Lynda.com Teaches Patience

Patience is a virtue when it comes to investing in education.  Lynda.com’s sale to LinkedIn for $1.5B is the latest in an increasingly long line of large transactions in the education market.  About this time last year, Renaissance Learning was acquired for $1.1B.  Two unicorns inside of twelve months.  In education.  Unbelievable.

Some are concerned about valuations and the flow of venture capital over the last three years in to the education space.  Back and forth on the question of a bubble here, here and here can get a little old and fast.  Timing market cycles is notoriously difficult to do but you can work diligently to know what you’re buying, who you’re investing with and a market’s underlying growth fundamentals.  By our count, nearly 65% of venture investors in edtech companies focused on post secondary education (including alternative education providers like lynda.com) in the last three years have made only one investment in the education market.  I suspect the story in the K12 edtech market would be similar.  Will these new investors be patient?

New sources of capital are needed and new investors bring new perspectives on opportunities in the market.  This is good.   Investors across asset classes with a range of risk appetites is also good.  Investors that have unrealistic expectations about time to market for products and time to exit for investment are not helpful for driving innovation in the market.  Lynda.com was founded in 1995.  Renaissance Learning was founded in 1984.  These transactions will generate enormous IRR% for those that invested recently but the real value created by these businesses were decades in the making.

Hats off to the team at lynda.com for building a business of such value.  Welcome to the team at LinkedIn to the education market.  I hope you’re in for the long haul.