ETCH Funding + M&A Update 9/27/23
The Big Aristotle gets into EdTech
Hello!
I hope that many of you enjoyed Sunday’s edition of Weekend Reading. This week the Weekly Update becomes the Funding + M&A Update, which is a newsletter for paid subscribers that provides analysis of recent financial transactions in the education space and short essays on trends I am seeing.
Today’s Funding + M&A Update covers 10 different financials transactions - including Shaq’s first EdTech investment and a company that specializes in training people to work with explosives!
With that, on to the update.
Funding / M&A
K12
Edsoma raises $2.5M / US, Language Learning / Shaq (yes, that Shaq) and other angels: San Antonio-based Edsoma is a late-breaking fourth entrant into the early literacy race and the company’s funding round raises a host of interesting questions. On the positive side, the company has scaled to 9K+ users (which would translate to ~$90K in MRR at list prices) in just a few months. On the negative side, it appears the company’s leadership team does not have any background in education and has only just made their first education hire this month. Shaq is a great brand to have by your side; I hope the company uses the funding from this round to prove out the product as a legitimate educational resource.
FullBloom acquires EmpowerU / US, Special Education: Minneapolis-based EmpowerU provides mental health services to K12 schools across the US. The EmpowerU team and product suite joins Philadelphia-based FullBloom, which provides content and behavioral health services to K12 school districts in the US, with a specific focus on special education.
Higher Ed
Gizmo raises $3.5M / UK, Homework Help / NFX, Ada Ventures, Capital T: London-based Gismo generates quizzes from user’s class notes. While Quizlet is the household name (and ChatGPT launch partner) in this space in the US, Gizmo’s quick growth to 300K+ users suggests there might be greenfield opportunity in other geographies. I’m not sure what this does to the product’s efficacy chops, but the company chose one of the more entertaining approaches to monetization, charging users if/when they get 15 questions wrong.
Golden Vision Capital buys out Hawkes Learning / US, Higher Ed Curriculum: Charleston-based Hawkes Learning is a courseware provider started in 1979 by a statistics professor from the College of Charleston. While the company initially focused on math materials, they expanded their product portfolio to include most popular subjects over time. Golden Vision Capital called this deal a “recapitalization” in the press release, which I initially assumed was marketing speak for a buyout. Upon further examination, I was wrong. The firm specializes in transitioning owner-operated businesses - taking a significant, but not total, position in their portfolio companies and installing new leadership teams to professionalize operations in preparation for a full sale (presumably at a bigger number) down the line. This is a corner of the private equity market I have not seen in the EdTech world before, and I am now curious whether we will see more of this type of transaction as the founders of EdTech companies from the 90s and 2000s start retiring. (Moodle is probably not going to get eaten by PE anytime soon, but their CEO’s transition is another good example of the type of company I am describing.)
Workforce
Lepaya raises €35M / Netherlands, Corporate Training / Endeit, Educapital, Mars Growth Capital, Liquidity Capital, Target Global, Mediahuis Ventures: Amsterdam-based Lepaya has quietly grown into a serious player in the corporate upskilling space. The round adds to the ~€45M already raised since 2018, which the company has used to purchase at least 4 other corporate upskilling providers (most notably Krauthammer this May). The funding from this round will go towards bringing an “AI Coach” to the 250K employees on the company’s client list. / ETCH Assessment of the deal by Charlotte Jones
Betterleap raises $13M / US, Recruiting software / A16Z, Peakstate Ventures, Streamlined Ventures, Active Capital, Air Angels, Stipple Capital: San Francisco-based Betterleap helps recruiters sort through job candidates more effectively. The company claims to have “the world’s largest database and most accurate data in the recruitment market.” This seems unlikely. But it is an interesting bet on a large, horizontal-market data play when many of the recruiting software models we’ve seen funded recently focus on vertical, domain, or function-specific job platforms.
Monark raises $1.5M / Canada, Leadership Development / Storytime Capital, The51, Archangel, UCeed: Calgary-based Monark is a leadership development platform targeted at middle managers. The company blends short, on-demand lessons with live, cohort-based learning to balance costs and learner engagement. The funding from this round will be used to continue building out the Monark product and expand go-to-market efforts into the US.
Babbel acquires Toucan / Germany (US), Language Learning: Santa Monica-based Toucan offers a browser extension that changes the palabras on web pages to the language of the user’s choice. Berlin-based Babbel is one of the larger language learning providers in the world; the company provides an interesting contrast to Duolingo in their decision to mostly eschew a freemium go-to-market model and instead build a large corporate customer base. I was a former user of Toucan and always liked the concept, though - given the volume of online reading I do - I did have a tendency to turn it off. I might have been less likely to do so had I been more fully engaged in learning the language. I quite like the strategic thesis here.
Spark Hire acquires Chally / US, Talent Management (Assessment): Dayton-based Chally offers talent management consulting services and a candidate assessment platform. It sounds like the assessment platform was the predominant rationale for this acquisition for Chicago-based Spark Hire. The Chally platform is the second technology addition - ATS Comeet was the other - that Spark Hire has made since raising a growth equity round in May 2022.
Apave acquires Trainor / Norway, Vocational Training: One of the best parts of being an investor (and now a newsletter writer who writes about investments) is you unearth all sorts of interesting companies. Tønsberg-based Trainor offers vocational safety courses, with a specialty in training workers to operate in “explosive atmospheres.” The Trainor team joins Paris-based risk management firm Apave. No word on whether the teams celebrated the acquisition with fireworks.
No story this week as the funding section already has me over my ~5 minutes of reading time target. Instead, two quick announcements for paid subscribers:
I am looking for more volunteers to write ETCH Assessments with me. I know many of you get inquiries from people looking to get into PE/VC, Corp Dev, and/or banking. I would love to offer ETCH Assessments as a way for these folks to prove they are serious and show their thinking. Please feel free to send them my way!
The Wall Street Journal ran a 1500-word article on the Fall of Byju’s on Wednesday. It was not as entertaining as a movie outline on the subject, but was sort of validating to read.
Question of the Week
Note: Shaq, Oprah, and Prince Harry are all actual EdTech investors! Fingers crossed Serena and Jay Z, who are active investors but haven’t done an EdTech deal as far as I know, join the ranks soon.
Results of last week’s poll:
