ETCH Funding + M&A Update 10/6/23
A growing market for VR in EdTech
Hello!
Busy week this week, but the EdTech deal pipeline never rests! I hope you enjoyed Sunday’s edition of Weekend Reading.
This week’s Funding + M&A Update covers 7 venture rounds and 2 acquisitions, the details of which will make you want to do somersaults.
With that, on to the update!
Funding / M&A
K12
Cartwheel raises $20M / US, Mental Health / Menlo Ventures, Reach Capital, General Catalyst, Box Group, Able Partners: Boston-based Cartwheel provides telehealth-based mental health services to K12 students. Importantly, these services are covered almost entirely by insurance (both private and through Medicaid). Cartwheel is actually the second Boston-based mental health edtech company to raise an eight-figure venture round this year - UWill raised $30M in May for a similar concept targeted at the Higher Ed market (but covered by the educational institution, not insurance).
Higher Ed
StudentCrowd raises €2.9M / UK, Student Marketing & Recruitment / PwC Raise Ventures, Mercia Fund: London-based StudentCrowd helps students make college decisions by providing peer reviews of universities in the UK. These types of businesses can be fickle. While the core reviews and rankings are peer-reviewed, the business side ends up depending on the schools at the bottom of the lists for monetization, creating warped incentives. Setting that concern aside, it is also interesting to see major accounting firm PwC as an investor in the company. A venture investment rarely moves the financial needle for a company of PwC’s size, so there is usually an ulterior motive (which sounds more sinister than I intend it to be) for their investment.
eDynamic Learning acquires Learning Blade / US, Course Materials: Chatanooga-based Thinking Media (the parent company of Learning Blade and Ready for Industry) provides STEM and technical education course materials for students in grades 5-9. The company joins Dallas-based eDynamic Learning, who is a K12 course publisher focused also focused on the technical education segment of the market. Thinking Media is the fourth acquisition eDynamic Learning has made since their 2017 buyout by Gauge Capital. This volume of transactions under private equity ownership is not abnormal, but it is somewhat surprising to see an acquisition 6 years into an investment rather than 2-3.
Workforce
Tranfr VR raises $40M / US, Virtual Reality / ABS Capital, JP Morgan Chase Impact Finance, Lumos Capital, Akkadian Ventures, Spring Tide Capital, Fireworks Ventures, Album: New York-based Transfr builds career-focused VR simulations for companies, workforce development organizations, and schools. The company focuses on building these simulations for “middle skill” jobs that, the company says, occupy about half of the US labor market. It is interesting to watch different segments of the VR market emerge. Last year we saw mostly high-end VR simulation providers raising money - from Osso to Loft Dynamics to Gemba to Dreamscape Learn.1 (Prisms was the one exception to this rule - like Transfr, their content is good, but targeted at a lower price point.) Seeing Transfr’s cumulative funding rise to almost $100M seems like a signal that a mass market for VR continues to grow.
PowerUs raises €24M / Germany, Vocational Training / Eurazeo, HV Capital, General Catalyst: Berlin-based PowerUs offers a career platform for electricians and plant mechanics. The company calls this a platform rather than a jobs marketplace because, in addition to connecting these vocations to work opportunities, they provide information on salaries and training opportunities. After building their network of electricians and plant mechanics to more than 80,000 certified workers, the funding from this round will be used to expand the platform to include other trades.
Cognota raises $5M / Canada, Corporate LMS / Grotech Ventures, IDEA Fund Partners, BDC Capital, Generation Ventures, CEAS Investments, Tyton Partners: Toronto-based Cognota helps companies manage their learning and development budgets. The platform simplifies program management of L&D activities and connects to other parts of the organization (like finance and sales) to produce more specific ROI metrics around training activities.2
Morphoses raises €2.1M / UK, Soft Skills Training / Uni.Fund: London-based Morphoses provides soft skills training to children aged 6 to 17. The company does this through live, weekly tutoring sessions with enrolled children. Interestingly, the company seems to be investing heavily in an employer go-to-market strategy - betting that companies will purchase access to the platform for their employees as a company benefit.
Teachme.to raises $2M / US, Consumer Upskilling / 1984 Ventures, Common Metal, Alumni Ventures: San Diego-based Teachme.to connects aspiring hobbyists with coaches. The company is initially focused on sports but plans to expand to other activities like piano and dance. I am, generally, pretty skeptical of marketplace platforms that connect people for real-world activities (particularly recurring activities), as the incentive to transact off-platform is substantial and often requires localized go-to-market teams to scale. However, one thing that sticks out about Teachme.to’s model is their emphasis on helping coaches build businesses rather than helping consumers find activities. Most coaches get into coaching out of passion, often in spite of their desire and/or competency as a businessperson. A platform that helps manage the drudge work of running a small business and allows a coach to focus on coaching might have some potential.
Focus Learning bought out by the Brydon Group / US, Compliance Training: San Luis Obispo-based Focus Learning provides compliance training software to “highly regulated industries,” most notably nuclear power plants. The Brydon Group is a private equity fund that specializes in backing search fund entrepreneurs (they are sector agnostic, but call out training & certification as an area of interest). Search funds are often thought of as the province of freshly graduated MBAs, but increasingly includes mid-career folks hungry for their first CEO role. The Brydon Group specializes in the latter, and has backed 70 “searchers” since their founding in 2020.
Story
I am over my 5-minute reading time target again, so no story this week. I’ve been enjoying taking a little more space to look into each transaction in this paid newsletter - particularly thinking about the various firms who participate in a given deal. The essays will be back - they are a good forcing function for me (and, I hope, helpful for you) to put a name on the trends happening in our space. I just need to find the right balance.
As always, the newsletter will continue evolving!
Question of the Week
Results of last week’s poll: this was, obviously, intended more for fun than as a serious question. But Serena vs. Oprah is a more interesting debate than you might expect. Serena has, by far, the most sophisticated venture investing operation of any of the folks on this list - rivaling Ashton Kutcher and Ryan Reynolds in terms of top celebrities-turned-business-people. On the other hand, my guess is that Oprah (and I would put Jay Z in this category too) has broader name recognition. For a consumer-oriented company like Edsoma - whose reading app Shaq invested in - that could make a meaningful difference in their ability to scale.
Dreamscape Learn and Gemba both announced their rounds in 2023, but would have done the vast majority of their fundraising activity in 2022.
Notably, Cognota’s crack team of PhD research scientists has determined that a corporate subscription to ETCH is, in fact, the most valuable thing an EdTech L&D organization can provide to their staff. See here for details. : )
Thank you!
Great read. esp the blurbs on Workforce. As I am doing coffee chats before my fundraising I find the mention of VCs leading and following helpful.