ETCH Weekly Update 9/13
Early literacy is a 3-horse race
Hello!
I hope that many of you enjoyed Sunday’s edition of Weekend Reading. This week’s Weekly Update provides analysis on the 8 post-Labor Day funding and M&A transactions, as well as a few thoughts on the future of labor unions.
As a reminder, the Weekly Update is for paid subscribers only - if you are a free subscriber, see below for how to upgrade.
On to the update!
Note to paid subscribers: The Weekly Update is arriving in your inboxes a day later than usual. I would like more time to write and reflect after Weekend Reading goes out on Sundays, and thought you might also enjoy more time between both editions to read and digest them. I’m going to monitor open rates and am also open to your feedback on this adjustment!
Funding / M&A
Early Childhood
Ello raises $15M / US, Literacy / Goodwater Capital, Common Sense Growth, Homebrew, Ravensburger, Y Combinator, WndrCo, Reach Capital, Visible Ventures, Khosla Ventures: San Francisco-based Ello is an app that provides adaptive feedback for children in grades K-3 that are learning to read. Early literacy is rapidly growing into one of my favorite picks for a breakout EdTech hit in the next 2-4 years. With this fundraise, there are now 3 main horses in the early literacy race: Ello, SoapBox Labs, and Amira Learning. Making this all the more interesting, each of the 3 uses a different go-to-market strategy - Ello is primarily a business-to-consumer company, SoapBox is primarily business-to-business (other businesses license their language models via API), and Amira leverages the established sales channel of publisher (and strategic investor) Houghton Mifflin Harcourt.
K12
PowerSchool acquires Neverskip / US, Software Infrastructure: The story of Folsom-based LMS/SIS-provider PowerSchool is full of entertaining history. 4 years after being founded, Apple bought the company for $62M in stock in 2001 (stock which would be worth billions today. I hope the team/investors held on to it!). Apple then traded PowerSchool to Pearson in 2006 because “Our customers will love having Pearson’s education content on their iPods.” After kicking around the company for ~10 years, Pearson sold PowerSchool to private equity giant Vista Equity in 2015. PowerSchool has been on an M&A warpath ever since - acquiring no fewer than 18 different companies in the past 8 years (and going public during the process).1 Chennai-based ERP provider Neverskip is the PowerSchool’s latest conquest and, to my knowledge, its first acquisition outside of North America.
Higher Ed
Firstcard raises $4.7M / US, Financial Services / AngelList Early Stage Quant Fund, CyberAgent Capital, East Ventures: San Francisco-based Firstcard is a banking services provider targeting college students. Student finances, and credit cards specifically, have historically been one of the most fraught areas of the EdTech ecosystem. This area has yielded (financial) winners like SoFi and many of the major Philanthropic funders, while also being responsible for some of the worst transgressions in the industry. Fortunately for Firstcard, this part of the industry is now better-regulated, so the company can focus on building the long-term relationships with students that make this segment so valuable.
Meazure Learning acquires Examity / US, Proctoring + Assessment: Birmingham-based Meazure Learning is the assessments proctoring company that resulted from the merger of ProctorU and Yardstick Assessment Strategies. (I’m not sure if Meazure is trying to be edgy or ironic by including a mispelling in the name of a proctoring company, but it just doesn’t do it for me.) Boston-based Examity also focuses on the proctoring market. OnEdTech’s Glenda Morgan provides a helpful breakdown of the consolidation path this portion of the EdTech market has been on for the past few years (even pre-COVID). I expect we will see the trend continue, and am curious to see if other private equity funds will join ProctorU’s owners, Gryphon Investors, in trying to roll up the space.
Workforce
Mentra raises $3.5M / US, Talent Management / Hydrazine Capital, Shine Capital, Verissimo, Full Circle, Charlotte Fund: Charlotte-based Mentra helps neurodivergent adults find jobs that suit their working styles and competency sets. I’ve been interested in these types of specialized talent marketplaces since diving into Clusiv’s $2.25M funding round last year. Both the neurodivergent (1 in 7 adults) and visually impaired (20M Americans) populations are bigger than I realized and appropriately utilizing these workers should be positive for both workers and their employers.
Athena Alliance raises $2.5M / US, Professional Networking / Leonas Capital: San Francisco-based Athena Alliance is a professional development/networking company focused specifically on women. Similar in many regards to Chief - which has had its ups and downs - Athena differentiates their product by encouraging their members to teach courses and provide services to others in the community.
Koios raises $550K / UK, Assessments / Seedcamp, Evolvient Ventures: London-based Koios decodes voice submissions from job applicants to offer “personality insights” to hiring managers. Apparently the system can do this with as little as 90 seconds of audio. It is hard not to be skeptical of this claim; were it not for the founders’ backgrounds and the credibility of Seedcamp as an investor I might have skipped writing about this funding round. Instead, I’m trying to take the optimistic view that the working standard of voice recognition is more powerful than I understand and needs to be explored further.
SkillArbitrage acquires Dataisgood for $3M / India, Upskilling: Delhi-based SkillArbitrage is a professional upskilling provider that helps its learners in India get remote jobs with international companies. The SkillArbitrage team appears to have acqui-hired Dataisgood, which is a Delhi-based nascent bootcamp provider focused on training learners in data science and cybersecurity.
Things I am Thinking About
I am now proactively avoiding using the word “AI” when describing companies. Too many companies use it as filler and/or to please investors/press. If the company or feature is still interesting when described without “AI”, my confidence in its potential goes up dramatically. The exception to this rule are companies building or servicing AI models built from scratch (though my bar for why a company would need an AI model built from scratch is high).
I am convinced that there is an emergent labor movement in the US (and possibly more globally). However, I don’t think it will be led by the labor unions most people think of when discussing this topic - the UAW, Teamsters, and/or AFT. Old-school unions are too focused on fighting to maintain the status quo - whether it is NFL running backs arguing that they should make more money to play a lesser role on football teams or UAW workers arguing…that they should make more money to play a lesser role for car companies. The defining feature of a modern labor union should be change - adapting to change, skill development that encourages workers to seek change, and consistently navigating changing environments.
Question of the Week
Note: votes are anonymous, but I encourage you to send me a note explaining why you are leaning in any one direction here!
Results of last week’s poll: Readers are bullish on Workforce!
Bookshop
As is hopefully clear from this newsletter, I spend a lot of my time reading. Often, this starts with articles about EdTech, but it usually also includes between 1 and 4 other books. I saw the Free Press experimenting with a list of book recommendations and thought I might do something similar.
Should you find yourself looking for a good book (both education and general interest), you can see mine here!
Also, if you have any book recommendations, I’d love to hear them!
It felt excessive to include 18 different links here, but I am happy to grab the list for you if you are passionate about this topic.
"I am now proactively avoiding using the word “AI” when describing companies. Too many companies use it as filler and/or to please investors/press. If the company or feature is still interesting when described without “AI”, my confidence in its potential goes up dramatically."
*tries to click the <3 button twice*