ETCH Weekly Update 8/22
Classwallet's fundraise, competing priorities at ED, and problems at Aakash
Hello!
I hope that you enjoyed Sunday’s edition of Weekend Reading. This Weekly Update newsletter includes stories about Classwallet’s $95M fundraise, the Education Department’s competing priorities, and emerging problems at Byju’s prized subsidiary, Aakash.
As a reminder, Tuesday’s Weekly Update is for paid subscribers only - if you are a free subscriber, see below for how to upgrade.
On to the update!
1. Most clicked link from Weekend Reading: Classwallet raises $95M
Context: Classwallet is best known for helping states facilitate the disbursement of Education Savings Account (ESA) funding. The funding announcement notes Classwallet’s ability to move beyond education funding to disbursement of any type of government funding, suggesting the company will start exploring new markets even as the ESA market continues growing.
Education policy may be stalled out at the federal level (see below), but it is rip-roaring at the state level. An unfortunately large amount of this activity is centered around fighting the woke wars. Of more interest to me, another large tranche of activity surrounds the concept of ESAs.
No fewer that 14 states have passed ESAs bills this year, with Texas and Pennsylvania falling just short of passing their own. In total, 42 states have at least introduced bills with ESA provisions.
That is a wild adoption rate! Which makes it notable, though not surprising, to see investors making a bet on a dramatic expansion of the market.
[MT Note: as mentioned in the disclosure link, I am an angel investor in Classwallet competitor Odyssey]
2. Is the Education Department being asked to do too much?
Context: The Education Department (ED) is managing so many major initiatives it is sometimes hard to keep track. Since President Biden took office, ED has taken on student loan relief, gainful employment, regulation of the online program management industry, a new FAFSA form, a new Supreme Court ruling on affirmative action, and tracking pandemic recovery spending. Any one of these efforts could be the tentpole effort of a different administration. Possibly as a result of ED trying to accomplish too much at once, former ally Arnold Ventures is now criticizing the department for spending too much time on student loans and not getting enough other policy work done.
I always understood that there was a connection between the education industry and education policy worlds, but writing this newsletter has pushed me to consider this relationship on a deeper level than before.
Virtually every big education business outside of language learning and publishing rests on some form of federal policy - from the tidal wave of upskilling RNs to BSNs to the development of the online program management, tuition assistance, and tech-enabled apprenticeships (in Europe) sectors. Even tutoring, which had previously existed without much subsidy (albeit on a much more local scale), was buoyed by pandemic spending (spending which, it appears, will continue for some time).
Policy changes represent both problems and opportunities on the private side of education. The tricky thing here is that the Biden administration’s top priority for policy change, student loan relief, has been repeatedly stymied.
Rather than pivoting to secondary priorities, the administration continues to double down on debt relief. This approach makes sense from a political point of view, as student loan relief is probably the most immediately impactful and broadly understandable policy measure the administration can enact prior to the next election cycle. But it has slowed down efforts on other fronts, in turn frustrating some of the administration’s more technocratic supporters, like Arnold Ventures.
It would be easy for the administration’s conservative opponents to cheer, but I’m not convinced this lack of policy action has been great for them, either. In particular, the stop-and-start action on gainful employment and online program management regulation has left companies in these sectors unable to plan for their (sort of inevitable, whether now or in a future cycle) regulated futures. And it leaves the market unable to price in the true value of these companies.
3. Aakash rebels against Byju’s ownership
Context: late-breaking news that didn’t make it into Weekend Reading. According to the Ken, Aakash - the 2021 acquisition that has become the crown jewel of Byju’s product portfolio - is staging a minor mutiny against its corporate parent. The Byju’s corporate sales team is no longer selling the Aakash product and it sounds like the Aakash team refused to integrate CRMs.
I don’t have much to add to this story other than the details start to carry more weight when you learn that competitor Unacademy announced the poaching of a senior leader from Aakash just last week. Aakash remains the keystone to the Byju’s financial picture and the parent company can ill-afford to have Aakash deliver anything other than exceptional results.
Quick Takes
I am kicking myself for not connecting last week’s CZI layoffs to a strategic pivot away from Summit Learning. If anything, the layoffs look like a move away from big internal swings, not towards them.
One aspect I didn’t touch on in last week’s story on the modern university is that it is far easier to sell a school community on “growth” or dramatic | cuts than incremental change. The Chronicle’s Thursday newsletter pushed me to think about this in more detail.
Question of the Week
Results of last week’s poll:
