Angel Impact: Entrepreneurial and Economic Success Education Technology: What s Next

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1 Angel Impact: Entrepreneurial and Economic Success Education Technology: What s Next Jean Hammond, LearnLaunch - Launchpad, Hub, & Golden Seeds Bill Hughes, Pearson Donna Harris, 1776

2 Edtech = Digital Learning & Innovative Solutions Digital learning is disruptive and demanded by students, educators, and parents Innovative solutions in education can create great growing and profitable businesses 92% of teachers would like to use more edtech in the classroom Source: May 2013 Harris poll of teachers 1

3 Education is at a Crossroads Physical to Digital Personalized Learning Accountability Extreme Cost Pressure Globalization Digital delivery reduces marginal costs, introduces flexibility and provides immediate assessment Allow development of learning paths and structured response to assessment Common Core adopted by 46 states, measuring 21 st century skills. Enables a national market Lots of changes and cost pressures. College tuition keeps going up but can students get jobs? Global opportunity and some global competitors 2

4 Edtech Market Growing Fast 23% annual growth expected in next 4 years 2012 Global elearning: $90.9 billion 2017 Global elearning: $166.5 billion Edtech now less than 5% of U.S. education market K-12: $687.6 billion Higher ed: $535.2 billion Corporate/Government: $133.3 billion Source: GSV Advisors, Education Sector Factbook

5 Edtech Market Growing Fast - US Edtech now less than 5% of U.S. education market U.S. $ Billion U.S. Education Spending U.S. $ Billion U.S. elearning Spending $1,800 $14.7 $70 $1,600 $1,400 $11.0 $13.1 $149.9 $ CAGR $60 $12.3 $1,200 $1,000 $800 $600 $400 $200 $0 $133.3 $688.5 $622.1 $535.2 $788.7 $853.1 $ Education elearning Other 6% Corporate / Government 4% 5% Higher Ed 5% 18% K-12 4% 20% Total 5% 15% $50 $40 $30 $20 $10 $0 $11.2 $9.6 $28.6 $17.4 $39.8 $13.4 $9.3 $ Source: GSV Advisors, Education Sector Factbook

6 Edtech Market Growing Fast - Global Globally, edtech is growing at an even faster rate U.S. $ Billion $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Global Education Spending $399.2 $524.0 $284.2 $449.3 $172.0 $356.6 $2,197 $1,884 $1,495 $2,930 $2,626 $2, CAGR Education elearning Other 18% Corporate / Government 8% 8% Higher Ed 8% 25% K-12 6% 33% Total 7% 23% U.S. $ Billion $250 $200 $150 $100 $50 $0 Global elearning Spending $25.5 $48.8 $16.6 $32.1 $95.4 $39.0 $37.5 $149.0 $ Source: GSV Advisors, Education Sector Factbook

7 VC investment Raised, U.S. $ m Number of Investment Rounds VCs & Angels Ramping Up Edtech Investment Edtech VC topped $500 million in Q $600 $500 Later-stage VC Early-stage VC Number of investment rounds, right axis $400 $300 $ $ $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Source: TechCrunch, based on CrunchBase data 6

8 Number of Exits Many Recent Edtech Exits Source: Capstone Partners 7

9 Leading Acquirers Pearson Education 2013: Learning Catalytics; ExamDesign 2012: Global English ($90 million), Embanet Compass ($650 million) 2011: Connections Education ($400 million) Houghton Mifflin Harcourt 2013: School Chapters; Tribal Nova; Choice Solutions Rosetta Stone 2013: Lexia Learning; Livemocha McGraw Hill Education 2014: Engrade 2013: ALEKS 2012: Key Curriculum MacMillan New Ventures 2013: Late Nite Labs Desire2Learn 2013: Knowillage; Wiggio, Degree Compass Hobson s 2013: National Transcript 2012: Beat the GMAT Plato Learning 2012: Archipelago Learning ($300 million) Blackboard 2012: Moodlerooms, Netspot 8

10 Edtech IPO s on Horizon 2014 Pipeline Up to 5+ s 9

11 Characteristics of an Acquisitive Industry End user market wants changes Edtech Market End users can implement new products +++ Solution architecture is understood + Product review machinery exists + Market size is large Established players have substantial turf to protect ++++ There are growing players who also can acquire +++ There are aggressive attackers +++ Innovation opportunities both incremental & disruptive Acquisition ecosystem (bankers etc. exist) +++ Early stage investors exist, follow-on capital identified ++ Up to 5+ s 10

12 Characteristics of an Acquisitive Industry Edtech Market End user market wants changes +++ End users can implement new products + Solution architecture is understood + Product review machinery exists + Market size is large Established players have substantial turf to protect ++++ There are growing players who also can acquire +++ There are aggressive attackers +++ Innovation opportunities both incremental & disruptive Acquisition ecosystem (bankers etc. exist) +++ Early stage investors exist, follow-on capital identified ++ 11

13 Innovation Capital Available to Scale Venture Capital (# of edtech companies in portfolio) Atlas (4), Bessemer (3), New Atlantic (3), Flybridge (1), Spark (1), NextView (1) 12

14 Accelerators: Key Role at the Seed Stage Silicon Valley Boston New York City Boston Midwest Washington, D.C. Philadelphia 13

15 Edtech.. Angels Q $500 million Seed/angel deals are 30% of money and 50% of deals Last few years: $1.1 billion ~250 companies Many VC players Large increase compared with Words of Wisdom In most categories there are 5-15 startups most angel groups and most VCs are only seeing 1 play and hearing about 2-4 from the start-up So surprise entrants are still showing up likely the accelerators or a few leading players are getting a more complete view of playing field 14