Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Natasha and Danny and Alex and Grace were all here to chat through the week’s biggest tech happenings. It was yet another busy week, but that just means we had a great time putting the show together and recording it. Honestly, we had a lot of fun this week, and we hope you crack a smile while we dig through the latest as a team.
Ready? Here’s the rundown:
And that is our show! We are back on Monday morning!
Four years ago, MasterClass, a platform that sells celebrity-taught classes, invited chess legend Garry Kasparov to teach a class. He said yes, but soon realized that creating a message that could satisfy a majority of players was a “struggle throughout the process.”
While the class did pretty well, Kasparov found it “a little bit annoying” that he had to downplay concepts and stick to a specific structure. So, now, Kasparov is launching a platform he says has been several years in the making: Kasparovchess.
Kasparovchess will be a platform in which legendary chess players will have free reign to share tips and tricks with players from various levels. Financed by private investors, and media conglomerate Vivendi, the company declined to disclose its total capital raised to date.
The platform, produced by Vivendi, includes documentaries, podcasts, articles and interviews between experts and known players in the chess community. Moe than 1,000 videos have been recorded to date, Kasparov said. Beyond content, Kasparovchess will have an exclusive Discord server attached to it and playing zones.
In many ways, it’s a vertical-specific version of the chess MasterClass he did years ago, with a big focus on community and variety. MasterClass, which is reportedly raising funding that would value it at $2.5 billion, has been a leader in the “edutainment” space, which monetizes off of documentary-style entertainment. One of the unicorn’s biggest characteristics, as Kasparov alluded to earlier, is that it has to appeal to a wide audience so subscribers can hop from one class to another. Within the same month, a user could go from a Kasparovchess class to general pontifications from RuPaul on self expression. The more classes that MasterClass can get you to take, the longer you’ll keep your subscription.
Image Credits: Kasparovchess
MasterClass might consider its broad view as a differentiator, but it’s clear that Kasparov views it as an opportunity.
Kasparovchess has a monthly or yearly subscription of $13.99 or $119.99, respectively. The majority of lessons from experts and retrospective analysis on games you’ve played sit behind the paywall. The premium product also grants users access to a database of 50,000 manually created puzzles that allows players to train certain skills. The product will be available to the public by the end of month.
A popular competitor already exists: Chess.com. It’s a chess server, forum and networking site that launched in 2005, with premium subscription that ranges between $5 a month or $29 a year. Kasparovchess is significantly more expensive.
Kasparov says his biggest differentiator will be a focus on community. The long-term goal of Kasparovchess is to connect global chess communities with each other, unearth prodigies that might not have access otherwise and give others access to his experiences. He thinks that remote education during the pandemic has shown the need to have more interactive solutions, beyond buzzy promises.
“It’s time to actually switch from what we’re teaching to how students can apply it,” he said. “And that helps us indirectly because chess has been recognized for centuries as a nexus for intelligence and creativity.”
Kasparov became the youngest world chess champion in 1985. He retired from public chess in 2005, and has since launched a foundation to help children have access to chess worldwide. Most recently, he helped advise for “Queen’s Gambit,” a show about a chess prodigy that became Netflix’s most-watched scripted limited series to date on the platform. The show was so ubiquitously popular that sales for chess boards soon skyrocketed.
“I was so happy because it was the first time where we could see chess as a positive factor,” he said. “We had so many years with chess being seen as potential destruction and something that could push kids to the dark area of psychological instability.”
The freshness of this message mixed with an uptick in remote education has given Kasparov confidence that his years-long project is finally ready to launch.
“It’s not just about teaching the game, or playing the game, or debating the game,” he said. Instead, he hopes people who come to the platform focus on the culture of chess, its survival and its seemingly timeless power.
Word nerds with a love for linguistic curiosities and novel nomenclature that’s more fulsome than their ability to make interesting new terms stick will be thrilled by Yak Tack: A neat little aide–mémoire (in Android and iOS app form) designed for expanding (English) vocabulary, either as a native speaker or language learner.
Yak Tack uses adaptive spaced repetition to help users remember new words — drawing on a system devised in the 1970s by German scientist Sebastian Leitner.
The app’s core mechanic is a process it calls ‘tacking’. Here’s how it works: A user comes across a new word and inputs it into Yak Tack to look up what it means (definition content for words and concepts is sourced from Oxford, Merriam-Webster, and Wikpedia via their API, per the developer).
Now they can choose to ‘tack’ the word to help them remember it.
This means the app will instigate its system of space repetition to combat the routine problem of memory decay/forgetting, as new information tends to be jettisoned by our brains unless we make a dedicated effort to remember it (and/or events conspire to make it memorable for other, not necessarily very pleasant reasons).
Tacked words are shown to Yak Tack users via push notification at spaced intervals (after 1 day, 2,3,5,8, and 13; following the fibonacci sequence).
Tapping on the notification takes the user to their in-app Tack Board where they get to re-read the definition. It also displays all the words they’ve tacked and their progress in the learning sequence for each one.
After the second repeat of a word there’s a gamified twist as the user must select the correct definition or synonym — depending on how far along in the learning sequence they are — from a multiple-choice list.
Picking the right answer means the learning proceeds to the next fibonacci interval. An incorrect answer moves the user back to the previous interval — meaning they must repeat that step, retightening (instead of expanding) the information-exposure period; hence adaptive space repetition.
It’s a simple and neat use of digital prompts to help make new words stick.
The app also has a simple and neat user interface. It actually started as an email-only reminder system, says developer Jeremy Thomas, who made the tool for himself, wanting to expand his own vocabulary — and was (intentionally) the sole user for the first six months after it launched in 2019. (He was also behind an earlier (now discontinued) vocabulary app called Ink Paste.)
For now Yak Tack is a side/passion project so he can keep coding (and indulge his “entrepreneurial proclivities”, as he wordily puts it), his day job being head of product engineering at Gusto. But he sees business potential in bootstrapping the learning tool — and has incorporated it as an LLC.
“We have just over 500 users spread across the world (17 different timezones). We’re biggest in Japan, Germany, and the U.S.,” he tells TechCrunch.
“I’m funding it myself and have no plans to take on investment. I’ve learned to appreciate technology companies that have an actual business model underneath them,” he adds. “There’s an elegance to balancing growth and business fundamentals, and given the low cost of starting a SaaS business, I’m surprised more companies don’t bootstrap, frankly.”
The email-only version of Yak Tack still works (you send an email to email@example.com with the word you’d like to learn as the subject and the spaced repeats happen in the same sequence — but over email). But the mobile app is much more popular, per Thomas.
It is also (inevitably) more social, showing users words tacked by other users who tacked the same word as them — so there’s a bit of word discovery serendipity thrown in. However the user who will get the most out of Yak Tack is definitely the voracious and active reader who’s ingesting a lot of text elsewhere and taking the time to look up (and tack) new and unfamiliar words as they find them.
The app itself doesn’t do major lifting on the word discovery front — but it will serve up random encounters by showing you lists of latest tacks, most-tacked this month and words from any other users you follow. (There’s also a ‘last week’s most tacked words’ notification sent weekly.)
Taking a step back, one of the cruel paradoxes of the COVID-19 pandemic is that while it’s made education for kids harder, as schooling has often been forced to go remote, it’s given many stuck-at-home adults more time on their hands than usual to put their mind to learning new stuff — which explains why online language learning has seen an uplift over the past 12 months+.
And with the pandemic remaining the new dystopian ‘normal’ in most parts of the world, market conditions seem pretty conducive for a self-improvement tool like Yak Tack.
“We’ve seen a lot of good user growth during the pandemic, in large part because I think people are investing in themselves. I think that makes the timing right for an app like Yak Tack,” says Thomas.
Yak Tack is freemium, with free usage for five active tacks (and a queue system for any other words you add); or $5 a year for unlimited tacks and no queue.
