Edtech Now Star Pupil in U.S. Capital Markets

By Roger James Hamilton

Feb. 22, 2021


While there were 130 edtech deals funded for a total of $2.2 billion in 2020, up from 105 deals and $1.7 billion funded in 2019, 2021 promises to the biggest year ever for edtech. Now even generalist funds are eying the edtech space. And while there are only a few high-profile public edtech companies listed on U.S. exchanges, experts say there are hundreds of private edtech companies that are ripe for acquisition.

 

Edtech is now a $10 trillion global industry, and while most U.S. edtech companies are not getting the high valuations compared to their Asian peers, there is plenty of investment pouring into the U.S. edtech sector. In fact, the valuation race may be taking a turn toward U.S. edtech companies. In January, Roblox, a San Mateo, California-based company, which teaches kids how to create and code their own educational games with 5.7 million peak concurrent users, raised $520 million at a $29.5 billion valuation. This is twice the valuation of the previously highest valued edtech company, Yuanfudao, a China based K-12 online tutoring company valued at $15 billion with 2021 projected revenue of $1 billion. Revenue for Roblox reached $588.7 million for the first nine months of 2020, up 68% over the previous nine months.

 

Roblox plans to go public via a direct listing offering in the U.S., though the timing is unclear. The previous funding round of Roblox, which was done by Altimeter Capital and Dragoneer Investment Group, was $150M at a $4 billion valuation. Welcome to the gameification of education, where millions of subscribers are creating their own metaverse while making money from selling educational games they create on the Roblox platform. Students create and potentially sell new engaging material, games that teach solving real-life problems. They also offer free lesson materials, with coding training to develop games that teach history, math, geography, art, and more.

 

There are several trends converging in the edtech sector that are driving investors’ growing appetite: the desire for lifelong learning, the need for upskilling workers, parents’ demand for more and better online learning and tutoring platforms, due to not only the covid-19 pandemic but the growth in A.I. driven learning technologies, and a desire for more personalized education.

 

According to a report by BMO Financial Group, there are “six times more education companies big enough to go public than 10 years ago” with 100 of those companies sporting enterprise values exceeding $500 million.

 

Also, the reemergence of SPACs, special acquisition corporations, particularly in the U.S. as alternative to traditional IPOs, is fueling the flow of money into edtech companies. We have identified six edtech SPACS that have raised nearly $1 billion in 2021 which does not include a deal valued at $1.5 billion between Churchill Holding Corp II and Skillsoft, which is expected to close in the first quarter of 2021. 

 

 

 

 

The highest profile person in the U.S. edtech space is Michael Moe, CEO and director of Class Acceleration Corp, NYSE: CLAS:U, a SPAC that raised $258.7 million and went public last month. Its filings state that the capital will be used to purchase a privately held education company. Moe, founder of GSV Asset Management, was one of the earliest investors in NYSE: Chegg, which went public in 2013 and announced on February 18 a $1B public offering of common stock. Moe also backed Coursera and Course Hero, private companies, both of which are valued at more than $1B. Moe’s criteria for acquisition targets in the edtech space include the following:

 

  1. Artificial intelligence and how it contributes to a personalized education experience.
  2. Learner engagement through storytelling, “Hollywood meets Harvard”
  3. Lifelong learning, includes upskilling

 

Michael Moe prophetically sums up the dynamics around the explosive growth in the edtech sector: “In the next 24 months, you’re going to see more public companies in the digital learning space. It’s going to shock people.”

 

Roger James Hamilton is a futurist and social entrepreneur. He is a NY Times bestselling author and the founder and CEO of Genius Group, the world’s No 1 entrepreneur education group. The Group has a global faculty, a global curriculum and global campuses including its online campus GeniusU, the edtech arm of Genius Group. Already they have served 1.4 million students in 200 countries, and with recent acquisitions valued at $80 million, revenue is expected to reach $35 million for 2020 with projected revenue of $100 million in 2021, the Company sees itself is as “a leader of the long-awaited revolution in education, with a bold mission to educate over 100 million entrepreneurs to achieve the 17 UN Sustainable Development Goals by 2030.”

