Education Technology: What’s Next

Jean Hammond, LearnLaunch - Launchpad, Hub, & Golden Seeds

Bill Hughes, Pearson

Donna Harris, 1776

Angel Impact: Entrepreneurial and

Economic Success

• Digital learning is disruptive …and demanded by students, educators, and parents

• Innovative solutions in education can create great growing and profitable businesses

April 4, 2014 1

Edtech = Digital Learning & Innovative Solutions

April 4, 2014

92% of teachers would like to use more edtech in the classroom

Source: May 2013 Harris poll of teachers

Education is at a Crossroads

April 4, 2014 2 April 4, 2014

Extreme Cost

Pressure

Lots of changes and cost pressures. College tuition keeps going up but can students get jobs?

Personalized Learning

Allow development of learning paths and structured response to assessment

Globalization

Global opportunity and some global competitors

Accountability

Common Core adopted by 46 states, measuring 21st century skills. Enables a “national” market

Physical to Digital

Digital delivery reduces marginal costs, introduces flexibility and provides immediate assessment

Edtech Market Growing Fast

April 4, 2014 3

Source: GSV Advisors, Education Sector Factbook 2012

April 4, 2014

• 2012 Global eLearning: $90.9 billion

• 2017 Global eLearning: $166.5 billion

23% annual growth expected in next 4 years

• K-12: $687.6 billion

• Higher ed: $535.2 billion

• Corporate/Government: $133.3 billion

Edtech now less than 5% of U.S. education market

Edtech Market Growing Fast - US

April 4, 2014 4

Source: GSV Advisors, Education Sector Factbook 2012

Edtech now less than 5% of U.S. education market

$687.6 $788.7 $853.1

$535.2

$622.1

$688.5 $133.3

$149.9

$162.2

$11.0

$13.1

$14.7

$0

$200

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$600

$800

$1,000

$1,200

$1,400

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2012 2015 2017

$5.4 $9.3

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$28.6

$39.8

$9.6

$11.2

$12.3

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$10

$20

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$60

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2012 2015 2017

U.S. Education Spending U.S. eLearning Spending

2012-2017 CAGR

Education eLearning

Other 6% —

Corporate / Government

4% 5%

Higher Ed 5% 18%

K-12 4% 20%

Total 5% 15%

U.S. $ Billion

U.S. $ Billion

April 4, 2014

$16.6 $39.0

$69.0 $48.8

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$149.0

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2012 2015 2017

$2,227 $2,626

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2012 2015 2017

Edtech Market Growing Fast - Global

April 4, 2014 5

Source: GSV Advisors, Education Sector Factbook 2012

Globally, edtech is growing at an even faster rate

Global Education Spending Global eLearning Spending

2012-2017 CAGR

Education eLearning

Other 18% —

Corporate / Government

8% 8%

Higher Ed 8% 25%

K-12 6% 33%

Total 7% 23%

U.S. $ Billion

U.S. $ Billion

April 4, 2014

VCs & Angels Ramping Up Edtech Investment

April 4, 2014 6

Source: TechCrunch, based on CrunchBase data

Edtech VC topped $500 million in Q1 2014

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Early-stage VCNumber of investment rounds, right axis

2009 2010 2011 2012 2013 2014

April 4, 2014

Many Recent Edtech Exits

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April 4, 2014 7 April 4, 2014

Source: Capstone Partners

Leading Acquirers

• Pearson Education – 2013: Learning Catalytics; ExamDesign – 2012: Global English ($90 million), Embanet Compass ($650 million) – 2011: Connections Education ($400 million)

• Houghton Mifflin Harcourt – 2013: School Chapters; Tribal Nova; Choice Solutions

• Rosetta Stone – 2013: Lexia Learning; Livemocha

• McGraw Hill Education – 2014: Engrade – 2013: ALEKS – 2012: Key Curriculum

• MacMillan New Ventures – 2013: Late Nite Labs

• Desire2Learn – 2013: Knowillage; Wiggio, Degree Compass

• Hobson’s – 2013: National Transcript – 2012: Beat the GMAT

• Plato Learning – 2012: Archipelago Learning ($300 million)

• Blackboard – 2012: Moodlerooms, Netspot

April 4, 2014 8 April 4, 2014

Edtech IPO’s on Horizon

April 4, 2014 9

Up to 5+’s

2014

Pipeline

End user market wants changes Edtech Market

End users can implement new products +++

Solution architecture is understood +

Product review machinery exists +

Market size is large +++++

Established players have substantial turf to protect ++++

There are growing players who also can acquire +++

There are aggressive attackers +++

Innovation opportunities both incremental & disruptive +++++

Acquisition ecosystem (bankers etc. exist) +++

Early stage investors exist, follow-on capital identified ++

Characteristics of an Acquisitive Industry

April 4, 2014 10

Up to 5+’s

Characteristics of an Acquisitive Industry

End user market wants changes +++

End users can implement new products +

Solution architecture is understood +

Product review machinery exists +

Market size is large +++++

Established players have substantial turf to protect ++++

There are growing players who also can acquire +++

There are aggressive attackers +++

Innovation opportunities both incremental & disruptive +++++

Acquisition ecosystem (bankers etc. exist) +++

Early stage investors exist, follow-on capital identified ++

April 4, 2014 11

Edtech Market

April 4, 2014

Innovation Capital Available to Scale

Venture Capital (# of edtech companies in portfolio)

– Atlas (4), Bessemer (3), New Atlantic (3), Flybridge (1), Spark (1), NextView (1)

April 4, 2014 12 April 4, 2014

Boston

Accelerators: Key Role at the Seed Stage

Silicon Valley

April 4, 2014 13

Philadelphia Midwest

New York City Boston

April 4, 2014

Washington, D.C.

April 4, 2014 14

Edtech ….. Angels

Q1 2014

• $500 million

• Seed/angel deals are 30% of money and 50% of deals

Last few years:

• $1.1 billion

• ~250 companies

• Many VC players

Large increase compared with 2003-2010

Words of Wisdom

In most categories there are 5 -15 startups … most angel groups and most VCs are only seeing 1 play and hearing about 2-4 from the start-up So “surprise” entrants are still showing up … likely the accelerators or a few leading players are getting a more complete view of playing field