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The Chronicle of Higher Education published a story today on ed-tech funding – “What the Slowdown in Ed-Tech Investment Means for Colleges” – and I’m quoted in it, saying that we are witnessing a “real slowdown” in investment. Now that I’ve calculated the ed-tech investment totals for May, however, the numbers are up from previous months – both in terms of the number of deals and the total amount invested. Figures, right? Perhaps that slowdown was short-lived, and the downward direction we’ve seen investment numbers take since the beginning of the year will now change. Perhaps.

It’s always important to remember that ed-tech investment has a context well beyond ed-tech. There’s been quite a bit of talk in the last month or so about tech investment in general, about a larger “tech bubble” that may or may not be bursting and about the paucity of tech IPOs. Investors seem to be increasingly skittish – or at least, that’s the story that tech entrepreneurs and (some of) the tech press seem to be telling one another. There’s also been some fairly high profile belt-tightening, with Dropbox for example axing a bunch of employee perks and with tech giants like Intel and IBM announcing substantial layoffs. Sales of ping pong tables are down, which according to The Wall Street Journal, is a meaningful signal of the troubling economic health of startup culture.

Earlier this month, investment analyst firm Mattermark examined investment patterns for 2016, cautioning against labeling any of this a “slowdown”: “U.S. Venture Capital Investment Dollars Down 11% Year-to-Date, Late Stage Rounds Hit Hardest Followed by Series B.” By comparison: at the end of April, the total amount of ed-tech investment for the year was down 19% from this time in 2015. But with a sunnier showing this month, the total’s now only down 7% from the end of May 2015. The number of deals is down 20% from the same time last year. That sure seems like a slowdown, but as investment can be a fairly emotional undertaking – motivated by fear or by greed – it’s not a surprise that many have tried to signal their continued confidence in the (ed-)tech sector. “Don’t panic!” is the message. (The other message: even if startup funding dwindles, the march of technology is inevitable. Inevitable!)

As such, it will be interesting to watch the responses to news that ed-tech funding has ticked upwards in May. Of course, the levels of funding do not reflect how good any of this technology is. The survivors of the last tech bubble were not “the best” for teaching and learning; they were just the most resilient businesses at the time. And one big, outlier investment can definitely skew things – this month it was $150 million for an educational app maker called Age of Learning that was over half of the total amount raised in May. Speaking of the Dot Com bubble, Age of Learning was founded by Doug Dohring, who also founded Neopets. Never change, ed-tech. Never change.

Here are my totals for May:

  • Amount invested: $264,640,000
  • Number of investments: 21
  • Average investment size: $13,200,000 / Median: $4,500,000
  • Number of acquisitions: 8

That last figure – the number of acquisitions – is the lowest it’s been all year. But the total number of acquisitions in 2016 is up almost 24% from the same time last year. That’s good news for those hoping for successful “exits,” particularly since there have still been no education IPOs this year. Indeed, one of the best known publicly traded education companies, Apollo Education Group (owner of the University of Phoenix), finalized its sale this past month and will go private. For what it’s worth, CB Insights, which tracks VC-backed investments, says that ed-tech startup exits are down overall since peaking in 2014. Investment bankers Berkery Noyes, on the other hand, contend that education M&As were up 30% between 2014 and 2015, with almost 750 deals occurring in that time frame.

Clearly what gets defined as an education or education technology startup really matters here. I’m not saying my definition is the right one, but hey, at least my data is freely and openly available.

The types of startups with the most investment activity so far this year: student loan companies, learn-to-code startups, and tutoring companies. The type of startup most often acquired: coding bootcamps (by for-profit universities, notably). There’s some debate, of course, about whether or not loan companies “count” as ed-tech; there’s probably debate too about whether or not “career services,” something The Chronicle of Higher Education says is still attracting investor attention even with this most recent downturn, “counts” either. Or maybe there’s no debate. The more we include, the more we can argue that the ed-tech sector continues to grow unabated. “Software is eating the world” or some bullshit like that.

Sorry, there’s no graph in this post to prove whatever point I want this data to make. Make your own.

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Audrey Watters


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