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Booming edtech M&A activity brings consolidation to a fragmented sector

As the COVID-19 pandemic continues to force teachers, students and parents to adopt new technologies, edtech’s total addressable market has massively grown in the last several months. The shift has urged venture capitalists to pour money into the sector accordingly, ushering a number of startups into the unicorn club.

But maturation doesn’t just mean bigger checks and high-flying unicorns — it also brings exits.

Edtech M&A activity is buzzier than usual: In the last week, Course Hero, a startup that sells Netflix-like subscriptions to students looking for learning and teaching content, bought Symbolab, an artificial intelligence-powered calculator. Saga Education, a tutoring nonprofit backed by Comcast, the Bill & Melinda Gates Foundation and others, acquired math software platform Woot Math. We also saw PowerSchool, which sells a suite of software services to manage schools, scoop up Hoonuit, a data management and analytics tool for educators. Finally, K-12 curriculum company Discovery Education bought K-5 science and stem curriculum upstart Mystery Science.

It’s a lot of news in a short period of time. Luckily, these consolidations offer some directional guidance regarding where some edtech businesses think the future of their industry is headed.

Smart content as a competitive advantage

Content, to an extent, is commoditized. If you can find a free tutorial on Youtube or Khan Academy, buy a subscription to an edtech platform that offers the same solution? The commodification of education is good for end-users and is often why startups have a freemium model as a customer acquisition strategy. To convert free users into paying subscribers, edtech startups need to offer differentiated and targeted content.

Edtech exits show a need for better plumbing

The Course Hero and Mystery Science deals show us that edtech businesses are hungry for personalized, targeted content. Course Hero’s acquisition of Symbolab was essentially a deal for more than a decade’s worth of data that captured which math questions students found hardest.

Symbolab is a math calculator that is set to answer over 1 billion questions this year. With each answer, Symbolab adds information to its algorithm regarding students’ most common pain points and confusion. Course Hero, in contrast, is a broader service that focuses on Q&A from a variety of subjects. CEO Andrew Grauer says Symbolab’s algorithm isn’t something that Course Hero, which has been operating since 2006, can drum up overnight. That’s precisely why he “decided to buy, instead of build.”

“It made a lot of sense to move fast enough so it wouldn’t take up multiple years to get this technology,” Grauer said. The deal was made as big companies get in the Q&A game too, he noted. Google acquired homework helper app Socratic in 2019 and Microsoft built Microsoft Solver in the same year.

Discovery Education, a curriculum provider for K-12 classrooms, acquired San Francisco-based K-5 STEM curriculum provider, Mystery Science. Discovery Education has launched a series of other products focused on science education, including Discovery Education Experience, the Science Techbook series and STEM Connect.  However, Mystery Science is largely focused on offering a creative digital solution to science education. The programming, a mix of videos, prompts and projects, cover a range of questions such as, “Where do rivers flow?” and “Could a volcano pop up where you live?” for young students.

Mystery Science CEO and founder Keith Schact explained how his product focuses on kids and educators, while Discovery Education focuses on educators and districts, making the deal feel like a “natural marriage.” Even as edtech goes directly to consumers, Schact remains bullish on the role that institutions play in true adoption of technology.

“You can go straight to teachers and get a certain market share,” he said. “But the institutions still do have a big role.” The founder likened the dynamic to the state of media: With the rise of blogs, you can publish directly and reach an engaged audience, but writers who want a bigger positioning tend to join larger platforms to grow their overall reach. Edtech is the same, in that some startups need an official sign-off from schools before they can reach venture-scale returns.

According to a source familiar with the transaction, Mystery Science was sold for $175 million after only raising $4 million in venture financing.

Using data management and analytics to improve student outcomes


Source: Tech Crunch

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WeWork employees used an alarmingly insecure printer password

A shared user account used by WeWork employees to access printer settings and print jobs had an incredibly simple password — so simple that a customer guessed it.

Jake Elsley, who works at a WeWork in London, said he found the user account after a WeWork employee at his location mistakenly left the account logged in.

WeWork customers like Elsley normally have an assigned seven-digit username and a four-digit passcode used for printing documents at WeWork locations. But the username for the account used by WeWork employees was just four-digits: “9999”. Elsley told TechCrunch that he guessed the password because it was the same as the username. (“9999” is ranked as one of the most common passwords in use today, making it highly insecure.)

Read more on Extra Crunch

The “9999” account is used by and shared among WeWork community managers, who oversee day-to-day operations at each location, to print documents for visitors who don’t have accounts to print on their own. The account cannot be used to access print jobs sent to other customer accounts.

Elsley said that the “9999” account could not see the contents of documents beyond file names, but that logging in to the WeWork printing web portal could allow him to release other people’s pending print jobs sent to the “9999” account to any other WeWork printer on the network.

The printing web portal can only be accessed on WeWork’s Wi-Fi networks, said Elsley, but that includes the free guest Wi-Fi network which doesn’t have a password, and WeWork’s main Wi-Fi network, which still uses a password that has been widely circulated on the internet.

Elsley reached out to TechCrunch to ask us to alert the company to the insecure password.

“WeWork is committed to protecting the privacy and security of our members and employees,” said WeWork spokesperson Colin Hart. “We immediately initiated an investigation into this potential issue and took steps to address any concerns. We are also nearing the end of a multi-month process of upgrading all of our printing capabilities to a best in class security and experience solution. We expect this process to be completed in the coming weeks.”

WeWork confirmed that it had since changed the password on the “9999” user account.