“I figure the worldwide TAM [total addressable market] of English-learners is really big, and at that low price point Yak Tack is both accessible and is a huge business opportunity,” he adds.
School closures due to the pandemic have interrupted the learning processes of millions of kids, and without individual attention from teachers, reading skills in particular are taking a hit. Amira Learning aims to address this with an app that reads along with students, intelligently correcting errors in real time. Promising pilots and research mean the company is poised to go big as education changes, and it has raised $11M to scale up with a new app and growing customer base.
In classrooms, a common exercise is to have students read aloud from a storybook or worksheet. The teacher listens carefully, stopping and correcting students on difficult words. This “guided reading” process is fundamental for both instruction and assessment: it not only helps the kids learn, but the teacher can break the class up into groups with similar reading levels so she can offer tailored lessons.
“Guided reading is needs-based, differentiated instruction and in COVID we couldn’t do it,” said Andrea Burkiett, Director of Elementary Curriculum and Instruction at the Savannah-Chatham County Public School System. Breakout sessions are technically possible, “but when you’re talking about a kindergarten student who doesn’t even know how to use a mouse or touchpad, COVID basically made small groups nonexistent.”
Amira replicates the guided reading process by analyzing the child’s speech as they read through a story and identifying things like mispronunciations, skipped words, and other common stumbles. It’s based on research going back 20 years that has tested whether learners using such an automated system actually see any gains (and they did, though generally in a lab setting).
In fact I was speaking to Burkiett out of skepticism — “AI” products are thick on the ground and while it does little harm if one recommends you a recipe you don’t like, it’s a serious matter if a kid’s education is impacted. I wanted to be sure this wasn’t a random app hawking old research to lend itself credibility, and after talking with Burkiett and CEO Mark Angel I feel it’s quite the opposite, and could actually be a valuable tool for educators. But it needed to convince educators first.
“You have to start by truly identifying the reason for wanting to employ a tech tool,” said Burkiett. “There are a lot of tech tools out there that are exciting, fun for kids, etc, but we could use all of them and not impact growth or learning at all because we didn’t stop and say, this tool helps me with this need.”
Amira was decided on as one that addresses the particular need in the K-5 range of steadily improving reading level through constant practice and feedback.
“When COVID hit, every tech tool came out of the woodwork and was made free and available,” Burkiett recalled. “With Amira you’re looking at a 1:1 tutor at their specific level. She’s not a replacement for a teacher — though it has been that way in COVID — but beyond COVID she could become a force multiplier,” said Burkiett.
You can see the old version of Amira in action below, though it’s been updated since:
Testing Amira with her own district’s students, Burkiett replicated the results that have been obtained in more controlled settings: as much as twice or three times as much progress in reading level based on standard assessment tools, some of which are built into the teacher-side Amira app.
Naturally it isn’t possible to simply attribute all this improvement to Amira — there are other variables in play. But it appears to help and doesn’t hinder, and the effect correlates with frequency of use. The exact mechanism isn’t as important as the fact that kids learn faster when they use the app versus when they don’t, and furthermore this allows teachers to better allocate resources and time. A kid who can’t use it as often because their family shares a single computer is at a disadvantage that has nothing to do with their aptitude — but this problem can be detected and accounted for by the teacher, unlike a simple “read at home” assignment.
“Outside COVID we would always have students struggling with reading, and we would have parents with the money and knowledge to support their student,” Burkiett explained. “But now we can take this tool and offer it to students regardless of mom and dad’s time, mom and dad’s ability to pay. We can now give that tutor session to every single student.”
This is familiar territory for CEO Mark Angel, though the AI aspect, he admits, is new.
“A lot of the Amira team came from Renaissance Learning. bringing fairly conventional edtech software into elementary school classrooms at scale. The actual tech we used was very simple compared to Amira — the big challenge was trying to figure out how to make applications work with the teacher workflow, or make them friendly and resilient when 6 year olds are your users,” he told me.
“Not to make it trite, but what we’ve learned is really just listen to teachers — they’re the super-users,” Angel continued. “And to design for radically sub-optimal conditions, like background noise, kids playing with the microphone, the myriad things that happen in real life circumstances.”
Once they were confident in the ability of the app to reliably decode words, the system was given three fundamental tasks that fall under the broader umbrella of machine learning.
The first is telling the difference between a sentence being read correctly and incorrectly. This can be difficult due to the many normal differences between speakers. Singling out errors that matter, versus simply deviation from an imaginary norm (in speech recognition that is often American English as spoken by white people) lets readers go at their own pace and in their own voice, with only actual issues like saying a silent k noted by the app.
(On that note, considering the prevalence of English language learners with accents, I asked about the company’s performance and approach there. Angel said they and their research partners went to great lengths to make sure they had a representative dataset, and that the model only flags pronunciations that indicate a word was not read or understood correctly.)
The second is knowing what action to take to correct an error. In the case of a silent k, it matters whether this is a first grader who is still learning spelling or a fourth grader who is proficient. And is this the first time they’ve made that mistake, or the tenth? Do they need an explanation of why the word is this way, or several examples of similar words? “It’s about helping a student at a moment in time,” Angel said, both in the moment of reading that word, and in the context of their current state as a learner.
Third is a data-based triage system that warns students and parents if a kid may potentially have a language learning disorder like dyslexia. The patterns are there in how they read — and while a system like Amira can’t actually diagnose, it can flag kids who may be high risk to receive a more thorough screening. (A note on privacy: Angel assured me that all information is totally private and by default is considered to belong to the district. “You’d have to be insane to take advantage of it. We’d be out of business in a nanosecond.”)
The $10M in funding comes at what could be a hockey-stick moment for Amira’s adoption. (The round was led by Authentic Ventures II, LP, with participation from Vertical Ventures, Owl Ventures, and Rethink Education.)
“COVID was a gigantic spotlight on the problem that Amira was created to solve,” Angel said. “We’ve always struggled in this country to help our children become fluent readers. The data is quite scary — more than two thirds of our 4th graders aren’t proficient readers, and those two thirds aren’t equally distributed by income or race. It’s a decades long struggle.”
Having basically given the product away for a year, the company is now looking at how to convert those users into customers. It seems like, just like the rest of society, “going back to normal” doesn’t necessarily mean going back to 2019 entirely. The lessons of the pandemic era are sticking.
“They don’t have the intention to just go back to the old ways,” Angel explained. “They’re searching for a new synthesis — how to incorporate tech, but do it in a classroom with kids elbow to elbow and interacting with teachers. So we’re focused on making Amira the norm in a post-COVID classroom.”
Part of that is making sure the app works with language learners at more levels and grades, so the team is working to expand its capabilities upwards to include middle school students as well as elementary. Another is building out the management side so that success at the classroom and district levels can be more easily understood.
The company is also launching a new app aimed at parents rather than teachers. “A year ago 100 percent of our usage was in the classroom, then 3 weeks later 100 percent of our usage was at home. We had to learn a lot about how to adapt. Out of that learning we’re shipping Amira and the Story Craft that helps parents work with their children.”
Hundreds of districts are on board provisionally, but decisions are still being kicked down the road as they deal with outbreaks, frustrated parents, and every other chaotic aspect of getting back to “normal.”
Perhaps a bit of celebrity juice may help tip the balance in their favor. A new partnership with Houston Texans linebacker Brennan Scarlett has the NFL player advising the board and covering the cost of 100 students at a Portland, OR school through his education charity, the Big Yard Foundation — and more to come. It may be a drop in the bucket in the scheme of things, with a year of schooling disrupted, but teachers know that every drop counts.
Outschool, a marketplace providing small-group, virtual after-school activities for children has raised a $75 million Series C led by Coatue and Tiger Global Management. TechCrunch first learned of the round from sources familiar with the transaction; the company confirmed the deal to TechCrunch later today.
