EdTech – Tag

Funding for EdTech Companies Hits a 10-year Low in Q1 2024

Funding for EdTech companies is down 90% from the 2021 high and is down 50% from this time last year, according to a study published by HolonIQ.

In addition, Q1 2024 saw a significant decline in demand in the core and ‘nice to have’ EdTech categories.

Overall, EdTech startups are cutting their headcount (shrinking), and global VC funding continues to wane, driven in part by high interest rates and cost of capital, as well as a lack of confidence in growth projections over the next 3-5 years.

The EdTech sector is in a holding pattern as investors try to understand the impact that AI will have on their product and service offerings.  At the same time, many leading established EdTech companies are experiencing strong organic growth in international education, education finance, ‘brick and mortar’ schools, and K12 market segments.   This makes it much more difficult for a startup to compete and gain market share.

Financial investors and strategic buyers look at VC funding rates as a leading indicator of trends in M&A valuations.  As a result, we expect that the valuation multiples for EdTech companies will decline over the next 12 months.

Update: In June 2024, investment giant Prosus wrote off its $2.1 billion investment in Byju, saying that it thinks it is currently worthless, though officials also say they hope the value of Byju can be restored.

About the Author and Jackim Woods & Co

Rich Jackim is an attorney, investment banker, and entrepreneur. For the last 25 years, Rich has been providing boutique investment banking services to small and middle-market companies in over 30 industries.

In addition to running a successful M&A advisory firm, Rich founded a successful training and certification company called the Exit Planning Institute, which he sold to a private family office in 2012.

Rich is also the author of the critically acclaimed book, The $10 Trillion Dollar Opportunity: Designing Successful Exit Strategies for Middle Market Businesses.  It became an Amazon best-seller in the business consulting category the year it was published.

If you own an education or EdTech business and are interested in exploring your options, I would welcome an opportunity to speak with you. There is no cost or obligation to you and all discussions are completely confidential.

Feel free to contact me at 224-513-5142 or rjackim@jackimwoods.com.

Acquisitions in the Education and Edtech Sectors in 2024

The following is a summary of mergers and acquisitions transactions in the education and edtech sectors in 2024.  We will update this post every two weeks as we work with more clients and learn of other deals in the sector.

The education and edtech sectors have been off to a slow start in 2024.  This is following a significant drop in valuations in 2022 and 2023 as edtech companies no longer benefited from the COVID boost in 2022, and many were no longer profitable in 2023.

For many in the industry, 2023 was a tumultuous year. Numerous deals were close to closing but fell apart during due diligence. Interest rates continued to rise, inducing anxiety around the cost of borrowing and requiring buyers to require a higher overall return on their investment, which depressed valuations.

At the same time, investors had to rethink their investment criteria due to a rash of bad decisions they made during the frenzy of the COVID pandemic.  Since then, most Edtech investors opted to take a much more cautious and conservative approach after making investments at inflated valuations in 2020 and 2021 that might have made sense during COVID, but now appear ridiculous in hindsight. Post-COVID, entire segments of the education sector have been shaken up – from the increased regulation on for-profit Title IV colleges and regulations that effectively put OPM providers “on life support” to concerns about the implications surrounding the expiration of ESSER funds and the effect that will have on preK-12 education.

As a result, valuations for small, medium, and large edtech companies are back to their pre-COVID levels and are still significantly higher than valuations for traditional businesses. The average small and medium-sized edtech company is valued at 2x to 3x trailing twelve-month annual recurring revenue.

Acquisitions in the Education and Edtech Sectors in 2024

Below is a summary of the mergers and acquisition transactions in the education and edtech sectors so far in 2024.  This is by no means an exhaustive list as many smaller transactions are never announced.  This list only represents the deals we have learned about through our network or that we have been directly involved in.  I’ll do my best to update the list every two weeks.

In November,

H.I.G. Capital and Thoma Bravo signed a definitive agreement to acquire CompTIA Brand and Products. CompTIA is the world’s largest and most well known information technology (IT) certification and training organization focused on promoting industry growth and skills development across the global IT ecosystem and its millions of professionals.

KidsKonnect, a Netherlands-based early-years organization, has acquired NoodleNow, a UB-based teacher training provider for early childhood education, to expand into the UK.

Vitality, a UK-based behavioral health platform, has acquired WellSpark, a US-based coaching provider, to integrate its tools into existing health plans.

In October,

EQT AB, a Swedish investment firm, acquired international schools operator, Nord Anglia Education, for $14.5 billion, making it one of the largest Education deals in since the pandemic. Nord Anglia Education operates over 80 schools in 33 countries and educates more than 85,000 students a year.

ILAC Education Group acquired the US-based UniApplyNow, a university admission platform, to strengthen its North American higher education platform customer base. The terms were not disclosed.

Trainocate, an IT education company, acquired EnterOne, an advanced technology training and services provider, to expand Trainocate’s global presence.

