By Mitch Leventhal and Ina Tang
In our first article, we briefly described the industry sectors comprising the Eduspace. We divided the industry into six (6) sectors and seventeen (17) subsectors. In this installment, we are going to focus on one of the hottest sectors – Educational Technology.
The educational technology sector is booming. According to the National Venture Capital Association, investments in this sector ballooned to $429 million in 2011 from $146 million in 2002.
In our analysis, we have divided Educational Technology into six (6) subsector
Learning Management Systems (LMS)
LMSs are software applications for student administration, documentation, tracking, reporting and delivery of education courses. These platforms have become very popular in recent years as education institutions expand their online offerings. Some representative LMSs are Blackboard, Moodlerooms and Schoology.
Assessment Management Systems (SMS)
AMSs are integrated technology solutions that collect and analyze student data. These systems allow educators to track student performance and use data to make informed decisions. Some examples are Escholar, Questar Assessment and Edusoft.
Instructional technologies include assistive and adaptive technologies, classroom management tools, and hardware such as computers, interactive whiteboards and student response systems. Effective use of these technologies enhance teaching and learning in classrooms. Iclicker and Turning Technologies are two companies in this subsector.
Social Learning Networks (SLN)
SLNs are online community for different stakeholders- administrators, teachers, parents, and students- to collaborate, discuss and share resources. For example, Claco is designed for teachers to collaborate with each other and Chegg is an online community for students to share information on textbook, scholarships and help each other on homework.
E-Learning is broadly defined as any learning or training that occurs online or delivered via tablets and mobile devices, including learning games, online classes and tutoring. Examples of e-learning companies include General Assembly, Codecademy and Duck Duck Moose.
Education & Career Planning
Education & career planning includes online portal or platforms that help students plan for education and career success. For example, Alltuition provides online planners to help students and families manage the college financial aid process and myEdu offers tools to help students manage college and get a job.
Of the 266 U.S. private equity firms that we have identified as of July 2013, 177 have made investments in Ed Tech. Three firms – ImagineK12, Macmillan New Ventures, and Rethink Education – exclusively specialize in this sector. Forty six (46) firms are interested in information technology in general and have included Ed Tech companies in their portfolios. The others are mostly firms with a broad investment focus, with education just being one sector of interest. Some of the most active firms in Ed Tech, ranked by number of education investments, include ImagineK12, Learn Capital, NewSchools Venture Fund, 500 Startups, and New Market Ventures.
Based on our examination of publicly available sources, these capital providers have together invested in 156 Ed Tech companies. Among the Ed Tech companies receiving funding, 45% are E-Learning platforms, 15% are SLNs and 14% are LMSs. A few of these Ed Tech companies have received investment from more than one private equity firm. For example, ClassDojo, a real time behavior monitoring platform, has raised capital from at least six private equity firms. Knewton, a technology company that uses data to personalize online learning content for individual students, has also received investment from at least six firms.
Several major trends are strongly encouraging investment in educational technology. The dramatic ongoing culture shift toward ubiquitous computing on mobile devices is keeping educational technology in the spotlight. The emphasis on outcomes-based learning and assessment at both schools and colleges demands creative solutions. At the same time, regulatory challenges faced by for-profit higher education enterprises has chilled investment in that sector, and has caused investors to seek alternate opportunities. For these reasons, we believe in the potential of Ed Tech, and we think that this sector will soon replace for-profit schools/institutions as the most popular sector for investment.
In future articles, we will discuss patterns of equity investment in the other Eduspace industry sectors.
@ 2013 Mitch Leventhal and Ina Tang