The new funding values Outschool’s at $1.3 billion, around 4 times higher than its roughly $320 million valuation set less than a year ago.
To date, Outschool has raised $130 million in venture capital to date, inclusive of its new round.
The company’s valuation growth curve is steep for any startup, let alone an edtech concern that saw the majority of its growth during the pandemic. But while CEO and co-founder Amir Nathoo says his company’s new valuation is partially a reflection of today’s fundraising frenzy, he thinks revenue sustainability is a key factor in his company’s recent fundraise.
The new unicorn’s core product is after school classes for entertainment or supplemental studies, on an ongoing or one-off basis. As the company has grown, ongoing classes have grown from 10% of its business to 50% of its business, implying that the startup is generating more reliable revenue over time.
The change from one-off classes to enduring engagements could be good for the company and its students. On the former, recurring revenue is music to investor ears. On the latter, students need repetition to develop close relationships with a course and a group. Ongoing classes about debate or a weekly zombie dance class makes for a stickier experience.
Nathoo says everyone always asks what the most popular classes are, but said it continues to change since its main clientele – kids – have evolving favorites. One week it might be math, the other it might be minecraft and architecture.
Its changing revenue profile helped Outschool generate more than $100 million in bookings in 2020, compared to $6 million in 2019 and just $500,000 in 2017. Nathoo declined to share the company’s expectations for 2021 beyond “projecting to grow aggressively.”
Outschool reached brief positive cash flow last year as a result of massive growth in bookings, but Nathoo shared that that has since changed.
“My goal is to always stay within touching distance of profit,” he said. “But given the fast change in the market, it makes sense to invest aggressively into opportunities that will make sense in the long-term.”
Nathoo expects to grow Outschool’s staff from 110 people to 200 by the end of the year, with a specific focus on international growth. In 2020, Outschool launched in Canada, New Zealand, Australia and the UK, so hiring will continue there and elsewhere.
On the flip side, Outschool isn’t teachers at the same clip it was at the height of the pandemic in the United States. When the pandemic started, Outschool had 1,000 teachers on its platform. Within months, Outschool grew to host 10,000 teachers, a screening process that the founder explained was resource-heavy but vital. Outschool makes more money if teachers join the platform full-time: teachers pocket 70% of the price they set for classes, while Outschool gets the other 30% of income. But, Nathoo views the platform as more of a supplement to traditional education. Instead of scaling revenue by convincing teachers to come on full-time, the CEO is growing by adding more part-time teachers to the platform.
Similar to how Airbnb created a host endowment fund to share its returns with the people who made its platform work, Outschool has dedicated 2% of its fundraise to creating a similar program to reward teachers on its platform in the event of liquidity.
One of Outschool’s most ambitious goals is, ironically, to go in school. While some startups have found success selling to schools amid the pandemic, district sales cycles and tight budgets continue to be a difficult challenge for scaling purposes. Still, the startup wants to make its way into students’ lives through contracts with schools and employers, which could help low income families access the platform. Nathoo says enterprise sales is a small part of its business, but the strategy began just last year as part of COVID-19 response. It is currently piloting its B2B offering with a number of schools.
Outschool will also consider acquiring early-stage startups focused on direct-to-consumer learning in international markets. While no acquisitions have been made by the startup to date, consolidation in the edtech sector broadly is heating up.
Nathoo stressed that Outschool’s continued growth, even as schools reopen, has de-risked the company from post-pandemic worries.
“There’s going to be a big spike of in-person activities because everyone is going to want to do that at once,” he said. “But then we’re going to settle at some more even distribution because the future of education is hybrid.”
He added that Outschool’s ethos around online learning hasn’t changed since conception. The company has never seen opportunity in the for-credit, subject-matter digital education sector, and instead has focused more on supplemental ways to support students after school.
“That’s the piece of the education system that is underserved and that was missing,” he said. “The advantages of online learning will remain in the convenience, the cost, and the variety of what you can get that isn’t always available locally.”
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Natasha and Danny and Grace were all here to chat through the week’s rigamarole of news. Alex took some well-deserved time off, but that meant we got to poke a little fun at him and create a Special Edition segment to start off the show.
Jokes aside, this week was yet another spree of creator economy, edtech, and new fund announcements, with fresh and unexpected news hailing from Natasha’s home state, New Jersey.
Here’s what we got into:
What a show! We’ll be back with the full trio next week, and until then, stay safe and thank you for listening.
Before Luis von Ahn co-founded Duolingo, a gamified language-learning app used by hundreds of millions around the world, he was fixated on squiggly letters. The entrepreneur was a co-inventor of CAPTCHA and reCAPTCHA, or those security prompts you get while browsing the web to verify if you are a human or if you are a robot.
And while von Ahn often jokes that his early inventions were considered annoying (it causes friction when consumers have to decipher letters before logging into their email) reCAPTCHA was impressive enough that Google scooped it up. Since then, von Ahn has moved on to creating another iconic company, this time, one that consumers are happy to see pop up on their screens: Duolingo.
Von Ahn is joining us at TechCrunch Disrupt 2021 this September 21-23 to talk about the making of a gamified edtech unicorn. The pre-IPO company started as a grad school project, and over the years has become a behemoth enjoyed by more than 500 million users.
We’ll get into how von Ahn leveraged crowdsourced translation to grow the app, its roller coaster route to monetization and, of course, the iconic — and often sassy — green owl, Duo. We’ll also discuss the broader edtech market for language learning, how the pandemic impacted business and why Duolingo sees opportunity in disrupting not just language, but the tests associated with it, as well.
While part of Duolingo fits into the edtech category, some see the startup as it currently stands as a consumer subscription product with a learning hook. Von Ahn can clear the air on what Duolingo is truly solving for — and what’s ahead for the business.
Von Ahn first presented Duolingo on the Disrupt stage nine years ago, with a website and goal to teach 100 million people a new language. Now, nearly a decade later, he’ll be coming back to explain what happened next. He doesn’t hold back — so you don’t want to miss this.
Disrupt 2021 runs September 21 -23 and will be 100% virtual this year. Get your front-row seat to see von Ahn and many, many more for less than $100! Secure your seat now.
Sophie Zhou Novati worked as a senior engineer at Facebook and then Nextdoor, where she struggled to hire great engineers for her team.
Frustrated, she decided to try training engineers to meet her team’s hiring standards by mentoring at a local coding bootcamp. After two and a half years of mentoring on nights and weekends, Novati decided to turn her passion into a career.
She and her husband, Michael, founded Formation with a couple of goals in mind. For one, they wanted to offer personalized training to help people not just learn to code, but to become “exceptional” software engineers. Sophie was also struck by the diversity of the people she witnessed going through coding bootcamps, but she realized that those graduates weren’t getting access to the same opportunities that students from traditional universities do.
With Formation, her goal is to personalize the training experience via a remote fellowship program that combines automated instruction with access to a “network of top tier mentors” from companies such as Facebook and Google. After one year in beta, Formation is unveiling its Engineering Fellowship, where every fellow gets a “personalized training plan tailored to their unique career ambitions.” So far, it’s placed just over 30 people in engineering roles at companies such as Facebook, Microsoft and Lyft with an average starting salary of $120,000.
Formation aims to offer an experience beyond bootcamps, which Sophie argues “have gotten too big, too fast, churning hundreds or thousands of students through fixed curriculums without individualized attention.”
The startup attracted the attention of Andreessen Horowitz, which just led its $4 million seed round. Designer Fund, Combine, Lachy Groom, Slow Ventures and engineers from Airbnb, Notion, Rippling and others also participated in the financing.
“The first thing that really struck me about this community is just how diverse it is. Forty-four percent of graduates are reporting that they identify as nonmale, and the percentage of Black and Latinx graduates is nearly double the national average at traditional universities,” Sophie told TechCrunch. “But the problem is that only about 55% of bootcamp grads are getting a job as a software engineer, and of the ones that do, their median salary is only about $65,000. At the same time, companies everywhere are just desperately looking for ways to diversify their talent pool.”