Boathouse Capital’s portfolio company, Guidewell Education, acquired College Matchpoint to expand college admissions support for students nationwide.

OffSec, a US-based cybersecurity training provider, was acquired by Leeds Equity Partners.

In September,

Novakid, a provider of online English language lessons for K-12 students, acquired Lingumi, a U.K.-based English learning app.

The online university, Western Governors University, acquired Craft Education, an education technology company that specializes in apprenticeship programs.

Savvas Learning Company, K-12 learning solutions provider, acquired Pointful Education, a provider of online career and technical education courses.

A Swiss media-centric investment firm, CosmoBlue Media, acquired Macademia, a gamified education provider for children.

TouchMath, a US-based K12 math education provider, has acquired Classworks, a K12 math EdTech firm, to expand its product offerings.

In August,

Roper Technologies agreed to acquire Transact Campus, a higher ed payment and ID company, for $1.5 billion.

IT company Climb Global Solutions acquired Douglas Stewart Software & Services, an SaaS solutions company focused on education, for $20.3 million.

In July,

Neuberger Berman, a U.S. asset manager, is close to acquiring a minority stake in Nord Anglia Education, an international network of schools. Insiders report that the Neuberger Berman will invest $15 billion in the deal.  That would be the largest K-12 deal in years.

IXL Learning, the company that owns Rosetta Stone and Dictionary.com, acquired Carson Dellosa Education, a teaching supplies publisher. The amount was not disclosed.

Instructure, the public company that makes the Canvas learning management system that is used by many schools and colleges, will be taken private by the large private equity group, KKR in a transaction worth $4.8 billion. That’s the single largest edtech deal in years.  At the same time, Instructure acquired student records management platform Scribbles.

School safety software company Raptor Technologies acquired payments and ticketing provider PayK12.

Intelvio, a healthcare education company backed by Eden Capital, acquired the Professional Crisis Management Association (PCMA). PCMA is a crisis management training and certification company based in Sunrise, Florida. The acquisition enhances Intelvio’s existing behavioral health offerings and expands the Company’s overall healthcare training platform.

Edwin Group, the UK’s largest provider of supply teachers, what we in the U.S. call “substitute teachers” was acquired by Quad Partners, a U.S.  based private equity firm, highlighting the potential growth of solutions to address global teacher shortages.

The animation studio Hobbes was acquired by Duolingo, the very popular language learning app.  No terms were disclosed.

The Indian edtech giant Byju filed for bankruptcy protection.  The company will likely sell off its operating divisions and edtech products.  This flood of deals on the market is likely to depress valuation of edtech companies for the next 12 months.

EdPower, a LMS provider in the U.S. was acquired by Prometric, a US-based testing and assessment provider.  The terms were not disclosed.

Genius Teacher, an Indian EdTech that provides content for primary school teachers was acquired by Schoolnet, a US K12 management system.

In June,

The College of Court Reporting, an Indiana-based nationally accredited, degree-granting court reporting college was acquired by a strategic buyer that owns and operates several other vocational colleges.  Jackim Woods represented the seller and arranged the transaction.

Instructure, (NYSE: INST) a Utah-based learning management software company, acquired Scribbles Software, a North Carolina-based company that provides software solutions for K-12 school districts, to bolster it’s K12 offering. The terms of the transaction were not disclosed.

TicTac Group, a Swedish company providing e-learning solutions, acquired Skillhabit, a Swedish AI-driven learning platform.

PepTalkHer, a New York-based coaching platform, acquired Mettacool, a Wisconsin-based E-learning and coaching platform.  The terms of the transaction were not disclosed.

Raptor Technologies, a Texas-based provider of school safety software, acquired PAYK12, an Indiana-based cloud-based education finance management company.

Children’s publisher Scholastic acquired 9 Story Media Group, which produces children’s content for $182 million.

Digital curriculum company Imagine Learning has acquired CueThink, a platform that uses artificial intelligence tools to improve students’ critical thinking in math instruction.

While not an acquisition, there is an interesting update on Byju.  Investment giant Prosus says that wrote off its $2.1 billion investment in Byju’s stating they now believe its 9.6% investment in the company is worthless.  This will certainly have a chilling effect on valuations in the edtech sector.

ClearCompany, a provider of human capital management software, owned by Gemspring Capital, acquired Brainier Solutions Inc. (“Brainier”), a leading provider of innovative learning management software for corporate clients. The terms of the deal were not disclosed.

In May,

PowerSchool, a K-12 software company, announced that it may go private in a $6 billion deal with Bain Capital, according to press reports. The deal is pending.  We will update the details once the deal is finalized. This is likely to be the largest edtech deal to date.

Follett School Solutions acquired MasterLibrary, maker of a facility management platform. The terms were not disclosed. MasterLibrary allows districts to manage facility scheduling, work orders, fees, rentals, and reservations, as well as access, edit, and customize floor plan drawings.

