Edtech Awash In Capital Amid Shift To Remote Learning
COVID-19 has provided a tailwind, allowing technology and content providers large and small to raise generous sums
By Marlene Givant Star
Education technology companies have raised more capital so far this year than in all of 2019 despite, or perhaps because of, the COVID-19 pandemic. According to Mergermarket analytics, at least 14 edtech companies raised over $569 million so far in 2020, more than all funds raised by the industry in calendar 2019. During that year, 15 edtech companies raised $480 million, the data show.
A number of companies secured capital in response to heavy inbound interest. For example, in May, StraighterLine CEO Burck Smith told Mergermarket that the Baltimore-based provider of affordable online college education solutions sold a majority stake to BV Investment Partners after receiving inbound interest from both strategic and financial suitors.
“We’ve had great performance, so it just seemed like a good time to do something,” he said.
The same was true of Coursera, the provider of online courses and certifications, which raised $130 million from existing investors after receiving an inbound approach, CFO Kenneth Hahn told Mergermarket in late July. In a similar vein, just this week, Course Hero raised an attention-getting $70 million extension of its $10 million Series B round in February. College students use Course Hero to obtain study materials and form study groups online.
“After six months, we feel confident in saying that 2020 will go down as one of the most unique years in the history of education investing,” said an Education and Technology Services update by Lincoln Financial. The report said COVID-19 has dramatically accelerated trends toward online learning and the use of digital solutions by schools at all levels. What’s more, the substantial increase in unemployment will accentuate the already acute skills gap, giving a boost to upskilling platforms.
Nevertheless, Mary Jo Zandy, managing director of investment bank Berkery Noyes, said in light of the heightened attention to online learning, she was a bit surprised companies weren’t rushing to sell instead of raise capital ahead of a potential boost in capital gains taxes if there is a new administration after the presidential election in November.
“The only reason to raise more money as opposed to selling is if you’re pretty confident in your growth and the trends in education,” she said. But she cautioned that edtech platforms whose principal customers are state and local school districts may be in for a shock. Funding is “a big question mark” because budgets are going to be strapped due to the pandemic, she said.
Lincoln’s report also sounded a cautionary note. “Back-to-school uncertainty is creating noise for many vendors to the education market and, at some level, is separating solutions that are “must-haves” from those that are “nice-to-haves,” the report said.
Marlene Givant Star is New York editor-sector coverage for Mergermarket and Dealreporter. She can be reached at firstname.lastname@example.org. Philip Segal provided analytics for this story.