Instead of having students follow a fixed curriculum, Formation leverages adaptive learning technology to build a personalized training plan tailored to each student’s specific skillset and career goals. The platform continuously assesses their skills and adapts their roadmap, according to Sophie.
About half of the people participating in Formation’s program are current engineers already working in the industry in some capacity.
Connie Chan, general partner at Andreessen Horowitz, said she’s been examining the edtech space for a while, including companies building new tools for teaching and upleveling coding skills.
Formation stood out to her as the “only true tech-based and scalable solution that optimizes each student’s mastery of important skills.” Its ability to dynamically change based on a student’s performance in particular was compelling.
“The founder-product fit is also super clear — Sophie brings her own best-in-class engineering experience to Formation, as well as her long-time passion for mentoring,” Chan wrote via email.
At the end of 2020, I argued that edtech needs to think bigger in order to stay relevant after the pandemic. I urged founders to think less about how to bundle and unbundle lecture experience, and more about how to replace outdated systems and methods with new, tech-powered solutions. In other words, don’t simply put engaging content on a screen, but innovate on what that screen looks like, tracks and offers.
A few months into 2021, the exit environment in edtech…feels like it’s doing exactly that. The same startups that hit billion and multi-billion valuations during the pandemic are scooping up new talent to broaden their service offerings.
Ruben Harris, the founder of Career Karma, a platform that matches aspiring coding professionals to bootcamps, put together a massive report recently with his team to talk about the pandemic’s impact on the bootcamp market.
James Gallagher, the author of the report, tells me:
It is important to note that the full potential of bootcamps has not yet been realised. We are now seeing more exploration of niches like technology sales which provide gateways into new careers in tech for people who otherwise may not have been able to acquire training. To scale such models, new businesses will need venture capital.
He went on to explain how a notable acquisition from 2020 was K12 scooping up Galvanize, “which would give K12 exposure into corporate training and the coding bootcamp space, a market outside of K12’s focus at the moment.”
To me this report signal two things: the financial interest in boot camps isn’t simply stemming from other bootcamps (although that is happening), but it’s surprising partnerships. Leaving this subsector, we see creative acquisitions such as a Roblox for edtech buying a language learning tool, and a startup known for flashcards scooping up a tech tutoring service.
Readers should know by this point that I love a nonobvious acquisition (except when this almost happened), so if you have any more tips on coming deals in edtech, please Signal me or direct message me on Twitter.
I’ll end with this: Successful startup founders are innately ambitious, finding opportunity in moonshots and convincing others that the odds are in their favor. However, the ceiling for what defines ambition heightens almost everyday. What used to be a win is now a nonnegotiable, and a feat is only a feat until your competitor hits the exact same milestone.
Acquisitions are one way to scoop up competition and synergistic talent, but it’s what happens next that matters the most.
In the rest of this newsletter, we will talk about Clubhouse competitors, how a homegrown experiment became one of the fastest growing companies in fitness tech and a cool-down in public markets (?!). As always, you can get this newsletter in your inbox each Saturday morning, so subscribe here to join the cool kids.
Remember when everyone was buzzing around about building Stories? That’s so pre-pandemic. A number of companies recently announced plans to build their own versions of Clubhouse, after the buzzy app unearthed the consumer love for audio.
Here’s what to know: It might be easier to start guessing who isn’t building a Clubhouse clone at this point. Our predictions are already starting, but jokes aside, the rise in clones could mean that Clubhouse might have to make a run for its pre-monetized money (cough, cough, Twitter spaces). It doesn’t matter if a startup is first in unlocking a key insight, all that matters is who executes that key insight the best.
Image Credits: Getty Images
Tonal, a fitness tech startup, became a unicorn this week after raising a new tranche of capital.
Here’s what to know: The new status underscores market growth for at-home fitness solutions. And while we don’t have a Tonal S-1 yet, we do have a Tonal EC-1. EC-1’s are TechCrunch’s riff on an S-1, and are essentially a deep dive into a company.
Reporter JP Mangalindan wrote thousands and thousands of words about Tonal, from its origin story to business model, its focus on communities and its biggest hurdles ahead.
Image Credits: Nigel Sussman
You’ve probably had a better week than Compass, Deliveroo and Kaltura. The three companies all had different events that illustrate a potential damper on the part that has been the public markets.
Here’s what to know: Compass cut its shares and lowered pricing of said shares, Deliveroo had a rough debut as a delivery company on the public markets, and Kaltura postponed its IPO after valuation demand didn’t hit expectations.
In other news, though:
Photo Taken In Arizona, United States. Image Credits: Jure Batagelj / 500px / Getty Images
Thanks to everyone who tuned in to TechCrunch Early Stage! If you enjoyed the event (or missed it), don’t worry: Disrupt is almost here.
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Edtech unicorns have boatloads of cash to spend following the capital boost to the sector in 2020. As a result, edtech M&A activity has continued to swell. The idea of a well-capitalized startup buying competitors to complement its core business is nothing new, but exits in this sector are notable because the money used to buy startups can be seen as an effect of the pandemic’s impact on remote education.
In the past week, the consolidation environment is making a clear statement.
The data agrees. Per Crunchbase data, there were 45 edtech exits in 2019 and 24 edtech exits so far in 2021. The same database shows just 35 exits for all of 2020. As we discussed nearly six months ago, the ability to buy (and be bought) has changed.
In the past week, the consolidation environment is making a clear statement: Pandemic-proven startups are scooping up talent — and fast. Kahoot, which is set to list on the Oslo Stock Exchange within months, has bought three businesses within the past 12 months. Quizlet, which became a unicorn nearly one year ago, made its first acquisition ever last week.
To understand more about this activity, I caught up with Quizlet CEO Matthew Glotzbach and Kahoot CEO Eilert Giertsen Hanoa. We talked about trends in the space including lifelong learning, self-directed learning and more.
“To be successful students in the past decade or two, it has required self-direction,” Glotzbach said simply a few minutes into our chat. “Quizlet as a platform is helping to empower that self-directed learner and give them the tools they need to really be successful.”
To further this goal, Quizlet acquired problem-solving tool Slader last week. Unfortunately, the price of the deal was not disclosed (but don’t worry, we’ll have numbers in the next section). What we do know is that it’s the startup’s latest move to solidify its focus as a tech-powered tutoring tool rather than a simple flashcard app.
Currently, Quizlet uses its data around flashcard sets, questions and trained natural language processing tools to understand how students might respond to certain prompts. Artificial intelligence gives the company a little more flexibility to understand the different ways a student could correctly answer the same question.
Coursera, an edtech unicorn, will begin its life today as a public company after pricing its IPO at $33 per share yesterday evening. Using a simple share count, the company’s valuation comes to $4.30 billion, or $4.38 billion if its underwriters exercise their option to purchase shares at its offering price.
A more diluted share count pushes the valuation of Coursera over the $5 billion mark.
Coursera was last valued at $2.57 billion after raising $130 million in mid-2020, per PitchBook data. The company’s simple valuation is around a 67% gain on that final private figure; that gain rises to just over 70% if its underwriters purchase their available shares.
Using a diluted valuation, Coursera has roughly doubled its final private price. In under a year. For edtech investors looking to Coursera to help determine public market sentiment regarding the exit-value of their investments, TechCrunch reckons it’s a pretty good day.
The amount of private capital at play in edtech startups is staggering; billions and billions of potential returns could get a further shot in the arm if Coursera trades well this morning. And the very same billions of invested capital could lose the smile that Coursera’s seemingly-strong IPO pricing brought them.
There are other edtech debuts in the wings. TechCrunch has covered Nerdy’s plans to go public, via a SPAC, for example.
