Edtech unicorns have boatloads of cash to spend following the capital boost to the sector in 2020. As a result, edtech M&A activity has continued to swell. The idea of a well-capitalized startup buying competitors to complement its core business is nothing new, but exits in this sector are notable because the money used to buy startups can be seen as an effect of the pandemic’s impact on remote education.
The data agrees. Per Crunchbase data, there were 45 edtech exits in 2019 and 24 edtech exits so far in 2021. The same database shows just 35 exits for all of 2020. As we discussed nearly six months ago, the ability to buy (and be bought) has changed.
In the past week, the consolidation environment is making a clear statement: Pandemic-proven startups are scooping up talent — and fast. Kahoot, which is set to list on the Oslo Stock Exchange within months, has bought three businesses within the past 12 months. Quizlet, which became a unicorn nearly one year ago, made its first acquisition ever last week.
To understand more about this activity, I caught up with Quizlet CEO Matthew Glotzbach and Kahoot CEO Eilert Giertsen Hanoa. We talked about trends in the space including lifelong learning, self-directed learning and more.
Q&A is a lucrative business
“To be successful students in the past decade or two, it has required self-direction,” Glotzbach said simply a few minutes into our chat. “Quizlet as a platform is helping to empower that self-directed learner and give them the tools they need to really be successful.”
To further this goal, Quizlet acquired problem-solving tool Slader last week. Unfortunately, the price of the deal was not disclosed (but don’t worry, we’ll have numbers in the next section). What we do know is that it’s the startup’s latest move to solidify its focus as a tech-powered tutoring tool rather than a simple flashcard app.
Currently, Quizlet uses its data around flashcard sets, questions and trained natural language processing tools to understand how students might respond to certain prompts. Artificial intelligence gives the company a little more flexibility to understand the different ways a student could correctly answer the same question.
With the Slader acquisition, Quizlet gets to beef up these operations, adding step-by-step explanations and modern examples to augment complex questions. About 20 folks from the Slader team will join Quizlet as part of the transaction.
Glotzbach said that Quizlet is still figuring out an “integration plan” to offer Slader to students, which means it’s unclear if the services will only be for paid users or for the free tier as well. Quizlet is one of many edtech startups that use the freemium business model, meaning that it offers part of its service for free and essentially “paywalls” other services.
We do know that the services will live under Quizlet Learn, which the CEO says is Quizlet’s most popular product. This product also includes features like progress tracking and goal setting.
As for what’s ahead, the CEO says that the company didn’t have any specific targets for future acquisitions, but did paint a picture of what he is looking for, which includes “anything that we can do to help students conquer that overwhelmed feeling when it comes to self-learning,” he said. The business is also looking into gamification opportunities to “drive engagement with science-backed nudges to provide encouragement to keep people motivated.”
Gamification makes for the perfect segue into Kahoot, a user-generated e-learning platform, that has bought triple the companies as Quizlet as it nears a public market listing.
Enterprise training continues to dominate
When Kahoot raised $215 million last October from SoftBank, the company said it plans to use “nonorganic growth” to capitalize on momentum for its business. It’s a fancy way to say it plans to acquire a boatload of companies, and the startup, valued at $2 billion, has done exactly that.
Kahoot has acquired three companies in less than six months. It bought Actimo, a platform to train and educate employees, for $33 million in September, and a month later, acquired Drops, a language learning service, for $50 million. In February, the startup bought Whiteboard.fi, an online whiteboard tool for teachers and students, for up to $12 million.
It’s clear that Kahoot is becoming a mass consolidator in the space, and when I spoke to Hanoa, he hinted at some of the reasons why: engagement, lifelong learning and community.
“We are looking for companies and teams who are really able to create an engagement with teachers [with a] very easy-to-use, compelling service that is creating a small ecosystem around it,” Hanoa said. As an example of this goal, he pointed to Whiteboard.fi, which has a “simple online whiteboard solution for teachers where teachers can see what happens on the screen, and students can see in real time on their own devices.” Drops similarly adds to the ecosystem goal — Hanoa says that adding 14 language courses means Kahoot can “extend the total experience and coverage” of the platform.
While Kahoot is most popular for the educational games it helps teachers and parents create for their students and children, Hanoa says that 60% of its revenue comes from its enterprise product that targets corporate customers and organizations. We know that companies are hungry for tech solutions to reskill their workforces, so Kahoot is validating an existent trend here. The Actimo acquisition, a platform for reskilling, shows that Kahoot is investing in businesses that immediately tie in with its revenue growth. Smart!
“Whether you’re working in theme parks or in shops or any kind of service, keeping [those employees] connected to the home base [company] is an area that is very important for us going forward,” Hanoa said.
The CEO said that Kahoot is focused on buying startups that can prove revenue and the commercial potential of their services and is only looking at companies that have a fully virtual offering.
“We believe that the plumbing [in edtech] will come from manufacturers like Apple and Samsung or Google, or infrastructure providers and public cloud services,” he said. “It doesn’t make sense for us to invest in [that kind of groundwork] because the services are so good from the big players.” In a similar vein, Google announced last month that it is rolling out a fountain of updates to its edtech services. Still, Hanoa’s lack of interest in startups with a similar foci is counter narrative, considering some in edtech view plumbing services as the key back end that is missing.
Another dynamic here is that Kahoot is planning to list on the Oslo Stock Exchange soon. The company’s shares are traded on the Merkur Market in Oslo — a stepping stone between being a fully private startup and a publicly listed company The recently priced Coursera, which opted for the upper end of its range earlier this morning, only acquired one startup before going public. Kahoot, pre-public, has acquired five startups to date, per Crunchbase. Chegg, as another data point, acquired 16 startups over its life time as a private and public company.
At the end of 2020, I argued that edtech needs to think bigger in order to win post-pandemic. It means key partnerships, surprising acquisitions and tools that meet a pandemic learner who is struggling, not a pre-pandemic student who always showed up to class on time and understood every concept from the start. Quizlet and Kahoot’s moves signal that some of that is happening. It also means the next, wild generation of public edtech companies aren’t the success of one team, they’re the success of many.
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