Decrypted: How Twitter was hacked, GitHub DMCA backfires


Source: Tech Crunch

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Is fintech’s Series A market hot, or just overhyped?

Ryan Falvey
Contributor

Ryan Falvey is co-founder and managing partner at Financial Venture Studio, an early-stage fintech venture capital firm.
More posts by this contributor

Theo Katsoulis
Contributor

Theo Katsoulis is an associate at Financial Venture Studio.

According to industry reports, venture capital deal-making has notably rebounded since dropping off briefly in March as shelter-in-place orders gripped much of the country.

As seed-stage fintech investors, this has certainly been our experience: “Hot” deals are getting funded faster than ever, and we increasingly see the large multistage global funds competing for the earliest access to companies. However, in our experience and anecdotal conversations with other early-stage investors, that excitement has not been translating to the Series A stage.

We’ve increasingly wondered if the Series A market in fintech is really as hot as it seems. As pre-seed and seed-stage investors, we know that the health of the Series A market is of critical importance.

In early October 2020, the Financial Venture Studio put together a brief survey of the Series A market in fintech and shared it with more than 100 investors with whom we work closely. Despite the high-level numbers indicating a healthy market, our research indicates a market that remains in flux, with significant ramifications for early-stage founders.

Why Series A is so interesting

Although the seed and pre-seed fintech market continues to attract substantial entrepreneurial and investor interest, it is also in some ways one of the easiest parts of the market to fund. The check size is smaller, the velocity of new deals is highest, and while the potential returns are also the highest, this is also the part of the market where information is most scarce. Perhaps counterintuitively, the fact that there is so little information on a business — aside from a plan, a team and maybe some early anecdotal evidence to support the vision — actually makes it easier to “pull the trigger” on deals where those data points align. There just often isn’t a lot more to dig into.

Similarly, by the time a company is raising Series B capital, they typically have some objective evidence that the idea is working. Companies are typically generating revenue, small teams have grown and become more sophisticated in how they operate, and importantly, the governance functions of a company have (hopefully) begun to take shape. The simple existence of a board member with invested capital at stake means that some of the more existential risks of the earliest stage have been mitigated.

In contrast, one of the big milestones for any startup has been to raise a Series A from an institutional investor. Besides an infusion of capital (which is often 2-3x the aggregate capital a company may have raised since its inception), this “stamp of approval” lends credibility to a small company that is trying to hire talent, sell to customers, and, in most cases, raise substantial subsequent capital.

Thus, it’s critical that Series A investors remain active; if not, many of these upstart companies may fail due to a lack of investment, even if they are able to demonstrate early market traction. The Series A funding market is one of — if not the most — critical funding stage in the innovation economy because it acts as a bridge between scrappy early innovation and commercialization at scale.

It stands to reason, then, that dollar amounts invested may not be the best barometer of the ecosystem’s health. What really matters is the volume of companies being funded and the variety of product approaches being pursued.

The post-COVID Series A

Once the initial shock of the pandemic wore off, the VC community had to get back to business, which admittedly is harder to do for funds that write $10 million+ checks and like getting to know founders in person. Still, Series A investors made it a point to let entrepreneurs know they were, and continue to be, “open for business.”

As investors have gotten more comfortable with the new normal, they have been more open to a virtual diligence process. Of the firms we surveyed, only 15% stated they have not completed a Series A investment during COVID-19 work restrictions. Of the firms who completed a Series A investment during COVID-19 (~85%), about half invested in a company whose founder(s) they had a limited or no relationship with prior to the onset of shelter-in-place orders.

The shift to a virtual environment means that process is more important than ever. Numerous investors have cited their renewed focus on following a structured approach to sourcing and diligence. The interpersonal aspect remains important to close a deal, but customer references, referrals from trusted seed-stage investors and a heightened scrutiny of metrics are all at the forefront of investors’ evaluations.


Source: Tech Crunch

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Original Content podcast: Bill Murray’s charm can’t hide the sadness of ‘On the Rocks’

“On the Rocks,” a new film on Apple TV+, focuses on a troubled marriage between Laura (a writer played by Rashida Jones) and Dean (a startup executive played by Marlon Wayans). When Laura begins to suspect Dean of cheating on her, she turns to her father Felix (Bill Murray) for help.

The film reunites Murray with his “Lost in Translation” director Sofia Coppola. It can feel feather-light at times, thanks to his seemingly effortless charm — it’s hard to resist Felix when he’s singing to a bar full of strangers or devouring caviar during an impromptu stakeout. But the script and performances also make it painfully clear that he’s let Laura down as a father, and that her disappointment hasn’t gone away.

As we discuss on the latest episode of the Original Content podcast, we loved watching beautifully shot footage of Murray and Jones in classic New York City bars and restaurants. We were, however, a bit less satisfied with the ending, which doesn’t really do justice to all the thorny emotional issues that the film raises.

In addition to reviewing “On the Rocks,” we also discuss Netflix’s imminent U.S. price increase and the new trailer for the pandemic thriller “Songbird”.

You can listen to our review in the player below, subscribe using Apple Podcasts or find us in your podcast player of choice. If you like the show, please let us know by leaving a review on Apple. You can also follow us on Twitter or send us feedback directly. (Or suggest shows and movies for us to review!)

And if you’d like to skip ahead, here’s how the episode breaks down:
0:35 “Emily in Paris” listener response
4:50 “Songbird” trailer discussion
9:14 Netflix price discussion
15:50 “On the Rocks” review
33:00 “On the Rocks” spoiler discussion


Source: Tech Crunch