Private investors, who put well north of $10 billion into edtech companies globally in 2020, are modestly bullish on edtech exit volume this year. In a prior TechCrunch venture capitalist survey, GSV managing partner Deborah Quazzo said the following:
Exit volume is rising already with a wide range of strategic and financial buyers of edtech companies — something that didn’t exist before. You will see numerous high-value exits in the first half of 2021. It’s the public market “exits” that have really lagged and that I hope turns around in 2021 and 2022. There are numerous global companies that could go public and the addition of SPAC IPOs creates another positive dynamic.
The Coursera IPO pricing at least, meets the mark for a high-value exit. Which could lead where? Extending Quazzo’s thinking a single step, perhaps a strong Coursera first-day trading session will bolster SPAC interest in taking more edtech startups and unicorns public.
Such a move could lock-in valuations for a number of currently illiquid edtech startups, and perhaps begin to return chunks of invested capital in the historically out-of-fashion technology sector.
Adding to that sentiment is Owl Ventures’ managing director Ian Chiu, who told TechCrunch in the same survey that “the pipeline for potential IPO candidates coming from the edtech sector continues to grow larger.” Let’s hope — parsing the Coursera S-1 filing was good fun and we’d like another at-bat with an edtech IPO document.
More when Coursera trades.
Y Combinator is slowly growing its stake in education companies, as the sector balloons with newfound demand from remote learners. In its latest batch, the famed accelerator had its highest number of edtech startups yet: 14 companies from around the world, working on everything from teacher monetization to homework apps to ways to train software engineers in an affordable fashion.
While Y Combinator isn’t the definitive source on what success in early-stage startups looks like — it quite literally has a post-mortem dinner after Demo Day to celebrate failure — it does serve well in providing an illustrative glance of how entrepreneurs are thinking about certain sectors in a given moment in time. Managing director Michael Seibel said that the number of startups in each sector isn’t a Y Combinator choice, but is in line with the concentration of applicants in each sector. In other words, YC is backing more edtech companies because more edtech companies are applying to the accelerator.
One dynamic worth pointing out here is that, of the 14 edtech startups in this batch, only two have a woman founder, UPchieve and Degrees of Freedom. Y Combinator provided aggregate batch diversity, stating that 19% of companies in W21 include a woman founder, and 10% of founders in the entire batch are women. It’s a slight uptick from the last batch, but not an immense jump.
diversity of the @ycombinator w21 batch:
19% of the companies have a woman founder (16% S20)
7% have a Black founder (6% S20)
13% have a Latinx founder (10% S20)
— natasha (@nmasc_) March 23, 2021
With this context, I will use the current edtech cohort within the batch to sketch out one version of the future of education in the eyes of this specific demographic of early-stage founders.
The current YC batch has 50% of its startups based outside of the United States, a first for the accelerator. The growing internationalization of Y Combinator might help partially explain the uptick in edtech companies. The growth of companies like India’s Byju’s, one of the most valuable edtech companies in the world, shows how consumer spending in education companies internationally is impressive, and it’s clear that early-stage edtech startups are taking note.
Only two of Y Combinator’s 14 edtech investments are from the United States, with the highest concentrations in South America and India.
The vast majority of startups in the current edtech batch charge consumers, instead of institutions or enterprises, for services. In some ways, edtech startups going for consumers instead of institutions isn’t new: it’s always been easier to convince a parent instead of a public school to pay for a service simply due to red tape. Consumers are an easier way to reach a venture-demanded scale, and that’s always been a truth of edtech.
Still, it’s noteworthy that we’re not seeing too much experimentation in business model here, despite the pandemic and that some schools have begun to invest more in edtech services.
A potential hurdle that these companies might face is access. If it costs to use your service, you can only educate so many people from specific income groups. As a result, income share agreements, or ISAs, were especially present in this batch, a set-up that allows a student to hold off on paying for an education until they are employed. Upon employment, said student has to give a percentage of their income to the company until their debt is paid. While the model is controversial, it was popularized by YC graduate Lambda School and continues to be one way to make the upfront cost of school more popular.
Acadpal, mentioned later, is an outlier here selling to schools in India. Before I move on to our next section, I do want to shout out two startups that I think embody the most ambitious bets in business model:
Despite the struggles of “Zoom University,” this batch of edtech founders clearly believe that the future of instruction is through online courses. This was perhaps the most overwhelming thread tying together all the companies in the sector: a bet on one of these companies is a bet that remote education will become status quo.
As previous sections show, a number of startups are offering online coding platforms for specific demographics. Now, I always have my inbox filled with different “Lambda School for X” startups, so seeing a variety of these startups pop up yet again isn’t exactly exciting. However, the pandemic did show how much community and network enhances a school experience. If these online schools can pull off strong partnerships with employers and alumni, I think there’s a huge opportunity here.
That said, where there’s big opportunity there’s always a lot of competition. These startups will have to find a way to differentiate themselves, like the one below:
There were bets on the infrastructure of how courses get done online, from course creation to completion.
To end, the edtech startups in the current YC batch are more complementary to each other than competitive. For a homework platform like Acadpal to succeed, it would be good news for a company like Codingal, which helps bring afterschool learning online, to get funding as well. For Unschool, which ties higher-ed to employment, a company like Degrees of Freedom could be a key partner or integration for students from a low-income background.
Edtech is growing — and fast — so the fragmentation of different plays is somewhat expected. And while this batch’s hard work starts now, it’s illuminating to understand where the earliest entrepreneurs out there are seeing promise.
In a new S-1/A filing, Coursera set an initial IPO price range between $30 and $33 a share, signaling the market views its edtech business warmly ahead of its impending public offering.
Coursera will have 130,271,466 shares outstanding after its IPO, or 132,630,966 including its underwriters’ option. At $30 per share, the low end of the company’s IPO range and a share count inclusive of 2,359,500 shares reserved for its underwriting banks, the firm would be worth $3.98 billion. That number rises to $4.38 billion at $33 per share.
This is a solid increase from Coursera’s last private-market valuation, which was around $2.4 billion when it raised a Series F round in October 2020.
For the bulls in the room, there’s a bigger valuation if you tinker with the numbers. In a fully diluted accounting, including in our calculation, shares that are issuable upon vested options and RSUs, Coursera’s share count rises to 166,006,474, or 168,365,974 if we count its underwriters’ option. At its most generous share count and highest projected price, Coursera’s valuation could reach $5.56 billion.
However, IPO-watching group Renaissance Capital comes to a smaller $5.1 billion figure for a midpoint-range, fully diluted valuation. That result excludes shares reserved for underwriters and equity currently present in vested RSUs.
Using the more modest $5.1 billion midpoint figure, Coursera would be worth around 17.5 times its 2020 revenue of $293.5 million. Using a run-rate figure calculated from the company’s Q4 2020 results, its multiple falls to just over 15x.
Coursera is therefore being valued as a software company, likely a breathe-easy moment for still-private edtech companies, since the debut could be an industry bellwether.
The valuation is also a vote of confidence that Coursera’s rising deficits are not even a valuation risk, let alone an existential threat to its business. In the four quarters of 2020, the edtech giant lost $14.3 million, $13.9 million, $11.9 million and $26.7 million, the final Q4 net loss being the largest among the time interval for which we have data.
From all appearances, investors are valuing Coursera on its growth, not its profitability — or lack thereof.
Helping push its losses higher are rising sales and marketing costs, something TechCrunch has written about in the past. In Q4 2019, for example, the company spent $16.7 million on sales and marketing activities. That figure rose to $35 million in Q4 2020.
Coursera’s S-1 dropped last Friday, giving us a glimpse of the financial impact that COVID-19 had on a large edtech company.
We worked through the numbers on the day the filing happened, but here are the core data points: Coursera’s 2020 revenue came to $293.5 million, up 59% from the year prior. During the same period, Coursera had a net loss of nearly $67 million, up 46% from the previous year’s $46.7 million net deficit.
