Intern journalist | Chen Zhenfang
A few days ago, the US venture capital Reach Capital released a report that in 2021, the US education technology company invested $8.2 billion, equivalent to nearly four times the total of $2.2 billion in 2020.
Last year, U.S. venture financing totaled $330 billion, with edtech companies accounting for 2.5 percent. Under covid-19, edtech companies have attracted investment from many of the world's leading funds – including A16z, Coatue, General Catalyst, IVP, SoftBank, TCV and Tiger Global Fund.
"More market liquidity, better price/performance ratio." Before the outbreak, few edtech start-ups developed enough to generate a return on investment from home runs. Reach Capital believes that this is the reason why education companies attract investment, and at the same time lead to shorter investment times, an increase in single investments, and increased competition for popular projects.
Wang Yungang, a partner at the TSVC Fund, told Interface Education that due to the impact of the epidemic, although the amount of investment (in the US education technology industry) has doubled many times, the capital mainly flows into the online education field, and the increase in other education sectors is not large.
"The (U.S.) investment industry as a whole is in a state of 'more money, less good projects', so early-stage start-up projects that can get financing have relatively higher valuations. Over the past year or so, the valuation range for Pre-A companies has reached $20 million to $50 million, at least three to four times higher than before the pandemic. Wang Yungang told Interface Education.
The top 21 edtech financing deals in the U.S. in 2021 accounted for 70% of the $8.2 billion total.
Image source: Reach Capital
Among them, corporate training occupies the largest share. Under the wave of resignation, the retention and training of employees in enterprises is particularly important, and it also causes great pressure on enterprise recruitment.
Corporate training firm Articulate Global secured the largest deal with a cumulative investment of $1.5 billion; BetterUp, a coaching platform for executives, received two rounds of funding last year totaling $486 million.
K12 and higher education are rapidly digitizing. The COVID-19 pandemic has accelerated the use of digital tools in schools, helping to maintain teaching and provide other critical support.
For example, Presence Learning is a provider of teletherapy and online special education-related services, with a cumulative financing of $350 million. Out school mainly provides children's interest courses, with two rounds of financing totaling $185 million.
Reach Capital expects the global demand for K12 digital teaching and assessment to double by 2025, with the market reaching $42.5 billion. Digital content will cement its position in the curriculum space, where Amplify and Newsela raised $215 million and $100 million, respectively, to expand their space long dominated by traditional publishers.
In higher education, Course Hero is rapidly scaling up to meet student demand for digital learning resources. As traditional hiring decreases, universities and companies are more closely connected, helping students find jobs.
The trend of C-end teaching for young children is prominent. Lovevery, a maker of physical and digital activities for young children, raised $100 million after a year of rapid subscription growth. Age of Learning, the developer of early learning app ABC mouse, raised $300 million in funding. ClassDojo, which connects parents to children's classrooms, raised $114 million.
Coursera, Duolingo, Instructure, Powerschool, Nerdy and Udemy have gone public over the past year, and the number of these six IPO events has exceeded that of the past decade combined.
"This suggests that the public market in the (U.S.) edtech space is finally starting to heat up and, like valuations of other tech companies, it's starting to value edtech companies based on their business, growth, and profits." Gone are the things that used to be. Reach Capital said.
In the private market, the U.S. edtech sector is also completing large-scale consolidation deals at higher valuations.
According to an analysis by investment bank Berkery Noyes, the total volume of global education mergers and acquisitions increased from 433 to 457 in 2021, an increase of 6% year-on-year. Total transaction value increased from $21.36 billion to $30.22 billion, up 41% year-over-year. The median revenue multiple increased from 2.5 times in 2020 to 3.5 times in 2021.
One of the biggest deals was the private equity Platinum Equity's $6.4 billion acquisition of publisher McGraw-Hill. The most active buyer is India-based Byju's, which acquired U.S.-based Tynker and Epic.
"The larger the exit deal for an investment project, the higher the valuation." HolonIQ, a global education think tank, said that of the world's 33 edtech tech unicorns, the United States accounts for 15, and huge valuations can often justify huge sizes.
On the last day of 2021, secondary market stock prices plummeted into 2022, with edtech companies not being spared by rising inflation and interest rates.
Valuation differences between public and non-public markets have the potential to dampen enthusiasm and investment activity, raising concerns. Reach Capital said in the report that investors were renegotiating terms at lower valuations and that the boom may be giving way to restraint and order.
"With the macroeconomic downturn, probably this year, at most in the first half of next year, the investment bubbles in the US edtech industry will burst one after another, and now it may be the last wave of carnival before the darkness, and soon everyone will start to live a hard life." Wang Yungang told Interface Education.
Looking forward to 2022, Wang Yungang believes that the United States will make a strong return to overseas education and training abroad. In the past two years, due to the epidemic and visa problems, the industry has been almost cut off, and the situation will change this year.