Class Over, a K-12 online course provider, is being merged with Battery Future Acquisition in a $135 million deal.

Domoscio, a French adaptive learning platform, was acquired by Rise Up, a French active learning platform, to expand its offerings in the space.

Tustawi, a digital education platform in Kenya, was purchased by Castnet Learning, an online education platform. This acquisition will allow Castnet to expand its service offerings to Kenya.

95 Percent Group, a literacy curriculum provider in the US, acquired Sortegories, a language learning app for K12 students. This acquisition will expand 95 Percent Group’s digital offerings for language learning.

In April,

Basis Vectors Capital, a private equity firm focused on vertical SaaS, acquired Cadient Talent, a talent acquisition solutions provider in the hourly hiring sector , to expand their portfolio of SaaS solutions and to expand Cadient’s growth. The terms were not disclosed.

Follet School Solutions acquired MasterLibrary, a K-12 solutions provider. The amount was not disclosed.

Wonderschool acquired ChildcareMatters, a substitute teacher staffing platform. The amount was not disclosed.

LEORON Institute, a corporate training EdTech company, acquired UAE-based XpertLearning, the leading professional training and development provider in the Middle East, to expand their market expansion in the region.

The tech training and development solutions provider, GenSpark, acquired ProGrad, an Indian end-to-end sourcing, screening, and training solutions provider, to broaden their service offerings in the APAC and Indian markets.

Kangarootime, a childcare management software provider for early education centers, acquired Clay, an AI-powered lesson planner. The terms were not disclosed.

Keystone Partners, a career transition and outplacement services provider, acquired CEC, which offers certification and training for coaching careers. The amount wasn’t disclosed.

Viking Mergers & Acquisitions, a business brokerage firm, acquired Sea School, a maritime licensing and education provider.

CareerArc, a hiring and recruiting company, acquired Lumina, a leading SaaS platform for generating visual job postings at scale. The amount wasn’t disclosed.

The content curation platform, Wakelet, acquired Bulb, a digital portfolio provider used primarily by teachers and job applicants, for an undisclosed amount.

IXL Learning, creator of adaptive online learning systems, as well as the owner of Rosetta Stone, acquired Dictionary.com for an undisclosed amount.

Wonderschool, a startup that provides software and support to help individuals and local governments spin up childcare businesses, has acquired EarlyDay, which operates an early childhood educator marketplace. The terms of the transaction were not disclosed.

In March,

the children’s publisher Scholastic acquired 9 Story Media, a children’s content producer and distributor, for a reported $186 million.

StraighterLine, an online course provider, acquired ProSolutions Training, an early childhood education training provider, for an undisclosed amount.

The online learning platform Skillshare completed its acquisition of Superpeer. The acquisition will expand Skillshare’s on-demand course offerings. The terms of the deal were not disclosed.

Accenture acquired Udacity, one of the pioneers of large-scale online courses. The terms of the deal were not disclosed, but it was announced at the same time Accenture announced a $1 billion investment to create a new learning platform focused on AI, called LearnVantage.  Accenture reportedly paid only $80 million for Udacity, which back in 2012 had raised over $300 million in venture capital investments.

Leeds Equity Partners acquired TouchMath, a K-8 math curriculum provider.

The U.S.-based language learning solutions provider, Wayside Publishing, , acquired Nualang, which develops tools for world language classrooms. The transaction details were not disclosed.

Kido International, an international daycare and preschool design, technology and learning company, acquired Amelio Early Education, a preschool and daycare operator. The amount was not disclosed, but is estimated to be north of $7.5 million.

Ellucian acquired EduNav, an academic planning and student success tool platform, for an undisclosed amount.

HMH acquired Writable, which provides a K-12 writing assessment and practice solution.

In February,

Communications and attendance software provider SchoolStatus acquired SchoolNow, a 25-year-old company that offers K-12 districts a website, app, and social media management platform.

Cognia, a forward thinking nonprofit organization laser-focused on improving educational opportunities for all learners, has agreed to purchase CenterPoint Education Solutions, a nonprofit organization that specializes in building cohesive education systems consisting of high-quality curriculum, aligned assessments, and expert professional learning.

CentralReach, publisher of autism software for special education teachers and caregivers, purchased New Jersey-based social and emotional learning software provider SILAS.

Podium Education, a career accelerator platform that partners with colleges to offer for-credit learning experiences to help students gain in-demand skills and work experience as part of their degree, acquired Untapped, a career opportunities software company, for an undisclosed amount.

Savvas, a K-12 solutions company, acquired Outlier.org, which offers online dual credit courses. The amount was not disclosed.

The National Association for Community College Entrepreneurship acquired SkillPointe, a skill-based career platform, for an undisclosed amount.

