but I think I still think they’ll be OK? If you have an old textbook lying around, I encourage you to ask ChatGPT some homework questions. The answers are, generally, not particularly helpful. By contrast, Chegg has a database of the answer keys to almost every textbook question asked in the past 20 years, which it can reference almost instantaneously.
The commoditization of content *should* favor companies with proprietary data and/or distribution advantages. While the world of AI is changing rapidly, I have not read or heard anything that challenges that assumption, and Chegg has both of those advantages. It makes sense that students would test free alternatives, but I’m not yet convinced that this is a long-term problem for them.
I plan to spend more time on this topic in the next Quarterly Earnings Report, but include the link here because this was the top story of the week and I suspect the ChatGPT > EdTech narrative will continue for a while.
Tulane invests heavily in the re-opening of Charity Hospital in New Orleans
For anyone who has spent time in New Orleans over the past 18 years, the empty shell of Charity Hospital in the middle of downtown has stood as a reminder of the toll Hurricane Katrina wrought on the city. That makes Tulane’s investment in re-opening the building an exciting story at base level. It also reflects the key role universities play in many urban and rural healthcare ecosystems, further underscoring their impact on community wellness and employment.
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
Question of the Week
Note: Votes are anonymous
Results of last week’s poll:
My prediction that ChatGPT would not be particularly harmful to Chegg’s business does not look particularly prescient at the moment (though I’m still not quite ready to pile on with everyone else on that one, see Links).
Campus is not technically starting from 0 - the company acquired MTI College in Sacramento as part of this fundraise. However, MTI only enrolled ~750 students last year and Campus appears to be sunsetting the MTI brand, so I am putting them in the owned-brand category. Trilogy, Coursera, and 2U would be well-known examples of companies that provided credentials while scaling on a venture timeline by leveraging their partner university brands.