ETCH Funding + M&A Update 11/17/23
Changes in the OPM world, new student financing options, and education-focused business process software
Hello!
The OPM sector, arguably the flag carrier of the EdTech market of the 2010s, is coming apart at the seams. Earlier this year, Pearson sold their OPM business to a private equity firm with no experience in education, who promptly gutted the workforce and started firing (unprofitable) clients. This week, Wiley sold their OPM unit for $110M ($150M with kickers), $330M less than the acquisitions they’ve made over the past 11 years to build the business. This morning, 2U replaced their founder and CEO, Chip Paucek, with CFO Paul Lalljie.
There will be some pithy tweets about all this. I have homework to do before trying to interpret what it all means. I’m all ears to anyone who has an opinion. You can reply to this email directly or fill out the 2023 End of Year Survey with your thoughts!
On a more tactical note, this week’s Weekend Reading will come out on Monday and there will be no Funding + M&A Update next week due to the Thanksgiving holiday in the US. Any funding announcements that happen during this period will be covered the subsequent week.
Both newsletters will then ramp down in mid-December so that I can focus on writing an end-of-year post and take a holiday break in a period where venture news is typically pretty light. The normal cadence will resume again in January.
With that, on to the update!
Funding / M&A
Early Childhood
LiveKid raises €3.14M / Poland, School Infrastructure / Inovo VC: Krakow-based LiveKid is a provider of school management software to daycares in Poland, Spain, and Mexico.
This funding round is actually relatively small given LiveKid’s size ($3M in ARR) and growth rate (from 1300 schools served in 2021 to 3500+ this year). Some of this is attributable to the lower cost of hiring at the company’s Poland HQ and Mexico, where the company will be devoting substantial resources now that they have more cash on hand. And some is likely due to the tepid EdTech VC market this year. All the same, the number still stuck out to me!
K12
DaySmart acquires Sawyer / US, Business Automation: Brooklyn-based DaySmart helps kids/parents find and sign up for extracurricular activities. It also helps the providers of those activities manage their businesses. The Sawyer team joins Ann Arbor-based DaySmart, which provides business management software to a range of small businesses - from salons to tattoo shops to gyms to outdoor activity providers.
This acquisition makes a lot of sense at face level. Sawyer gets access to the resources of a larger, private equity-backed company and DaySmart expands their addressable market to extracurriculars without having to build anything new.
That said, Sawyer had raised in the neighborhood of $20M in venture funding; their last round coming pre-COVID, in 2019. Given the company’s focus on in-person children’s activities, I imagine COVID was quite a roller coaster.
It is entirely possible that the company successfully navigated to offering online extracurriculars. It is also possible that COVID damaged the business beyond what their cash runway and prior valuation could support. Unfortunately, it is tricky to say which of these scenarios played out, and whether the acquisition was financially positive for Sawyer, without more details.
Higher Ed
EduFi raises $6.1M / Singapore, Student Financing / Zayn VC, Palm Drive Capital, Deem Ventures, Q Business: Singapore-based EduFi facilitates loans between banks and students in Pakistan.
Startups that touch student financing are the toughest companies for me to analyze. It is broadly acknowledged that the current state of student loans is bad. In both the US and many (most?) other countries, with the exception of a few high-income countries that have prioritized keeping higher education affordable.
And yet, conversations about private solutions are often fraught. Sometimes with good reason! But, often, it feels like concerns with new solutions are grounded in some vaguely bad possible future scenario. We advocate for bandaging a bad status quo rather than investing in finding something better.
On another note, EduFi’s product is a great example of one of the most interesting things I see in international companies that almost never happens in the US - they build a super diverse tech stack in-house.
EduFi is, ostensibly, a student loan platform. They make money packaging private loans to students and selling them to other financial institutions. But they also do much more. The company facilitates payments from students/parents to their partner institutions, lets students/parents track their academic progress, lets schools subsidize the loans offered to their students (remember that these loans are being packaged and sold elsewhere), lets schools take upfront payment of the student’s tuition, lets schools manage student information, and lets financial institutions manage their student loan portfolios.
That is at least 6 different companies in the US! And, to be clear, I don’t know how well EduFi actually serves all of these functions. But this type of product development approach is something I see in many international startups. I suspect that it often comes out of necessity, when the company needs a specific feature to make progress and there are no other good, local options.
Offee raises ~$600K / India, Proctoring / JIIF Investors, Bombay Industry Association, Riidl: Mumbai-based Offee helps universities in India deliver secure, offline, and digital testing environments.
FlyWire acquires StudyLink for $39M / US (Australia), School Infrastructure: Adelaide-based StudyLink supports international students who want to apply to and enroll in Australian universities. The StudyLink team joins Boston-based FlyWire, which is a payments company with a long history of serving universities and other parts of the education ecosystem.
This is a somewhat small acquisition for a publicly traded company like FlyWire, whose market cap is almost $3B and annual revenues are north of $300M. StudyLink’s business is also somewhat adjacent to FlyWire’s core function of facilitating payments.
What makes this transaction interesting is who FlyWire is buying StudyLink from - Navitas.
Navitas is one of the largest providers of the same services as StudyLink - helping learners study internationally. They do a lot of this under their own brand, but have acquired and invested in a number of EdTech companies over the years - Navitas Ventures probably deserves more credit as one of the OG EdTech investors, though the parent company has de-prioritized the ventures function of late.
I provide this color because StudyLink’s relationship with Navitas is a core part of this deal. This is not FlyWire paying $40M to be the preferred payments provider of Navitas (and, presumably, Navitas’ 98 university partners), but it is not not that either.
Workforce
Forum raises $5.3M / US, Mentoring / MBX Capital, Cue Ball Capital, SRB Capital, City Light Capital: New York-based Forum is a platform that facilitates support groups led by an experienced support professional.
Forum is similar-ish to Sidebar, which I wrote about just last week after they announced their own $13.5M fundraise. The main difference between the two is that Sidebar is laser-focused on professional development support groups. Forum includes career support/professional development as a use case, but also endeavors to support a broader set of use cases - including grief, loneliness, chronic conditions, substance use recovery, caregiving, and relationships.
The major question Forum will need to answer over the next ~18 months (the typical runway for a venture raise) is how generalizable a support group platform can be. Can the same tool be used to effectively serve substance abuse groups as relationship support? Or will vertical platforms win out with their specific feature sets, like Sidebar in the professional development world?
(Yes, you could argue that the market for support groups is big enough to support multiple winners but that is, of course, less fun to debate.)
Question of the Week
The Question of the Week is not getting enough votes to provide useful signal, so I’m retiring it for now. I will experiment with it again as paid readership grows to a larger base to sample from.
In the meantime, if you have other ideas for having at least one active portion in the paid newsletter, I am all ears!