Avenue Growth Partners acquired a minority stake in BridgeCare, an infrastructure platform for early childhood education, for $10 million.

Google acquired Edlyft, an AI tutoring platform, for an undisclosed amount.

In January,

Oliver Solutions, a digital training platform, acquired Spiffy for an undisclosed amount.

Instructure Holdings, Inc. (Instructure) (NYSE: INST), the leading learning ecosystem and maker of Canvas, announced today it has completed the acquisition of Parchment, the world’s largest credential management platform and network.

Avathon Capital acquired Magical Beginnings, a network of early childhood learning centers in Massachusetts, for an undisclosed amount.

Google acquired Edlyft AI Tutor, an AI-powered STEM upskilling platform that seeks to make computer science education more accessible, especially for Black students.

Quantum5, an automotive training platform acquired Trivie, an AI-powered provider of a workforce engagement platform that personalizes learning content.

Avathon Capital, a private equity firm, acquired Magical Beginnings Learning Centers, a Massachusetts-based network of early childhood education centers.

ETS, the language testing company that runs TOEFL, acquired PSI, a U.S.-based language testing company. The amount was not disclosed.

Follet School Solutions, a K-12 edtech company, acquired Livingtree, a platform for fundraising management, for an undisclosed amount.

PowerSchool acquired Allovue, a K-12 financial planning, budgeting and analytics software provider, for an undisclosed amount.

Intelvio, a healthcare education company backed by Eden Capital, acquired Classward, an online provider of continuing education for aspiring and current EMS professionals. Classward’s EMS content complements Intelvio’s growing platform focused on solving healthcare employee shortages across the US.

Upgrad Education announced that it is in negotiations to acquire Udacity.  It also stated that it intends to raise $100 million, a large part of which will be used to finance the purchase, according to media reports.

We will update this post every two weeks as we learn about other transactions and close more deals in the education sector.

Read our previous article for information about mergers and acquisitions deals in the education sector in 2003 or our previous article about mergers and acquisitions deals in the education and edtech sectors that closed in 2002.

About the Author and Jackim Woods & Co.

Rich Jackim is an education industry investment banker, education industry entrepreneur, and former mergers and acquisitions attorney.

For the last 25 years, Rich has been providing boutique investment banking services to middle-market companies in the education sector.

Rich also founded a successful training and certification company called the Exit Planning Institute, which he sold to a private equity group in 2012.

Rich is also the author of the critically acclaimed book, The $10 Trillion Dollar Opportunity: Designing Successful Exit Strategies for Middle Market Businesses.

Jackim Woods & Co offers skilled mergers and acquisitions advisory services to privately owned schools, colleges, and EdTech companies in both sell-side and buy-side transactions. Jackim Woods & Co has arranged over 100 successful transactions, ranging from less than one million to more than eighty million dollars in value.

If you own an education-related business and are interested in exploring your options, I would welcome an opportunity to speak with you. Feel free to contact me at 224-513-5142 or rjackim@jackimwoods.com.

Mergers and Acquisitions in the Education Industry in 2022

This post provides an overview of mergers and acquisitions activity in the education and edtech sectors in 2022

The education sector took some significant twists and turns when the COVID-19 pandemic changed the world. We saw a surge of new users, and new tools, around online learning; but we also saw people and organizations in 2020 and 2021 rethinking how to get the best out of learning environments overall. Now that COVID is largely behind us, 2022 is a year to take stock of how different education related companies evolved and grown.

McGraw Hill acquired Boards & Beyond, a provider of on-demand video libraries and comprehensive online resources for medical students, for an undisclosed amount.

Global University Systems acquired FutureLearn for an undisclosed amount.

GoStudent acquired Studienkreis for an undisclosed amount. This is GoStudent’s 4th acquisition.

The Riverside Company, a private equity group, acquired Applied Educational Systems (AES), a provider of digital career and technical education content for K-12 schools and career centers. AES is an add-on to Riverside’s iCEV platform, a leading developer of SaaS-based digital curriculum, instructional materials and industry certifications.

Universal Technical Institute, a provider of vocational education and  skilled trades programs, acquired healthcare-related higher ed provider, Concorde Career Colleges, Inc., for $50 million.  Concorde Career Colleges has 16 brick and mortar campuses and roughly 11,200 enrolled students in its allied-healthcare programs.

Solutions provider Follett School Solutions acquired the library management system Access-It Software Ltd.

Apogee, a company that offers technology services for higher ed, acquired Cumulus Technology Services, a cloud services consultancy.

The education communications and analytics provider SchoolStatus acquired Smore, a Tel Aviv-based K-12 email newsletter provider that’s widely used in the U.S.

Publisher McGraw Hill acquired the on-demand video library for medical students, Ryan Medical Education, LLC d/b/a Boards and Beyond. The amount was not disclosed.

As mentioned above, London-based FutureLearn was acquired by Global University Systems, a global for-profit higher ed provider based in the Netherlands.

