In December education startup Clever raised $30 million in funding, capping a record year for the industry as a slew of education-technology companies drove investment in the space to new heights.
Education venture and equity financing increased 55% to $1.87 billion in 2014, according to CB Insights. Financing within the industry has nearly quintupled from a base of $385 million in 2009, the year the research firm started tracking education data.
“In 2009 a lot of activity was at the early stage. Now you’re seeing firms pick the winners and put a lot of capital behind them,” says Matthew Wong, an analyst at CB Insights. In addition to startups like Clever, Wong points to massive funding rounds at Pluralsight ($135 million), TutorGroup ($100 million), and Dude Solutions ($100 million). Press darlings like Khan Academy tend to pose for the photo ops, but it’s companies like these–which provide technology training and management tools–that are claiming the dollars.
In 2015, Wong hypothesizes that the industry will need to start producing the kind of marquee exits that keep investors writing checks. Whereas massive exits in the consumer technology industry are all but commonplace–from Nest to WhatsApp to Beats–acquisitions and IPOs in the education space remain rare by comparison. There were just two IPOs in 2014 and seven over the last five years; large corporations like Pearson and Blackboard, which dominate acquisitions, typically spread their budgets thin across dozens of smaller targets. “There hasn’t been a huge recent edtech exit,” Wong says.
Michael Staton, a partner at Learn Capital, sees promise in a new wave of startups, many of which have developed viable business models by skirting the labyrinth-like procurement processes and regulations that govern K12 and higher education. “One of the reasons growth capital exists in the space is that companies are making money,” he says, adding that “many companies are on a $50 to $100 million revenue trajectory.”
Despite edtech’s growth, though, Staton calls the 2014 total a “drop in the bucket if you compare it to public funding and philanthropic giving” for education.
Clever is emblematic of this next generation of education startups. The company’s core product links school district IT systems with education vendor software, creating a streamlined service for students and teachers. District administrators and vendors like Scholastic save on costs, while students gain access to lessons and assignments from a central hub. “Schools can count on Clever being around for the long term,” says CEO Tyler Bosmeny.
To make money, Clever charges software vendors monthly fees, ranging from $6 to $25 per school, based on the school’s size. Over 150 vendors and 30,000 schools have signed on, meaning Clever’s annual run rate is likely in the eight figures.
“As schools come online they need solutions like Clever,” says Bosmeny. “Our goal is to spend the next year growing to ubiquity.”
[via New York Times]