 

EDTECH SPACS

 

  1. Edify-NASDAQ:CM EACPU, based in N.Y, raised $276M IPO, backed by Colbeck Capital Management, targeting education, edtech, workforce development and HCM companies: BMO Capital, B.F Riley FBR underwriters. Closed January 20, 2021

 

  1. EtechXU Holdings II-EDTXU: NASDAQ GS, based in U.K. Closed $100M offering December 15, 2020, Jefferies, Macquarie Capital the underwriters. Based in United Kingdom, focused on education technology, reskilling, and training.

 

  1. AditEdtech-ADEX.U: NYSE-$276M IPO-education training, education technology, closed January 19, 2021, EarlyBirdCapital and Maxim Group underwriters

 

  1. Class Acceleration: Woodside, California, $258.7 IPO, NYSE:CLAS.U- focused on the education technology sector. Investment Banker: Oppenheimer, closed January 20, 2021

 

  1. OCA Acquisition: $149.5M IPO, NASDAQ:OCAXU-Investment Bankers: Stifel Nicolaus, Nomura, sponsored by Olympic Capital Asia, focused on acquiring U.S. companies in the education technology or healthcare technology sector. Closed January 20, 2021,

 

  1. Churchill Capital Corp II: NYSE: CCX, Raised $697M in June 2019. In October 2020 announced acquisition of Skillsoft, publisher of training software for businesses, and Global Knowledge Training, an IT and professional skills company. Deal valued at $1.5B. Lead investor: Prosus.

 

Appendix

 

Six Edtech Companies Listed on U.S. Exchanges

 

  1. CHEGG, NYSE: CHGG, whose theme is “a Smarter Way to Student®”, based in Santa Clara, California, announced a $1B public offering on February 18, 2021. Morgan Stanley, Goldman Sachs are banking the deal. Currently, they are trading 20x their 2020 revenue of $644.3 million. Revenue is projected to grow 25% in 2021. Market cap: $13.2 billion. The stock is up 138% over the last 12 months.

 

With 4.4 million subscribers, their higher education platform provides homework help learning services, online writing tools, and math solver tools. The platform also helps students find internships, rent books, and find scholarships.

 

Trading 20x Revenue (ttm)

 

  1. 2U Inc., Nasdaq: TWOU

 

Revenues increased 35% to $774.5M for 2020 over 2019 and were up 32% in the first quarter to $215.3M. Based in Lanham, MD. $4B market cap, trading 5x trailing revenue, 500,000 educational offerings and 75 university partnerships, proprietary technology started with online graduate programs, now offering lifelong learning opportunities. Goal is to “build, deliver and support digital and in-person educational offerings, including graduate degrees, undergraduate degrees, professional certificates, boot camps and short courses.”

 

Trading 5x Revenue (ttm)

 

  1. Plurasite, Nasdaq: PS

 

Technology upskill platform, $3.1B market cap, $391 million revenue (going private)

 

 Trading 8x Revenue (ttm)

 

  1. Yu Group, Nasdaq: YU, China edtech, $150M revenue, 54M students, in school and after school ed tech tutoring platform, K-12

 

 Trading 20x Revenue (ttm)

 

  1. Stride Inc., NYSE: LRN, serves as online public school and private school, they focus on personalizing education for grades K-12, college prep as well as workforce training. Market cap $1.1B, revenue $1.27B

 

Trading 1x Revenue (ttm)

 

  1. Amesite, Nasdaq: AMST, uses artificial intelligence (AI) software in a cloud-based environment to deliver content for K-12, college, university and business education and upskilling. They create their own content branded for their customers.

Market cap $153M, revenue $200,000

 

Trading 500x revenue (ttm)




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