California-based Mattel, one of the biggest toy sellers in the world, acquired Caribu, a digital reading app for families, for an undisclosed amount.

Higher education solutions provider Top Hat acquired STEM learning platform Aktiv Learning.

University Headquarters acquired Discover Early Childhood EDU, an informational guide about degree offerings.

BiC, one of the world’s biggest pen sellers, acquired Advanced Magnetic Interaction, a company that’s focused on “augmented” human-computer interaction.

Learnsoft, a learning management system provider, raised $16.7 million in Series A funding led by Elsewhere Partners.

Discovery Education, a digital edtech platform provider, acquired Pivot Interactive, which has a library of interactive educational science videos. Discovery has private equity backing from Clearlake Capital, and it also acquired DoodleLearning earlier in the month.

EarlyDay, an early childcare education career marketplace, raised $3.25 million.

The children’s publisher Scholastic acquired Learning Ovations, which runs a literary assessment and instructional system.

Edlio, a K-12 communications technology company, acquired SchoolInfo, a mobile app creator for schools.

LumiQ, a Canada-based company that runs a podcast for training chartered professional accountants, raised $5 million for expansion in the U.S.

Roper Technologies, Inc., announced it has reached an agreement to acquire the school administration software provider Frontline Education in a transaction valued at $3.725 billion.

Akili Interactive, which is developing a video game treatment for pediatric ADHD, raised $163 million in a merger with the special purpose acquisition company (SPAC) Social Capital Suvretta Holdings Corp.

Upkid, an on-demand marketplace for childcare centers and teachers, raised $1.7 million in a pre-seed round.

Outcome Group, Inc., an education financing company, announced it has received new debt facility from Variant Investments, LLC, to expand its education portfolio.

Alchemy, a Web3 developer, acquired ChainShot, a coding bootcamp company, for an undisclosed amount.

Renaissance Learning, an educational software services company, acquired Illuminate Education for an undisclosed amount, according to an email sent to Illuminate customers.

Discovery Education, a digital learning platform, acquired the UK-based math and language arts product provider DoodleLearning for an undisclosed amount.

Vsauce’s Curiosity Box subscription service was acquired by science subscription provider MEL Science. It reportedly closed for $12 million.

The future-of-learning private equity firm Achieve Partners acquired Helios Consulting, a certified Workday advisory partner, to build out its apprenticeship programs.

Cybrary, a cybersecurity and IT career development company, raised $25 million in Series B funding.

Territorium, a skill acquisition edtech company, closed $4.4 million in seed funding.

Creative Galileo, an early learning platform, raised $7.5 million in Series A funding.

Pearl, leading research backed, all-in-one tutor management platform, announced its seed fundraising has passed $4 million.

Arist, a microlearning platform, raised $12 million in Series A funding.

APDS, a public-benefit corporation whose advanced career readiness platform offers career training to incarcerated people, raised $7 million in Series C funding.

Class Technologies announced it has closed its acquisition of Blackboard Collaborate.

Kangarootime, an early childhood education software management company based in Buffalo, NY, closed $26 million in Series B funding.

Coding Dojo, a coding boot camp company, raised $10 million. The Bellevue, Washington-based organization trains software engineers both in-person and online and has experienced more than 100% year-over-year growth over the last two years.

upGrad, a Mumbai-based “unicorn” and test-prep company, doubled its valuation after a $225 million funding round. It’s now valued around $2.25 billion. The nonprofit Educational Testing Service was involved in the funding round.

Elevate K-12, the leading provider of high-quality live-streaming instruction for US K-12 classrooms, raised a Series C $40M round of funding led by venture capital firm General Catalyst.

Velocity Career Labs, a startup that wants to create a blockchain-based platform to manage employee’s credentials, raised $6.5 million in funding.

Multiverse, an apprenticeship facilitator, founded in London and now co-headquartered also in New York — has closed a Series D of $220 million, with its post-money valuation coming in at $1.7 billion. StepStone Group (not to be confused with recruiting platform StepStone) and previous backers Lightspeed Venture Partners and General Catalyst all co-led this round, with Founders Circle Capital and past backers Audacious Ventures, BOND, D1 Capital Partners, GV and Index Ventures also participating.

Cambly, a language learning app, raised $60 million in Series B funding, which is encouraging because language learning apps are a rarity in the VC-backed consumer tech space because they have struggled to make money.

Prenda, a K-8 micro-school company, announced a $20 million Series B funding round. The Series B is being led by Seven Seven Six (776), Alexis Ohanian’s firm, with strong participation from edtech-focused VC Learn Capital, Modern Venture Partners, Peak State Ventures, and the companies original angel investors also participating.