The company is still unprofitable, despite the pandemic’s general lift to its business and customer base. But does it have a path to profits? Piggybacking from our Coinbase S-1 analysis piece, let’s ask five questions concerning Coursera’s S-1 that we’ll answer as we go.
Our work will help us grok not just Coursera’s performance, but the health of other companies in the edtech space as well. So let’s get into the numbers and work toward better comprehension of one of the most active categories in the startup world, that of turning technology to bear on the global education market.
Coursera has two freemium lines of business, one targeted at consumers, and the other at a portion of its enterprise business, namely “Coursera for Campus.” In the case of the latter, Coursera made parts of its enterprise offering free to use during the pandemic.
We had two questions: First, can we track the impact of rising freemium usage on Coursera’s growth? And can we weigh that growth against the costs of the service to compare the two? The answer to both is yes.
Regarding the impact of freemium on consumer usage, we can intuit from a sharply rising “registered learner” count in recent quarters that offering a free tier was useful in filling the top of Coursera’s funnel during COVID. Here’s the data: From 2018 to 2019, Coursera’s registered learner count grew from 37.3 million to 46.4 million. Then from 2019 to 2020, it shot to 76.6 million. The accelerated growth was aided by the pandemic, but made possible in part by the fact that there was no cost (no barrier to entry) to sign up for the company’s mass-market offering.
On the enterprise side, we can track the growth of its university-facing work somewhat easily. Enterprise revenue — which encompasses Coursera for Campus, the product that added a free tier in 2020 — has grown in recent years. From 2018 to 2019, the top line from the segment grew from $26.8 million to $48.3 million. Then from 2019 to 2020, it expanded further to $70.8 million. And from 2019 to 2020, the number of paid enterprise customers grew from 240 to 387.
Here, it’s harder to parse the possible impact of the freemium effort. From the numbers, you might wonder where the freemium model might have had an impact; Coursera added around $22 million in enterprise revenue during both 2019 and 2020, so can we find a bump at all?
It’s probably yet to come. The company notes in its S-1 filing that its “Campus Response Initiative [i.e., freemium move] enabled over 4,000 institutions globally, including approximately 10% of all degree-granting institutions, to tap into ready-made, high-quality digital curricula from leading universities with minimal upfront costs.” Coursera goes on to note that it intends to convert those customers as part of its growth plan.
Summarizing: On the consumer side, we can see rapid adoption, and on the enterprise side, we see the potential to accelerate future growth.
That set of mostly good news was not cheap; the company’s sales and marketing costs rose from 31% of revenue in 2019 to 37% in 2020. The company explained it spent $9.2 million more in 2020 than it paid in 2019 to host and support new, free users.
However, given that the company’s full-year revenue was more than 30 times that amount, the expense seems to fit neatly next to the company’s rapidly growing consumer user base that we feel was boosted by having a freemium offering; whether the enterprise side of the coin will convert is not yet clear, but having an option on future high-margin, low-churn revenues is likely attractive for Coursera and its potential investors.
A key question for edtech startups in the wake of the pandemic is whether a temporary increase of use will actually lead to long-term impact on adoption. Giving your platform away for free can always feel like a question mark; but in edtech, that organic, limitless consumer growth can help it land key enterprise deals eventually and a good reputation. For example, only 3% of Duolingo’s users pay, but they are worth $180 million in bookings.
Coursera’s general success with a freemium business model shows that top-of-funnel edtech, which is good for widespread adoption, can be a lucrative route for founders to consider.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Natasha and Danny and Alex and Grace were all here to chat through the week’s biggest tech happenings. In very good Show News, Chris is back! He’s working on the next iteration of the show, something that you will be able to see starting Very Soon. Get hype!
Today though, we had a delectable dish of dynamic doings, namely news items of the following persuasion:
And that’s our show! We are back early Monday morning for a packed week. So keep your podcast app warm, we’re coming for it.
The rise of “Zoom University” was only possible because edtech wasn’t ready to address the biggest opportunity of the past year: remote learning at scale. Of course, the term encapsulates more than just Zoom, it’s a nod to how schools had to rapidly adopt enterprise video conferencing software to keep school in session in the wake of closures brought on by the virus’ rapid spread.
Now, nearly a year since students were first sent home because of the coronavirus, a cohort of edtech companies is emerging, emboldened with millions in venture capital, ready to take back the market.
The new wave of startups are slicing and dicing the same market of students and teachers who are fatigued by Zoom University, which — at best — often looks like a gallery view with a chat bar. Four of the companies that are gaining traction include Class, Engageli, Top Hat and InSpace. It signals a shift from startups playing in the supplemental education space and searching to win a spot in the largest chunk of a students day: the classroom.
While each startup has its own unique strategy and product, the founders behind them all need to answer the same question: Can they make digital learning a preferred mode of pedagogy and comprehension — and not merely a backup — after the pandemic is over?
Answering that question begins with deciding whether videoconferencing is what online, live learning should look like.
“This is completely grounds up; there is no Zoom, Google Meets or Microsoft Teams anywhere in the vicinity,” said Dan Avida, co-founder of Engageli, just a few minutes into the demo of his product.
Engageli, a new startup founded by Avida, Daphne Koeller and Serge Plotkin, raised $14.5 million in October to bring digital learning to college universities. The startup wants to make big lecture-style classes feel more intimate, and thinks digitizing everything from the professor monologues to side conversations between students is the way to go.
Engageli is a videoconferencing platform in that it connects students and professors over live video, but the real product feature that differentiates it, according to Avida, is in how it views the virtual classroom.
Upon joining the platform, each student is placed at a virtual table with another small group of students. Within those pods, students can chat, trade notes, screenshot the lecture and collaborate, all while hearing a professor lecture simultaneously.
“The FaceTime session going on with friends or any other communication platform is going to happen,” Avida said. “So it might as well run it through our platform.”
The tables can easily be scrambled to promote different conversation or debates, and teachers can pop in and out without leaving their main screen. It’s a riff on Zoom’s breakout rooms, which let participants jump into separate calls within a bigger call.
There’s also a notetaking feature that allows students to screenshot slides and live annotate them within the Engageli platform. Each screenshot comes with a hyperlink that will take the student back to the live recording of that note, which could help with studying.
“We don’t want to be better than Zoom, we want to be different than Zoom,” Avida said. Engageli can run on a variety of products of differing bandwidth, from Chromebooks to iPads and PCs.
Engageli is feature-rich to the point that it has to onboard teachers, its main customer, in two phases, a process that can take over an hour. While Avida says that it only takes five minutes to figure out how to use the platform to hold a class, it does take longer to figure out how to fully take advantage of all the different modules. Teachers and students need to have some sort of digital savviness to be able to use the platform, which is both a barrier to entry for adoption but also a reason why Engageli can tout that it’s better than a simple call. Complexity, as Avida sees it, requires well-worth-it time.
The startup’s ambition doesn’t block it from dealing with contract issues. Other video conferencing platforms can afford to be free or already have been budgeted into. Engageli currently charges $9.99 or less per student seat for its platform. Avida says that with Zoom, “it’s effectively free because people have already paid for it, so we have to demonstrate why we’re much better than those products.”
Engageli’s biggest hurdle is another startup’s biggest advantage.
Class, launched less than a year ago by Blackboard co-founder Michael Chasen, integrates exclusively with Zoom to offer a more customized classroom for students and teachers alike. The product, currently in private paid beta, helps teachers launch live assignments, track attendance and understand student engagement levels in real time.
While positioning an entire business on Zoom could lead to platform risk, Chasen sees it as a competitive advantage that will help the startup stay relevant after the pandemic.
