ETCH Funding + M&A Update 10/27/23
Getting Crafty
Hello!
I hope you enjoyed Sunday’s edition of Weekend Reading.
The Funding + M&A Update is a weekly newsletter for paid subscribers that provides analysis of recent financial transactions in the education space and short essays on trends I am seeing. If you are not a paid subscriber, see below for how to upgrade.
Today’s Funding + M&A Update covers the funding rounds of Poppins, Rocket Tutor, Sidebar, Pack, and Crafty Workshop.
With that, on to the update!
Funding / M&A
K12
Poppins raises €8M / France, Special Education / Eurazeo, Verve Ventures, Allianz France, HEC Ventures: Paris-based Poppins built a video game to help students with “dys” learning difficulties - dyslexia, dysorthographia, and dyscalculia. Importantly, this video game is backed by 5 years of research from doctors, researchers, and speech therapists at one of France’s top universities, the École Polytechnique.
It feels like we’re seeing more companies building at the intersection of EdTech and Healthtech. And not just in the sense of “train more nurses”, which is an important but mature collaboration between the sectors. These are companies trying to deliver complex health and/or education outcomes leveraging existing institutional channels. To illustrate the trend without going too much deeper on it, I would point to the $80M+ UWill, Daybreak, and Cartwheel have raised for school-led mental health services since the start of 2022.
However, Poppins goes a step further than these companies. Venturing into, effectively, developing new drug therapies rather than taking existing therapies into new channels.
This is risky! Poppins will face more significant regulatory hurdles to scaling their product than a more traditional HealthTech/EdTech company. Even then, they will have their work cut out for them building trust among consumers - a lesson the Akili team has had to learn painfully over the past 18 months.1
Investment risk aside, holy moly! Imagine a world where access to a research-backed, low-marginal-cost video game makes a meaningful impact on students with learning difficulties.
Rocket Tutor raises €1M / Germany, Tutoring / Better Ventures, Caesar Ventures: Munich-based Rocket Tutor offers personalized, software-driven (no humans involved) tutoring support to math students in Germany.
Setting Rocket Tutor apart from other homework help bots, the platform provides a sort-of project management layer for teachers that encourages their students to use it. This layer allows the teacher to track each student’s progress, intervening alongside the bot as appropriate.
Workforce
Sidebar raises $13.55M / US, Peer Mentorship / Foundation Capital, Scribble Ventures: San Diego-based Sidebar offers a platform for, and expert-led facilitation of, small professional development groups.
I am, generally, a fan of small professional development groups. I think it is good to have a stable peer cohort in your professional life that is not dependent on your employer. I think these types of groups will grow in importance as the world turns faster and more of the economy is driven by gig work.
These groups are good businesses too - in 2019 YPO did $130M in revenue while adding to its $120M cash pile.2 Reforge dedicated an entire blog post to what a good business they were running prior to raising VC money.
That said, I’m skeptical that these businesses are a good fit for venture capital. Most are built around an element of exclusivity — the idea that it means something special to be able to join. Sidebar highlights their 5,000-person waiting list while others encourage social media badges for this reason.
Venture-scale growth contingent on the premise of exclusivity is sort of an oxymoron. Established organizations like Reforge have a slightly better venture argument because they took the time to build some social credibility prior to fundraising. Sidebar faces a stiff challenge growing from 0 into the substantial valuation a funding round of this size implies.
Pack raises €500K / Italy, Corporate Mentorship / Techstars: Bologna-based Pack helps corporations manage mentorship program through their digital platform and network of trained mentors.
Mentorship was a hot commodity in venture funding last year, with 7 companies raising $300M+ over the course of the year.3 However, all but one of those rounds were for companies that headquartered in the US or Canada market. It is far too early to predict Pack’s story, but it stands to reason that there could be opportunity in the mentorship market outside of North America.
Crafty Workshop raises $400K / Egypt, Consumer Upskilling Platform / EdVentures: Cairo-based Crafty Workshop offers a catalog of video-based courses focused on creative industry topics (think: design, illustration, animation, photography, etc.).
The company joins AlMentor - which raised $10M in March for their own, more generalized, video-based course platform - as the only EdTech companies to raise institutional capital in Egypt this year. This round also introduced me to EdVentures - one of very few EdTech-specialist investors focused on the Middle East and the only one, to my knowledge, based in Egypt.
Thing(s) I am thinking about
2 ideas I am workshopping but do not yet have enough confidence in to write a full essay on. I would love your help pressure-testing them!
The rise of craft: I’m not sure how investable this trend is, but I feel like I am seeing more examples of folks placing a premium on human-crafted items and services. Right now, this is trend is largely reserved for rich people - people who can afford to ship wooden furniture from Denmark rather than buying from Wayfair, can take the day off work to work on their restomod vintage car, fly to Italy for their made-to-measure suits, and prefer their child’s pandemic education to be taught in-person by a human. The market is at least big enough for an Italian luxury fashion house to invest in its own school for leatherworking artisans. Is there a macro event - like the reshoring of many critical industries - that might help push this trend into a broader market?
On microlearning: longtime readers might remember that I am not a fan of microlearning. I am considering doubling-down on this stance by further contesting the notion that “attention spans have shortened.” My evidence: Joe Rogan’s podcast routinely crosses 2 hours (and often goes 4+). Ryan Kaji’s most-watched Youtube videos are, generally, also his longest videos - asking for an hour-plus of time from his 2-6 year-old demographic. The average Roblox player spends 2.3 hours on the platform every day. The problem with learning is not attention spans, it is that learning is hard. And modern society has so many other channels offering more immediate gratification, even if that gratification is short-lived.
I don’t love using Akili as an example because the SPAC craze led to a lot of bad decision-making. They might have had more success following a more traditional path, but we will never know.
2019 was the last year with 990 data available. I highlight the cash pile because the (non-profit) organization only recorded a modest profit for the year, but I suspect they could raise that profitability number pretty easily if they wanted to.
Coachhub’s Softbank-led $200M round makes up a decent chunk of that number, but 6 companies in one space raising $100M+ would still feel like a trend to me.
Regarding attention spans and the myth that young people (or anyone) have shorter ones than previous generations: Read Michelle D. Miller's well-evidenced and approachable book, Remembering and Forgetting in the Age of Technology, particularly chapter 4. She debunks the myth thar our brains' have less capacity to pay attention.
+ 1 on having your own cohort for professional learning AND microlearning without vision, KYC and purpose is wack... Udemy was never intentional who they served so long they paid ... 70% don't begin after starting. Loneliness in learning is a sure thing