Achieve Partners acquired a majority stake in Boclips, a company that curates educational videos.  Boclips works with publishers and education providers worldwide to enrich learning with the world’s best educational videos and podcasts. Boclips is the trusted destination for rich media that are vetted for quality, sourced from leading creators, and curated specifically for education.  Achieve Partners is engineering the future of learning and earning by investing in cutting edge technologies and novel business models to bolster skill development and secure the future of work for millions of Americans.

IXL Learning, a learning platform company, acquired Curiosity Media, which develops language learning services.

BibliU, a learning platform, announced it has raised $15 million in funding. All existing institutional Series A investors – Stonehage Fleming, Oxford Science Enterprises, Guinness Ventures, and Nesta Impact Investments – participated in the round.

Beable Education, an online literacy recovery platform, acquired Readorium, a leading provider of educational software that teaches reading comprehension skills through science text differentiated to students’ reading levels.

Go1, a hub of on-demand corporate training resources, announced that it raised more than $100 million in a new round of funding, bringing its total market valuation to over $2 billion.  The funding was co-led by AirTree Ventures and Five Sigma, with SoftBank Vision Fund 2, Salesforce Ventures, Blue Cloud Ventures, Larsen Ventures, Scott Shleifer and John Curtius from Tiger Global, TEN13, M12 (Microsoft’s venture fund), Madrona Venture Group, SEEK and Y Combinator also participating.

Riverside Insights, a leading developer of research-based assessments and analytics, today announced its acquisition of Aperture Education, the leading provider of research-based social and emotional learning (SEL) assessments for K-12 schools. With more than 65 years of combined research and SEL experience, Aperture sets the standard for research-based SEL assessment solutions.

Elsevier, a global leader in research publishing and information analytics and part of RELX, has closed the acquisition of Interfolio, a provider of advanced faculty information solutions for higher education, headquartered in Washington DC, US. For over 20 years, Interfolio has supported academics, researchers, higher education institutions and funders. Interfolio’s portfolio includes Faculty Information System (FIS), Dossier, and Researchfish.

India-based startup PW, or PhysicsWallah, has raised $100 million in its Series A funding, the profitable startup said Tuesday. Westbridge and GSV Ventures financed the startup’s first institutional round, which values the two-year-old firm at $1.1 billion (post-money). The company offers low-cost education classes. According to the company’s CEO, “The firm has been profitable since inception with positive cash flow and reserves.”

Guild Education, which provides and manages education-as-a-benefit programs for employers, raised $175 million in a Series F funding round. The round was led by Wellington Management, with participation from Oprah Winfrey, Bon Secours Mercy Health, Citi Impact Fund, and existing investors. The latest funding brings the Denver-based company’s total valuation to $4.4 billion.

About the Author and Jackim Woods & Co.

Rich Jackim is an education industry investment banker, educational industry entrepreneur, and former mergers and acquisitions attorney.

For the last 25 years, Rich has been providing boutique investment banking services to middle-market companies in the education sector.

Rich also founded a successful training and certification company called the Exit Planning Institute which he sold to a private equity group in 2012.

Rich is also the author of the critically acclaimed book, The $10 Trillion Dollar Opportunity: Designing Successful Exit Strategies for Middle Market Businesses.

Jackim Woods & Co offers skilled mergers and acquisitions advisory services to privately owned schools, colleges, and EdTech companies in both sell-side and buy-side transactions. Jackim Woods & Co has arranged over 100 successful transactions, ranging from less than one million to more than eighty million dollars in value.

If you own an education-related business and are interested in exploring your options, I would welcome an opportunity to speak with you. Feel free to contact me at 224-513-5142 or rjackim@jackimwoods.com.

How to Value an EdTech Company: Multiples & Example

One of the hardest things to do when building an EdTech business is determining its value. Whether you are seeking growth capital or looking to exit, you need to have a basic idea of what your business is worth.  If you value your business too high, investors won’t be willing to speak with you.  If you value it too low, you leave money on the table or end up giving away too much equity to raise the growth capital you need. So, how do you calculate a reasonable value for your EdTech company?

Well, the valuation methodology outlined below applies to all EdTech companies, regardless of when you are pre-revenue, established, or looking to exit.

How to Value an Edtech Company: Multiples & Example

The global Edtech industry is expected to reach a market value of over $340 billion by 2025. Because of strong underlying market trends, the Edtech sector has received some of the highest tech valuations, with publicly traded EdTech companies trading at 5.0x to 18x  next twelve months’ revenue (NTM)!  These valuations dropped significantly in late 2021 and early 2022, but are expected to rebound.  See our article on EdTech multiples.

If you are the founder of an EdTech company and are thinking of raising a round of growth capital, you’re at the right place. In this article, I’ll provide a step-by-step guide on valuing any Edtech company.

First and foremost, it’s important to understand that EdTech companies are not valued like traditional businesses. Valuations of conventional businesses are based on the company’s free cash flow. With EdTech companies, the most common valuation method is what’s referred to as the Venture Capital approach, which values companies based on a multiple of revenues.