“We’re not really pitching it as pandemic-related,” Chasen said. “No school has only said that we’re going to plan to use this for a month, and very few K-12 schools say we’re only looking at this in case a pandemic comes again.” Chasen says that most beta customers say online learning will be part of their instructional strategy going forward.
Investors clearly see the opportunity in the company’s strategy, from distribution to execution. Earlier this month, Class announced it had raised $30 million in Series A financing, just 10 weeks after raising a $16 million seed round. Raising that much pre-launch gives the startup key wiggle room, but it also gives validation: a number of Zoom’s earliest investors, including Emergence Capital and Bill Tai, who wrote the first check into Zoom, have put money into Class.
“At Blackboard, we had a six to nine month sales cycle; we’d have to explain that e-learning is a thing,” Chasen said, who was at the LMS business for 15 years. “[With Class] we don’t even have to pitch. It wraps up in a month, and our sales cycle is just showing people the product.
Unlike Engageli, Class is selling to both K-12 institutions and higher-education institutions, which means its product is more focused on access and ease of use instead of specialized features. The startup has over 6,000 institutions, from high schools to higher education institutions, on the waitlist to join.
Image Credits: Class
Right now, Class software is only usable on Macs, but its beta will be available on iPhone, Windows and Android in the near future. The public launch is at the end of the quarter.
“K-12 is in a bigger bind,” he said, but higher-ed institutions are fully committed to using synchronous online learning for the “long haul.”
“Higher-ed has already been taking this step towards online learning, and they’re now taking the next step,” he said. “Whereas with a lot of K-12, I’m actually seeing that this is the first step that they’re taking.”
The big hurdle for Class, and any startup selling e-learning solutions to institutions, is post-pandemic utility. While institutions have traditionally been slow to adopt software due to red tape, Chasen says that both of Class’ customers, higher ed and K-12, are actively allocating budget for these tools. The price for Class ranges between $10,000 to $65,000 annually, depending on the number of students in the classes.
“We have not run into a budgeting problem in a single school,” he said. “Higher ed has already been taking this step towards online learning, and they’re now taking the next step, whereas K-12, this is the first step they’re taking.”
Engageli and Class are both trying to innovate on the live learning experience, but Top Hat, which raised $130 million in a Series E round this past week, thinks that the future is pre-recorded video.
Top Hat digitizes textbooks, but instead of putting a PDF on a screen, the startup fits features such as polls and interactive graphics in the text. The platform has attracted millions of students on this premise.
“We’re seeing a lot of companies putting emphasis on creating a virtual classroom,” he said. “But replicating the same thing in a different medium is never a good idea…nobody wants to stare at a screen and then have the restraint of having to show up at a previous pre-prescribed time.”
In July, Top Hat launched Community to give teachers a way to make class more than just a YouTube video. Similar to ClassDojo, Community provides a space for teachers and students to converse and stay up to date on shared materials. The interface also allows students to create private channels to discuss assignments and work on projects, as well as direct message their teachers.
CEO Mike Silagadze says that Top Hat tried a virtual classroom tool early on, and “very quickly learned that it was fundamentally just the wrong strategy.” His mindset contrasts with the demand that Class and Engageli have proven so far, to which Silagadze says might not be as long-term as they think.
“There’s definitely a lot of interest that’s generated in people signing up to beta lists and like wanting to try it out. But when people really get into it, everyone pretty much drops off and focuses more on asynchronous, small and in-person groups.”
Instead, the founder thinks that “schools are going to double down on the really valuable in-person aspects of higher education that they couldn’t provide before” and deliver other content, like large lecture-style classes or meetings, through asynchronous content delivery.
This is similar to what Jeff Maggioncalda, the CEO of Coursera, told TechCrunch in November: Colleges are going to re-invest in their in-person and residential experiences, and begin offering credentials and content online to fill in the gaps.
“We’ve been on the journey to create a more and more complete platform that our customers can use since almost day one,” Silagadze said. “What the pandemic has brought is much more comprehensive testing functionality that Top Hat has rolled out and better communication tooling so basically better chat and communication tooling for professors.”
Community costs $30 per semester, per student. Currently Top Hat has most of its paying customers coming in through its content offering, the digital textbooks, instead of this learning platform.
InSpace, a startup spinning out of Champlain college, is similarly focused on making the communication between professors and students more natural. Dr. Narine Hall, the founder of the startup, is a professor herself who just wanted class to “feel more natural” when it was being conducted.
InSpace is similar to some of the virtual HQ platforms that have popped up over the past few months. The platforms, which my colleague Devin Coldewey aptly dubbed Sims for Enterprise, are trying to create the feel of an office or classroom online but without a traditional gallery view or conference call vibe. The potential success of inSpace and others could signal how the future of work will blend gaming and socialization for distributed teams.
InSpace is using spatial gaming infrastructure to create spontaneity. The technology allows users to only hear people within their nearby proximity, and get quieter as they walk, or click, away. When applied to a virtual world, spatial technology can give the feeling of a hallway bump-in.
Similar to Engageli, inSpace is rethinking how an actual class is conducted. In inSpace, students don’t have to leave the main call to have a conversation during inSpace, which they do in Zoom. Students can just toggle over to their own areas and a professor can see teamwork being done in real time. When a student has a question, their bubble becomes bigger, which is easier to track than the hand-raise feature, says Hall.
InSpace has a different monetization strategy than other startups. It charges $15 a month per-educator or “host” versus per-student, which Hall says was so educators could close contracts “as fast as possible.” Hall agrees with other founders that schools have a high demand for the product, but she says that the decision-making process around buying new tooling continues to be difficult in schools with tight budgets, even amid a pandemic. There are currently 100 customers on the platform.
So far, Hall sees inSpace working best with classes that include 25 people, with a max of 50 people.
The company was born out of her own frustrations as a teacher. In grad school, Hall worked on research that combined proximity-based interactions with humans. When August rolled around and she needed a better solution than WebEx or Zoom, she turned to that same research and began building code atop of her teachings. It led to inSpace, which recently announced that it has landed $2.5 million in financing led by Boston Seed Capital.
The differences between each startup, from strategy to monetization to its view of the competition, are music to Zoom’s ears. Anne Keough Keehn, who was hired as Zoom’s Global Education Lead just nine months ago, says that the platform has a “very open attitude and policy about looking at how we best integrate…and sometimes that’s going to be a co-opetition.”
“In the past there has been too much consolidation and therefore it limits choices,” Keehn said. “And we know everybody in education likes to have choices.” Zoom will be used differently in a career office versus a class, and in a happy hour versus a wedding; the platform sees opportunity in it all beyond the “monolithic definition” that video-conferencing has had for so long.
And, despite the fact that this type of response is expected by a well-trained executive at a big company in the spotlight, maybe Keehn is onto something here: Maybe the biggest opportunity in edtech right now is that there is opportunity and money in the first place, for remote learning, for better video-conferencing and for more communication.
Special purpose acquisition vehicles regained popularity in 2020 as an alternative way to take startups public, and now they are eyeing edtech companies.
So far, Skillsoft has gone public through Churchill Capital, and Nerdy, parent company of Varsity Tutors, did the same through a reverse merger with TPG Pace Tech Opportunities. On the investor side, Edify and Adit EdTech Acquisition are both separate, $200 million SPACs for education companies.
SPACs are not being used to prop up companies that can’t go public through traditional means.
But is there anything specific to SPACs that makes them a better route for edtech companies than a traditional IPO or direct listing? To explore the question, I reached out to Chuck Cohn, CEO of Nerdy, which is currently in the process of being SPACed by TPG, and Susan Wolford, chairperson of Edify Acquisition, a $200 million SPAC for edtech companies.
Nerdy’s business is growing, but the company doesn’t expect to be profitable until 2023 and wants to drive revenues up 31% and 43% from its 2020 and 2021 expectations, respectively. Cohn said the balance sheet looks the way it does because they are heavily investing in product and engineering, and focusing on being well-capitalized.
