Intel Has Acquired Kno, Will Push Further Into The Education Content Market With Interactive Textbooks

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We had a tip about, and have now confirmed, Intel’s latest acquisition: Kno, the education startup that started life as a hardware business and later pivoted into software — specifically via apps that let students read interactive versions of digitized textbooks.

“I can confirm Intel has purchased Kno,” a spokesperson told us just now. The company is not disclosing deal terms but we’ll hopefully going to speak to John Galvin, the GM of Intel Education, to get more details. Since then, Intel has published a more detailed statement from Galvin on its site, which points to how Kno will fit into Intel’s efforts to build up its business in the education market — an effort it is making both in <a target="_blank" href=" wider efforts in hardware and software.

He writes:

The acquisition of Kno boosts Intel’s global digital content library to more than 225,000 higher education and K-12 titles through existing partnerships with 75 educational publishers. Even more, the Kno platform provides administrators and teachers with the tools they need to easily assign, manage and monitor their digital learning content and assessments … We’re looking forward to combining our expertise with Kno’s rich content so that together, we can help teachers create classroom environments and personalized learning experiences that lead to student success.

To date, Kno’s apps can be accessed via its iPad, Android and Windows 7 and Windows 8 apps, and the main idea behind Kno is that the books are not only digitised but also include additional features to help students and teachers assess their progress, share information with others and generally get more engaged in the content.

“They are the same books, only smarter,” the company notes on its site.

Although the pricing of the deal remains unclear, we have learned that the entire Kno team will be joining Intel as a result of the acquisition — with one notable exception. Osman Rashid, the co-founder and CEO (who is also a co-founder of Chegg), will not be joining the company. His plans after the exit remain unclear; we’re trying to find out and will update when we learn more.

“He was definitely the figurehead behind it,” Galvin admitted later to TC in an interview, but ultimately the two did not see eye to eye about the direction of Kno under Intel. “[Staying on] was something that Osman and I talked about early in the process,” he said. “But where I wanted to take Kno and where Osman wanted to take it were two different things. His direction was to continue with a North American focus and I want to go international; and for us to go international, that’s about integrating with Intel’s sales teams, working on bringing this to new markets.”

Using Kno for an international education play is not an out-of-left-field idea. The two companies had already been working together in markets like China on textbook digitising initiatives. Kno was a natural partner that that Intel Capital was among Kno’s list of investors. (The company had raised some $73.4 million in funding since being founded in 2009, with Intel leading its Series C round in 2011. In that $37.5m round, Intel invested $20m.)

“It became more attractive to me to have them be a part of the portfolio rather than just a partner,” says Galvin. He pointed out the company’s ingestion engine as a particularly interesting aspect of the business to help Intel work more closely with the publishing world.

There are also some aspects that play into Intel’s bigger investments into areas like AI and natural language processing. “Kno is a very nice e-learning platform, and perhaps eventually also a natural language support platform, with an analytics engine. The capabilities are there. We can perhaps push them into areas they weren’t ready to go in on their own,” said Galvin. He also added that there is still some IP left from the company’s previous incarnation as a hardware play, though for now the focus will be on more software development.

Hardware is an area where Intel wants to grow its presence. From reference designs for processors to use in other OEMs’ tablets to its own devices, Intel has been working hard to make sure that it remains a relevant part of the gadget equation with the move to tablets and other mobile devices (it’s been an uphill battle in mobile devices).

In education specifically, the biggest chipmaker in the world wants to take on Apple and Google — or the iPad and the Chromebook, respectively. Again, this is an uphill battle, with Apple currently holding a 94% share of the school market in the U.S. (no surprise that Intel is looking internationally).

With this acquisition, it essentially becomes the software platform for Intel’s hardware shell. It’s the same motivation that arguably led Amazon to acquire an education company, TenMarks, last month. And it wouldn’t be surprising to see Microsoft next, says BenchPrep CEO Ashish Rangnekar. (BenchPrep operates in the same space.)

A Kno-win situation?

For all the positives this deal may bring to Intel, the same may not be said for Kno. Most of the funding Kno received was for its hardware business. Why? Because distribution is a really difficult problem to solve in the education technology space, and a lot of great products die because they can’t get to scale in time.

But software is an equally tricky play because of margins. A few sources we talked to said that Kno’s gross margins weren’t exactly sky high, and though its product evolved and it continued to add great strategic partnerships, the business wasn’t blowing the roof off.

Rumors have been swirling for several months now that Kno’s principal investors have been pushing for the company to find an exit opportunity, and we’ve also heard from sources that this deal came together fast. It may not have been a huge financial victory for Kno or its investors, but ultimately Kno is better off in the hands of a company like Intel, which has enormous distribution scale behind it.