In this article, we’ll use publicly-traded companies in the Edtech industry for comps so you can follow along and use them to value your EdTech business.

Note: If you need help preparing a pitch book for investors, contact us to learn how we can help you prepare a solid Edtech pitch book that will significantly increase the odds of a successful capital raise.

Venture Capital Edtech Valuation Method

There are several startup and early-stage valuation methodologies. While none of them is perfect, they all try to estimate a valuation for a business based on several qualitative and quantitative factors. The Venture Capital Valuation Method is the most common method investors use to value Edtech companies.

The VC method considers business fundaments, market demand, and investor return on investment factors.

Why Do Investors Use the Venture Capital Method to Value an EdTech Company?

The VC method is a relatively simple and straightforward way to value an early-stage EdTech company because it is driven by several factors that can be grouped into 4 categories.

1. Market Demand

Your EdTech company will be more valuable if you demonstrate that it is part of a large, highly fragmented market that is growing at double or triple digits.

2. Market Fit & Adoption

Your EdTech company will be more valuable to investors if you prove that the business has early adopters or users (market-fit) and that people are willing to pay for your service (adoption.)

3. Management Team & Track Record

Your Edtech company will be more valuable to investors if you demonstrate that your management team has relevant sector experience and a successful track record of growing similar businesses.

4. Investor’s Expectations & Founder’s Negotiating Power

Last but not least, keep in mind that investors are willing to back EdTech startups and early-stage companies because they can earn a substantial return on their investment. If a startup is deemed too expensive, it reduces an investor’s return on investment, and they won’t invest.

At the same time, the more investors you can pitch to and the more term sheets you receive, the better your negotiating position and the higher the valuation.

The Three Value Drivers When Valuing an EdTech Company

The VC method allows founders and investors to estimate an EdTech company’s value by inputting three main variables:

1. Projected Revenues

Projected revenues are usually based on an integrated financial model that includes projected revenue for the next five years. Keep in mind that unless your financial model, and the assumptions that drive it, are supported by facts and hard data, investors will take them with a grain of salt. So it’s important to work with an independent, objective financial advisor who can help you develop a rock-solid set of projections.

2. Comparable Industry Valuation Multiples

Investors rely heavily on valuation multiples from comparable companies within the same industry and sector. The most common multiple used is EV/Revenue, which stands for Enterprise Value as a multiple of Revenue. See below for 2022 public Edtech company valuation multiples.

These multiples change daily and are sensitive to many variables, including interest rates, stock market performance, IPO results, M&A activity, market demand, etc.

3. Investors’ Required IRR

The other important variable is the rate of return investors are looking for. An investor’s required IRR (“Internal Rate of Return”) depends on the type of investor, the EdTech company’s stage, and the investment’s perceived risk. The higher the perceived risk, the higher the required IRR. For example, an investor would need a higher IRR for a seed money investment in an EdTech startup than for an investment in an early-stage EdTech company looking for a Series A or Series B round of financing.

Edtech Valuation Example

Now that we’ve covered how the Venture Capital valuation method works let’s see how to use it to value an early-stage Edtech company looking to do a Series A capital raise.

Prove Market Fit & Adoption

The first thing to do is create a detailed, integrated financial model that includes historical financial data and operating metrics. This is important because your historical performance will prove market fit & adoption and support the assumptions you use to create your projections.

Expected Revenues

The next step is to create detailed revenue and expense projections for five years. While the valuation is based on a multiple of revenues, it’s also important to know your operating and growth assumptions to determine how much capital you need to raise to hit your revenue targets.

Need help building an integrated financial model and projections? Contact us for a free, no-obligation consultation.

So, for this example, let’s assume your EdTech company is in the K12 reading sector. You’ve been in business for three years and have been funded by personal funds and friends and family investors. Your business now has 450 subscribers and is generating $250,000 in revenue, and your subscriber base grew by 100% last year. You built an integrated financial model with historical results and projected revenue for the next 5 years. The projections show that next year you expect revenues to be $625K and grow to $4.1 million in Year 5.

Below is a very basic example of projected revenues for the next five years.

Public EdTech Valuation Multiples

The next step is determining the right multiple to use to value your business.

Investors track over a dozen publicly traded Edtech companies to gauge the market’s appetite for EdTech investments.

While the multiples vary a lot from company to company, each is based on investors’ assessments of the company’s market demand, business model, management team, growth rate, and profitability.

Below is a sample of some of the public EdTech companies we track.  Be sure to read this excellent article from the venture capital group, GSV Ventures regarding the valuation of publicly traded EdTech companies.

In our example of the VC valuation method, we will use the Sector Average EV/Revenue multiple of 4.0.

Keep in mind that when preparing a valuation of your EdTech company, it’s important to select the comparable companies that are the most like the company you are trying to value. That won’t always be possible, but to support your valuation, you’ll need to explain to investors why you selected the comparable companies you picked rather than others.