The SPAC, he said, is an opportunity to accelerate Nerdy’s core business: “It’s less about going into the public markets, and more about that this transaction allows us to take an offensive position and lean into the big opportunities.”
Cohn said they pursued a SPAC because it is a faster route to going public. As vaccines roll out, growth in remote learning will slow, which could hurt growth expectations — especially ones as ambitious as Nerdy’s. For that reason, it’s clear why some edtech companies want to get out to the public markets as soon as possible.
Despite some naysayers, Cohn said SPACs are not being used to prop up companies that can’t go public through traditional means.
“I think that perception was fair a year ago,” he said. “But if you look at companies that have taken this route recently, including OpenDoor, they are very high quality. There’s a fundamental perception change.” He added that “SPACs have been reaching out over the years,” but the timing felt more fortuitous due to TPG’s interest and track record.
On the other side of the table, Wolford said she is currently searching for an edtech company to bring public on behalf of Edify, a $200 million SPAC she has raised. She noted that PIPE instruments, aka private investments in public entities, have helped de-risk SPACs for the general audience. These instruments have been around for decades, but Wolford said they recently became more mainstream to use in SPACs.
Google today introduced a suite of updates for its online education tools whose adoption and further development have been accelerated by the pandemic, including Google Classroom, Google Meet and the next generation of G Suite for Education, now rebranded as Google Workspace for Education. In total, Google is promising more than 50 new features across its education products, with a focus on meeting educators’ and admins’ needs, in particular, in addition to those of the students.
When Google first introduced Google Classroom, it didn’t set out to create a Learning Management System (LMS), the company says. But during the COVID-19 pandemic, Google found that many educators had begun to use Classroom as the “hub” for their online learning activities. Today, the service is used by over 150 million students, teachers and school admins, up from just 40 million last year.
As a result of the pandemic-prompted adoption and user feedback, Google is introducing a range of new features for Classroom this year, some of which will be made available sooner than others.
To better cater to those who are using Classroom as the hub for online learning, a new marketplace of Classroom “add-ons” will allow teachers later this year to select their favorite edtech tools and content and assign them directly to students, without requiring extra log-ins. Admins will also be able to install these add-ons for other teachers in their domains.
Also later this year, admins will be able to populate classes in advance with Student Information System (SIS) roster syncing and, for select SIS customers, students’ grades from Classroom will be able to be exported directly to the SIS. Additional logging, including Classroom audit logs (to see things like student removals or who archived a class), as well as Classroom activity logs (to check on adoption and engagement) will be available soon.
When students attend in-person school, teachers can easily notice when a student is falling behind. A new set of Classroom tools aims to do the same for virtual learning, as well. With the new student engagement tracking feature, teachers will be able to see relevant stats about how students are interacting with Classroom, like which students submitted assignments on a given day or commented on a post, for example.
Image Credits: Google
Other tools will tackle the realities of working from home, where internet connections aren’t always reliable, or — for some low-income students — not available at all. With an updated Classroom Android app, students will be able to start their work offline, review assignments, open Drive attachments and write in Google Docs without an internet connection. The work will sync when a connection is again available. And when students upload assignments by taking a photo, new tools will allow students to combine photos into a single document, crop and rotate images and adjust the lighting.
Classroom will also gain support for rich text formatting — like bold, italics, underline and adding bullets across web, iOS and Android.
Image Credits: Google
Originality reports, which help to detect plagiarism, will be available soon in 15 languages, including English, Spanish, Portuguese, Norwegian, Swedish, French, Italian, Indonesian, Japanese, Finnish, German, Korean, Danish, Malaysian and Hindi.
And Google’s own free, introductory computer science curriculum, CS First, is immediately available in Classroom.
Beyond Classroom itself, Google Meet is also being updated with the needs of educators in mind.
One must-have new feature, rolling out over the next few weeks, is a “mute all” button to give control of the classroom back to teachers. In April, teachers will also be able to control when a student can unmute themselves, as well.
Image Credits: Google
Other moderation controls will roll out this year, too, including controls over who can join meetings, chat or share their screen from their iOS and Android devices. Policies over who can join video calls will be able to be set by admins in April, as well, enabling rules around student-to-student connections across districts, professional development opportunities for teachers, external speakers visiting a class and more. Students will also not be able to join Meets generated from Classroom until their teacher has arrived. Teachers, meanwhile, will be made meeting hosts so multiple teachers can share the load of managing classes.
Google Meet is adding engagement and inclusivity features for students, too. Students will be able to select emoji skin tones to represent them and react in class with emoji, which teachers will be able to control.
Image Credits: Google
Finally, Google’s “G Suite for Education,” which includes Classroom, Meet, Gmail, Calendar, Drive, Docs, Sheets, Slides and more, will be rebranded as Google Workspace for Education. The tools themselves, now used by 170 million students and educators globally, won’t change. But the set will be available in four editions instead of just two to better accommodate a wider variety of needs.
The free version will be rebranded Google Workspace for Education Fundamentals, and will remain largely the same. The paid version, meanwhile, will become available in three tiers: Google Workspace for Education Standard and Google Workspace for Education Plus, as well as the Teaching and Learning Upgrade, which can be added on to Fundamentals or Standard to provide video communication in Google Meet, and other Classroom tools, like originality reports.
Standard has everything in Fundamentals, in addition to enhanced security through Security Center, audit logs and advanced mobile management. Plus has everything in the three other versions, as well as advanced security and analytics, teaching and learning capabilities, and more.
Fundamentals and Plus are available today and the others will go live April 14, 2021. Those who already have G Suite for Enterprise for Education will be upgraded to Education Plus.
Related to these changes, the storage model will be updated to a new, pooled storage option that aims to better allocate storage resources across educational institutions. The new model offers schools and universities a baseline of 100 TB of pooled storage shared by all users, which goes into effect for current customers in July 2022, and will be effective for new customers in 2022. Google says less than 1% of institutions will be impacted by the updated model, whose baseline supports over 100 million documents or 8 million presentations or 400,000 hours of video, to give an idea of size.
The company plans several updates for its Google Workspace for Education product line in the weeks to come, including saved drafts in Google Forms (in Fundamentals) Google Meet meeting transcripts (in the Teaching and Learning Upgrade) and more.
Outside of software product updates, Google is launching over 40 new Chromebooks, including a set of “Always Connected” branded devices that have an LTE connectivity option built in. Chrome’s screen reader, ChromeVox, has also been improved with new tutorials, the ability to search ChromeVox menus and voice switching that automatically changes the screen reader’s voice based on the language of the text.
Parents, who are now participating in their child’s online learning in a number of ways, will be able to add their child’s Google Workspace for Education account to their child’s personal account with Family Link — Google’s parental control software. That means kids can still log into their school apps and accounts, while parents ensure they stay focused on learning by restricting other apps and overall device usage.
Top Hat, a startup that digitizes textbooks and turns them into an interactive experience for college students, announced on Wednesday that it has acquired yet another business: Fountainhead Press. The acquisition marks Top Hat’s third scoop of a publishing company in the past 12 months.
Consolidation is going to be huge in the next few years for edtech, as bigger players raise enough financing (and gain profits) to be able to afford other businesses.
Top Hat’s whole business proposition is a subtweet to Zoom University: It wants to make learning an active, online experience and completely digital. That focus has let them reach 3.5 million students and thousands of universities. With a new acquisition, Top Hat is bringing more content into its fold, and with it, more customers who need a better solution to a dusty textbook.
I caught up with Top Hat CEO and founder Mike Silagadze to understand what has triggered this string of content acquisitions. While the M&A isn’t tech-focused, we can learn about how a well-funded edtech startup is navigating the early innings of 2021.
We’ll talk about the shift from offline to online, edtech’s consolidation environment and why the “sell to Pearson or bust” mindset might officially be out the door for the sector.