As the COVID-19 pandemic continues to force teachers, students and parents to adopt new technologies, edtech’s total addressable market has massively grown in the last several months. The shift has urged venture capitalists to pour money into the sector accordingly, ushering a number of startups into the unicorn club.
But maturation doesn’t just mean bigger checks and high-flying unicorns — it also brings exits.
Edtech M&A activity is buzzier than usual: In the last week, Course Hero, a startup that sells Netflix-like subscriptions to students looking for learning and teaching content, bought Symbolab, an artificial intelligence-powered calculator. Saga Education, a tutoring nonprofit backed by Comcast, the Bill & Melinda Gates Foundation and others, acquired math software platform Woot Math. We also saw PowerSchool, which sells a suite of software services to manage schools, scoop up Hoonuit, a data management and analytics tool for educators. Finally, K-12 curriculum company Discovery Education bought K-5 science and stem curriculum upstart Mystery Science.
It’s a lot of news in a short period of time. Luckily, these consolidations offer some directional guidance regarding where some edtech businesses think the future of their industry is headed.
Smart content as a competitive advantage
Content, to an extent, is commoditized. If you can find a free tutorial on Youtube or Khan Academy, buy a subscription to an edtech platform that offers the same solution? The commodification of education is good for end-users and is often why startups have a freemium model as a customer acquisition strategy. To convert free users into paying subscribers, edtech startups need to offer differentiated and targeted content.
The Course Hero and Mystery Science deals show us that edtech businesses are hungry for personalized, targeted content. Course Hero’s acquisition of Symbolab was essentially a deal for more than a decade’s worth of data that captured which math questions students found hardest.
Symbolab is a math calculator that is set to answer over 1 billion questions this year. With each answer, Symbolab adds information to its algorithm regarding students’ most common pain points and confusion. Course Hero, in contrast, is a broader service that focuses on Q&A from a variety of subjects. CEO Andrew Grauer says Symbolab’s algorithm isn’t something that Course Hero, which has been operating since 2006, can drum up overnight. That’s precisely why he “decided to buy, instead of build.”
“It made a lot of sense to move fast enough so it wouldn’t take up multiple years to get this technology,” Grauer said. The deal was made as big companies get in the Q&A game too, he noted. Google acquired homework helper app Socratic in 2019 and Microsoft built Microsoft Solver in the same year.
Discovery Education, a curriculum provider for K-12 classrooms, acquired San Francisco-based K-5 STEM curriculum provider, Mystery Science. Discovery Education has launched a series of other products focused on science education, including Discovery Education Experience, the Science Techbook series and STEM Connect. However, Mystery Science is largely focused on offering a creative digital solution to science education. The programming, a mix of videos, prompts and projects, cover a range of questions such as, “Where do rivers flow?” and “Could a volcano pop up where you live?” for young students.
Mystery Science CEO and founder Keith Schact explained how his product focuses on kids and educators, while Discovery Education focuses on educators and districts, making the deal feel like a “natural marriage.” Even as edtech goes directly to consumers, Schact remains bullish on the role that institutions play in true adoption of technology.
“You can go straight to teachers and get a certain market share,” he said. “But the institutions still do have a big role.” The founder likened the dynamic to the state of media: With the rise of blogs, you can publish directly and reach an engaged audience, but writers who want a bigger positioning tend to join larger platforms to grow their overall reach. Edtech is the same, in that some startups need an official sign-off from schools before they can reach venture-scale returns.
According to a source familiar with the transaction, Mystery Science was sold for $175 million after only raising $4 million in venture financing.
Using data management and analytics to improve student outcomes
Once the enemy of many parents, remote school has made screen time cool again. With the increased use of devices and decreased opportunities for face-to-face interactions, educators need new ways to understand students’ needs and weaknesses.
The answer is more than just asking a student to turn their camera on for Zoom school (which, in fact, could be harmful to students with a difficult family life). Instead of trying to force videos and icebreakers, teachers and administrators are turning to data services to identify which students are struggling and at risk for dropping out. It helps with student comprehension and school retention, which impacts budgeting and resource allocation.
The PowerSchool and Saga Education deals indicate a growing focus on analytics-powered learning sessions amid remote schools.
PowerSchool sells a suite of services for school operations and management, from assignments and grading, to HR, state reporting and student enrollment. With its acquisition of Hoonuit, it is bringing on more direct data management and analytics tools that are focused on educators. Hoonuit also offers teacher training that uses predictive modeling to better understand student outcomes and comprehension.
PowerSchool currently supports more than 45 million students, while Hoonuit serves more than 14.5 million. While the deal will likely bring in a healthy cohort of customers for PowerSchool, the deal is more about software than customer acquisition. Hoonuit uses machine learning to understand how attendance, behavior and academic outcomes are all tied together, thus giving a snapshot into how well a specific student is performing.
“When identifying and addressing at-risk issues, time is the most valuable resource as earlier identification means quicker intervention,” Hardeep Gulati, CEO of PowerSchool told TechCrunch. “Consolidating disparate data and applying machine learning is key for having the right insights in the right place at the right time.”
Saga Education, which offers math tutoring and mentoring to low-income students, bought a service that invested in research-backed software for math instructions — Woot Math. Woot Math’s product offers three versions of comprehension: self-led tutoring, teacher-led tutoring and peer-to-peer tutoring. Originally only an in-school service, Saga is now online with Woot Math. The software glow-up not only gives Saga placement in more homes, it also allows tutors to have a consistent relationship with their students. It’s been backed by the NSF, U.S. Department of Education and the Bill & Melinda Gates Foundation.
We’re likely to see dozens more acquisitions in the coming months, simply because every edtech founder is thinking about a new way to become differentiated in an increasingly stagnated world. Edtech as a sector has often lost out on investor interest due to overall fragmentation in services. Now, with fresh droves of capital, edtech is able to finally iterate — and consolidate — on its inefficiencies.
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