In 2015, the investing community sat up and took notice of edtech. LinkedIn acquired Lynda, and ever since, more analysts have been meticulously studying the growth of edtech funding and innovation. With $1.85 billion raised in 2015, and a nod from Mary Meeker’s 2015 report, more people are starting to realize that the Internet has just begun to impact education.
Since 2014, I have noticed an increase in volume and diversity among strategic buyers. Ten years ago, edtech startups were often sentenced to slow growth — or “death by integration” within a big publisher. But today, edtech firms are generating unprecedented interest from big brands like Google and Amazon, while driving scale through unconventional education business models.
Are the days of big publishing’s R&D by acquisition a thing of the past? What do the interests of edtech’s new strategic buyers tell us about what’s to come?
Get closer to the classroom
Life in the classroom is changing fast. It’s hard for big, albeit well-intentioned companies, to stay on top of the latest trends and teacher preferences. As a result, teacher-founded businesses are more appealing than ever to strategic buyers. Tech-savvy teachers, turned entrepreneurs can bring design thinking to bear on corporate strategy.
Earlier this year, for example, Renaissance Learning gobbled up cloud storage and content management service uClass for its products and services. uClass founder Zak Ringelstein was a teacherpreneur who knew first-hand how to create authentic solutions for real-world education problems.
Don’t take your parents to the prom
The head of M&A from one strategic buyer told me that entrepreneurs should get out and meet the leaders of big publishers or edtech firms — and even potential competitors — proactively and in-person. The idea seemed crazy at first, as big companies almost always rely on advisors and bankers to broker deals and facilitate introductions. But even tiny companies should get to know their bigger siblings right off the bat.
When TES Global was courting Wikispaces prior to its acquisition in March of 2014, the founders were the face of buying conversations, not an investment banker. Companies who know they are “acquirable” should be capable of running deal conversations themselves, without giving away proprietary strategies and insights.
Be nimble, but credible
Startups pride themselves on being able to pivot, but there’s a fine line between adaptive and unpredictable. We meet with a lot of the same companies throughout the course of the year at conferences and events and often see wild swings in their product and strategy, which can be a turn off.
Focus on what you do well and help partners and potential buyers understand your unique value.
Companies that get acquired aren’t chasing financial returns — they’re going after results for the long haul. Sophisticated education investors and strategic buyers understand that progress takes time. Rather than exaggerated usage numbers, they look for high-quality adoption and a proof of concept, particularly with district, school or parent customers.
When you assume, you…
Tell your story objectively; don’t adapt your vision based on what you think buyers want to hear. Bigger players can be powerful allies and provide a platform to help earlier-stage products make an impact. But, the first meeting often only gives a sliver of the broader, long-term strategy. You may not know why your product or tool is interesting as a part of a corporate strategy or product suite initially, and that’s okay.
Andrew Joseph, co-founder of Tenmarks, never expected Amazon to be a strategic buyer for their math intervention business — and while the strategy remains confidential, it’s clear that the long-term vision for Amazon in edtech represents a massive departure from the way we have historically thought about the role of content and technology in education.
Focus on what you do well and help partners and potential buyers understand your unique value rather than boiling the ocean with a vision that falls short of reality. Candor and focus are not only great values to embrace in partnerships, they’re also indicators of whether a management team will succeed in executing a strategy as part of a larger organization.
It’s hard to spot patterns in edtech M&A, given the range of divergent interests and business models that are being experimented with today. Without a doubt, the most consistent trend is, perhaps, inconsistency.
Early exists, or exits at all, aren’t going to be the right move for every entrepreneur — but I’m encouraged that new and bigger corporate platforms are creating an unprecedented opportunity for entrepreneurs to scale ideas that work more quickly, solve challenges and make an impact.