Although few education startups have swayed the masses, VCs are backing tech companies focused on the sector, especially those that incorporate social and digital media, game dynamics and performance tracking.
Investors in the past few years have logged respectable returns—and even some stellar multiples—from the acquisitions of online education service providers, as well as the IPOs of China-based school operators. They’ve also made a lot of losing bets, including some big busts from the dot-com era and, more recently, smaller-scale startups that failed to gain traction.
Meanwhile, some of their largest wagers—such as textbook retailer Chegg, which has raised $215 million to date—are still sitting in venture portfolios.
As Venture Capital Journal recently reported, over the past few quarters, investors have been writing frequent and often large checks for education-focused startups, with an eye for businesses that incorporate social and digital media, game dynamics and technology-enabled performance tracking. While in the past, education entrepreneurs fretted about rolling out technologies too early for mass adoption, investors say there are reasons to think this time is different.
“For the first time we really have students from pre-K through college who have grown up around the Internet their whole lives,” Rob Stavis, a partner at Bessemer Venture Partners, tells VCJ.
Bessemer has invested in four education technology companies, including Knewton, Piazza and
Tutor.com 2tor Inc.
“[Today's students] don’t turn their noses up at online education like previous generations,” Stavis says. “They understand that it can deliver better engagement and higher quality.”
VCJ Senior Editor Joanna Glasner and contributor Tom Stein reported that in the past year, dozens of startups have raised funding. Edmodo, a kind of social network for education, landed $15 million from Greylock Partners and Benchmark Capital. Piazza, an online hub for sharing questions and answers between classmates, secured $6 million in Series A funding from Bessemer. Coursekit, a tool that lets teachers build quasi social networks around individual courses, scored $5 million in a funding round led by Social+Capital Partnership. And Knewton, an adaptive learning startup, closed a $33 million round led by The Founders Fund.
It’s not hard to see what has attracted them to the market. Total annual U.S. education expenditure has been estimated at about $1.3 trillion, with K-12 education accounting for close to half of the spending, according to a September report from the White House’s Council of Economic Advisors.
VCJ subscribers can read more about how VCs are interested in education by clicking here. The story also includes tables on education-related deals, investments in textbook companies and notable exits.
In addition, Andrew D’Souza, chief revenue officer of Top Hat Monocle, wrote a perspective called “The Consumerization of Education.”
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