While venture capitalists are pouring funding into edtech startups, the surge of interest isn’t coming without pressure.
Edtech companies are searching for new ways to tap into a booming market. As Course Hero co-founder Andrew Graeur put it, the goal for his Q&A platform went from reaching a million subscribers to “many millions” as a result of the COVID-19 pandemic.
One way edtech companies are approaching these unprecedented times is by raising extension rounds that are earmarked specifically to bring on strategic partners from around the world. The approach of trading equity for a chance at globalization is neither rare nor cheap, but comes with new weight given the sector’s boom.
Today, ApplyBoard closed a $55 million extension round for its Series C, which now totals $130 million. ApplyBoard helps international students search and apply to universities and colleges across the world. It wants users to think of it as a Common App for international students, serving as a college undergrad application.
A spokesperson for the startup — which became a unicorn valued at over $1.4 billion in May — says the round did not change its valuation. Instead, the financing was “less about funding, and more about the partners that we were able to bring on board as a result.”
And the key partner who was part of the deal? Education Testing Services (ETS) Strategic Capital, the new investment arm of ETS, the world’s largest nonprofit education testing and assessment organization. ETS also administers the TOEFL English-language proficiency test and the GRE graduate admissions test.
It’s clear that ETS and ApplyBoard have some beneficial synergies. In a statement, ApplyBoard noted that the two businesses will help provide prospective international students with a new end-to-end experience that includes standardized testing, searching and the college application process.
Labster’s recent $9 million Series B extension round is another example of an equity investment aimed at bringing on a strategic partner. The VR laboratory startup raised the small check off the heels of a $21 million Series B financing to bring on GGV as an investor. Jenny Lee, a Shanghai-based partner with GGV, will take a board seat at Labster.
With GGV on board, Labster is looking to strengthen its position in Asia. Breaking into new markets often requires a strategic investor with an informed perspective regarding how that market operates, thinks, and, most importantly, learns. Asian markets are particularly lucrative for edtech companies because consumer spending is higher compared to the North American market.
Labster CEO and co-founder Michael Jensen says Labster has been conservative in raising cash since being founded in 2012. The strategic check only came when they saw an opportunity to open a global door. To date, inclusive of this round, Labster has raised $40 million in venture capital.
I’ll end with Duolingo’s $10 million raise in late April. The company, last valued at $1.5 billion, told TechCrunch that the check came with a board observer seat from General Atlantic, a global edtech investor in OpenClassrooms, Ruangguru and Unacademy.
The $10 million check also welcomed Duolingo’s first outside investor in almost three years. Along with the transaction, an existing stockholder sold some stock to General Atlantic to give it any even bigger stake in Duolingo.
Duolingo, similar to ApplyBoard, noted that there was a limited need to raise more primary capital. The check, instead, was for General Atlantic’s global reach and experience with online education in Asia.
Edtech’s boom is well-known at this point. It seems now that our focus should be more on what those startups are doing with the new cash, since the ability to raise means much less than the ability to make money.
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