Sector Deal Dynamics – June 2019

by: Tyton Partners | Blog |Jun 4th, 2019

Educational publishing is a sector roiled by change. Last month’s head-turning announcement of the planned merger of McGraw-Hill Education and Cengage Learning was yet another stark reminder that the emergence of digital technology is continuing to lower barriers to entry in the educational content market, creating the same types of pressures on entrenched players and opportunities for up-starts that consumers have experienced in myriad other sectors.

In the K-12 sector, a greater comfort with and appetite for digital content and tools has led a growing number of school districts to forgo purchases of traditional basal content and increasingly choose from among a growing range of alternative providers. Formative and interim assessment providers like NWEA, Edmentum, Renaissance, and Curriculum Associates have benefited materially from this shift in resources as teachers have increasingly valued real-time feedback on students’ learning progress. This, in turn, has fostered a desire to tie these assessments more closely to instructional content and district buyers can now see Curriculum Associates and Renaissance (partnered with HMH) as options in basal content adoption processes.

Two deals announced this month illustrate this trend: First, Sterling Partners’ Education Opportunity Fund (EOF) announced its investment in Reading Plus, an adaptive literacy intervention and practice tool for grades 3-12. And perhaps more significantly, Renaissance announced its acquisition of Freckle Education. Freckle is a small but fast-growing, San Francisco-based digital content provider with full digital alternatives to basal content in Math, English Language Arts, Science and Social Studies. Conceived as a digital product from its inception, Freckle is loved by its teacher-users and has found itself being adopted by districts as a full replacement for traditional basal curriculum. Backed by Renaissance’s access to capital and national distribution power, and presumably tied to its assessment products, Freckle is likely to quickly emerge as the most popular publisher that no one previously knew existed.

Best,
Adam & Chris

K-12: More Evidence of Growing Consumer Presence in K-12 Learning

Kahoot!, the Oslo-based, K-12 edutainment company and self-described “Netflix of education,” announced two acquisitions in May. It has acquired both DragonBox, a start-up that builds math apps, for $18 million in a combination of cash and shares and Poio, a Norwegian reading app developer that boasts 100,000 users in Scandinavia, for $6.5 million in cash and stock. Kahoot! has already become a staple among elementary school children and by broadening its portfolio will have the ability to better leverage both its school and consumer distribution platforms.

For years, the world of gamified education was a slow-growing, hit-driven backwater in the K-12 education market. But recent datapoints – Kahoot!’s recent acquisition spree being one of them – suggest that some combination of technological development and generational change has begun to allow offerings like Kahoot! and equally fast-growing Education.com to break through the general noise of the education game market to capture more meaningful mind-share among parents and educators. We have yet to see a billion-dollar Edutainment company, but that time may not be very far off.

Higher Ed: Administrative Tools Market Heating Up

The higher education market faces numerous well-documented challenges and in recent years investors have embraced a spate of private market solutions attempting to alleviate or solve for those problems. Some of these, like OPMs and enrollment marketing firms, are focused on driving incremental revenue. Others are focused on improving processes and throughput in an effort to either improve student retention or reduce administrative and other process costs. Two deals this month are reflective of this broad trend.

RNL (formerly Ruffalo Noel Levitz), a leading provider of higher education enrollment, student success, and fundraising solutions, announced its acquisition of Converge, a digital marketing firm for higher education. Converge will deepen RNL’s marketing capabilities in three areas of increasing importance to its university clients: graduate, online, and continuing education students. Over the past seven years Converge has partnered with graduate and online programs from business schools, engineering programs, new certificate programs, and a number of elite institutions.

PeopleGrove, an online platform that connects students with alumni and mentors before, during, and after college, closed a $4.7 million Series A round of financing led by Reach Capital, with participation from Bisk Ventures, Collaborative Fund, GSV Acceleration, Launch Capital, Riverpark Ventures, and University Ventures. The platform helps universities respond to pressures they increasingly feel to better demonstrate value from their students’ experiences by activating and making explicit the beneficial social networks that exist in and around the university. Today, PeopleGrove partners with more than 180 client institutions, ranging from large public universities to smaller private institutions and liberal arts colleges.

HCM: Fueling the Trend

Two deals jumped out in May, each illustrative of emerging trends in the human capital arena. The first is the merger of Shaker International, a provider of predictive talent intelligence and assessment solutions backed by Riverside, and Montage, which provides a single solution to engage, interview and hire candidates. The combined client base includes 47 of the Fortune 100. While higher education institutions and alternative credential providers work to better understand and respond to labor market demands, Shaker Montage is one of an emerging group of companies working to help the labor market better define its needs and source talent. The emergence of entrepreneurial, tech-enabled services companies working to bridge this gap from each side is undoubtedly being encouraged by the tight job market, but we believe the progress made to apply better analytics to the still highly inefficient process of matching available talent and skills with employer needs will be of equal benefit in an economic downturn as well.

The second transaction of note, is a $5.5 million Series A raise for Interplay Learning, an Austin-based provider of online training for skilled trades utilizing virtual reality (VR) and 3D simulations which was founded in 2010. More than 70,000 students and professionals use Interplay’s products for lessons for mechanical, electrical and industrial jobs; S3 Ventures led the investment round with participation from Shasta Ventures, Sierra Ventures, Holt Ventures, Wild Basin Investments, and Shelter Capital Partners. Of all the excitement around VR content for the education market, the most concrete applications have taken place in and around industrial training, particularly in areas such as automotive and large machine training, where face-to-face instruction requires large and often expensive facilities.

Recent Deals

PreK-12

Recent Deals

PreK-12

Vän Robotics raises $200K

Iridescent raises $1.1M

Outschool raises $8.5M

ApplyBoard raises $55M

Xplorabox raises undisclosed amount

Mightier raises $6.6M

Appliqate acquires Onfire’s Learning

Zoobean raises undisclosed amount

Unruly Studios raises $1.8M

Renaissance acquires Freckle Education

Abl acquires School by Design

Little Thinking Minds raises $500K

ProQuest raises undisclosed amount

Tutor House raises $2.54M

Classplus raises $1.60M

Acadsoc raises $15M

Sawyer raises $11M

Kahoot acquires Poio

Reading Plus raises undisclosed amount

Kinteract raises $1.63M

Netflix acquires StoryBots

Kahoot! acquires DragonBox

O2B Kids Early Education acquires Brookside Academy

Excelligence acquires Letter People & DIG

McGraw-Hill and Cengage merge

Onion Math raises $44.5M

Higher Ed

Perceivant raises $590K

Pillar raises $5.5M

Upswing raises $2M

Cialfo raises $3M

CollegeDekho raises $8M

Mos raises $4M

Wiley acquires Knewton

RNL acquries Converge

People Grove raises $4.7M

Human Capital Optimization

OpenSesame raises $28M

Absorb Software acquires Torch LMS

Academy to Innovate HR (AIHR) acquires Digital HR Tech

Elucidat raises $4.43M

2U acquires Trilogy Education Services

Curiious raises $2M

Shaker International and Montage merge

Interplay Learning raises $5.5M

Acendre acquires ICS Learning Group

Pesto raises $2M

Pluralsight acquires GitPrime

Northpass raises $4M

Cluey Learning raises $20M

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