Adjusting the Multiple for a Private EdTech Company

Because we started with valuation multiples from public companies, we need to adjust that multiple to reflect that your EdTech company is privately owned. Privately owned companies are less valuable than publicly traded companies because they are much more difficult, time-consuming, and expensive to sell. As a result, investors apply an Illiquidity Discount, also referred to as a Discount for Lack of Marketability, of between 20% and 30%.

Let’s use a 25% discount, which results in an adjusted EV/Revenue multiple of 3.0x.

Determining Your Exit Value

The next step in the VC Method is to calculate your EdTech company’s value when your investors exit. In this example, we assumed the exit would be after five years. This is called the Exit Value.

Exit Value = EV/Revenue x Revenue at exit (Year 5)

Year 5 Revenue = $4.1 million

EV/Revenue Multiple = 3.0x

Exit Value = 3.0x x $4.1 million

Exit Value = $12.3 million

Investors’ Required Rate of Return (IRR)

The next step is determining the return on investment your investors will seek. The internal rate of return (IRR) required by investors will vary depending on the investor, the stage of the EdTech company they’re investing in (early-stage deals require higher returns than later-stage deals), and the industry trends.

Based on our experience, VCs typically look for a 40-60% IRR on the companies they invest in. Over the last few years, venture capital firms, on average, have generated a 19.8% IRR. Keep in mind that this is an average, so it includes their failed deals (the ones that went wrong) as well as their success stories. They look for a 40%-60% IRR because providing venture capital is a high-risk business, and an estimated 80% of the deals they invest in are unsuccessful or don’t live up to expectations.

In this example, I’ll use 40%IRR as a low-end and 60% IRR at the high-end expected rate of return.

Keep in mind that as your EdTech venture becomes more proven and successful, the perceived risk of the investment goes down, so investors will be willing to accept a lower IRR.

Calculating Your Post-Money Valuation

The next step is to calculate your Post-Money value. Let’s assume you are looking to do a Series A capital raise, so we will also assume investors will require a 40-60% IRR over the next five years.

Using these IRR assumptions, we discount the Exit Value back to its present-day value to estimate the post-money valuation of your business. The post-money valuation is your EdTech company’s value after receiving the infusion of capital. In contrast, a pre-money valuation is the value of your EdTech company as it is today, without the injection of capital.

Post-money valuation = Exit Value / (1 + IRR)^5

Post-Money Value = $12.3 million/(1 + 40%)^5 = $2,287,865

This is the high end of the post-money valuation range, based on the lowest expected rate of return.

To calculate the low end of the post-money valuation range, use the highest expected rate of return.

Post-Money Value = $12.3 million/(1 + 60%)^5 = $1,173,466

This means the post money value of your early-stage EdTech company is between $2.3 million to $1.2 million.

It’s interesting to note that while we calculated the Exit Value using a 4.6x multiple (from the publicly traded EdTech companies), the EV/Revenue multiple for your early-stage EdTech company is much higher and between 4.7 and 9.2 times your current revenues of $250,000.

Getting the Best Terms

Finally, remember that the post-money valuation arrived at above is for 100% of your business. When doing a capital raise, it’s important to raise as much capital as possible while giving up as little equity as possible in exchange.

To get the best terms from potential investors without giving up all your equity, your integrated financial model must include an accurate estimate of your operating expenses so you can figure out exactly how much capital you need.

If your projections show that you need $1 million in growth capital, you may be able to raise the capital you need and only give up 44% of the equity in your company ($1M/$2.3M=44%) in exchange.

The other important this you can do to limit the amount of equity you give to investors is to work with an experienced investment banker. An investment banker who knows the education space can help you build a compelling investment deck, create an integrated financial model backed by solid assumptions, and introduce you to more investors. The more investors you speak with and the more term sheets you receive, the better terms you’ll get.

 About the Author and Jackim Woods & Co.

Rich Jackim is an education industry investment banker and educational industry entrepreneur, and former mergers and acquisitions attorney.

For the last 25 years, Rich has been providing boutique investment banking services to middle-market companies in the education sector.

Rich also founded a successful training and certification company called the Exit Planning Institute which he sold to a private equity group in 2012.

Rich is also the author of the critically acclaimed book, The $10 Trillion Dollar Opportunity: Designing Successful Exit Strategies for Middle Market Businesses.

Jackim Woods & Co offers skilled mergers and acquisitions advisory services to privately owned schools, colleges, and EdTech companies in both sell-side and buy-side transactions. Jackim Woods & Co has arranged over 100 successful transactions, ranging from less than one million to more than eighty million dollars in value.

If you own an education-related business and are interested in exploring your options, I would welcome an opportunity to speak with you. Feel free to contact me at 224-513-5142 or rjackim@jackimwoods.com.