The Wisdom of Crowds: Four Education Investing Trends that are Thriving

There were fewer headline-grabbing deals announced in September, though the $121M transfer of Softbank’s stake in Kahoot! to General Atlantic was notable. While the transaction might say more about Softbank than Kahoot!, it does underscore the staying power of edtech that another large, global venture investor is entering the sector in such a meaningful manner.

We are also pleased to highlight two Tyton-led deals closed in September: Childcare Education Institute was acquired by StraighterLine (see below) and Linkage was acquired by the Society for Human Resource Management (SHRM).

Last week, we were also at EDUCAUSE in force, walking the expo floor and catching sessions between meetings. Two of our consultants, Cathy Shaw and Ria Bharadwaj, participated in a panel on “Unlocking Technology’s Potential to Improve Academic Outcomes for BLI Students” based on some of our work in this area.

We hope you enjoy this month’s investing themes around crowd-driven wisdom making an impact on education moving forward. While we are highlighting some major deals in the space, we are also taking the occasion to comment on several smaller deals that collectively illustrate some consistent trends in the education investing market.

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The Wisdom of Crowds: Four Education Investing Trends that are Thriving

In James Surowiecki’s seminal work, “The Wisdom of Crowds,” he posits that large groups of people are collectively smarter than individual experts in problem-solving, decision-making, innovating, predicting, and yes, investing. And while our parents’ warnings about not following our friends off a bridge can be equally valuable investing advice, this month, we look at four current and very popular investment trends in education for insights.

The consolidation of early childcare centers

In September, we counted eight deals in the site-based PreK-12 school market globally – a trend we have been discussing for months. Though site-based school economics are largely local, smaller operations tend to be under-managed and larger operators can bring marketing, curriculum, and best-in-class operational practices that often can improve both top- and bottom-line performance. Though the private school market tends to be cyclical, investors are betting that the secular trend away from public schools sparked by COVID-19 will continue, even if the economy slows.

• UK-based Gymfinity Kids, which operates after-school activity centers, raised capital
• Nord Anglia acquired Amman Academy in Jordan
• Leeds Equity-owned Endeavor Schools acquired Mission Montessori in San Francisco
• UK-based Kids Planet acquired Kettering Nursery
• KinderCare Learning acquired Colorado-based Crème de la Crème childcare centers
• Pansophic Learning acquired Dubai-based school consulting firm BBD Education
• Netherlands-based Partou acquired UK-based All About Children
• Rockbridge Growth Equity made a strategic investment in The Nest Schools

Training and upskilling teachers

The great resignation has been particularly difficult in the K-12 education market with teacher shortages reported across the U.S. This fact, along with additional challenges created by widespread learning loss and student mental health challenges coming out of the pandemic, has created a growing need for a wider array of teacher training and professional development services. As great as this need is in the U.S. market, the issues are global in scale. Four deals announced in September illustrate this trend.

• StraighterLine has acquired Childcare Education Institute (Tyton Partners advised CEI)
• XanEdu acquired PLC Associates, a provider of training and advisory to school leaders
• India-based teacher training platform Online Live Learning raised seed capital
• ICEF has acquired Australia-based PIER digital educator training platform

Innovating in university enrollment pathways

The enrollment environment for U.S. higher education is challenging. A declining high school population and a highly competitive labor market have created meaningful recruiting headwinds for schools. This general pressure has been exacerbated by the decision at many institutions to deemphasize or eliminate the SAT and ACT testing requirements to promote greater equity in admissions. The screening function of these tests is lost to schools along with the direct mail lists of qualified applicants provided by the test registrations. Finally, inconsistent student visa policies by different presidential administrations have disrupted international admissions efforts as well. For all these reasons, universities have found themselves in greater need of third-party recruiting assistance and the private market has responded in kind with a range of potential solutions. September saw six new deal announcements from a variety of companies attempting to find new ways to connect prospective students with schools.

• Australian student-placement company, IDP Education, acquired Taiwan-based Intake Education for US $55.8M
• Vista Equity-backed EAB acquired Concourse Global, a college search platform for high school counselors
• Citizen’s Bank acquired consumer-facing college planning platform, College Raptor
• Student loan app, Sparrow, raised venture financing
• An AI-driven communication tool for college applicants, Ocelot, raised $117M in its first outside round of funding
• SavvyFi, a platform that supports college savings and student loan repayment as an employee benefit, raised venture capital

Training and test preparation for licensure

The consolidation of high-stakes test prep is a reliable edtech investing trend that seems impervious to any macro-economic speculation. The Internet has lowered the barriers for expert practitioners to innovate in creating new and better content for test prep for high-stakes exams, which had historically been a fragmented and localized collection of micro-markets. Meanwhile, financial investors have been happy to put capital behind consolidating these providers to achieve meaningful scale. While occupational hiring may fluctuate, the areas with the greatest number of high-stakes tests – health care and technology – have strong secular growth trends behind them. September saw five new deals in this area.

• Eden Capital-backed Edcetera acquired PrepFE, an exam prep platform for the Fundamentals of Engineering (FE) exam
• CeriFi acquired Solomon Exam Prep, which supports the FINRA, NASAA, and MSRB financial licensing exams
• NexPhase Capital-backed KnowFully Learning Group acquired EMT & Fire Training Inc.
• Vilnius Coding School acquired Poland-based Baltijos Kompiuteriu Akademija, an IT professional and certification training company
• India-based professional licensure exam prep company, Veranda, raised private capital

These are certainly not the only investing trends in edtech at the moment, but they are global in scope and reflect responses to real market problems that edtech is uniquely suited to solve. If you would like to discuss these trends or any other investible sectors within education, we invite you to reach out.