EdTech Spending: Where is the Money Going?

Edtech M&A: A Surge in Acquisitions

Following substantial investment in the education technology sector in 2020, numerous edtech unicorns now possess significant financial resources.

Consequently, the volume of mergers and acquisitions (M&A) within edtech has been steadily increasing.

While acquisitions of competitors by well-funded startups are a common strategy, the current wave of exits is particularly noteworthy.

The capital driving these purchases can be directly linked to the expanded need for remote education spurred by the pandemic.

Data Highlights the Growing Trend

Analysis of Crunchbase data confirms this trend.

There were 45 edtech exits recorded in 2019.

By contrast, 24 edtech exits had already occurred by the same point in 2021.

For comparison, the entirety of 2020 saw only 35 such exits.

As previously discussed, the landscape for both acquiring and being acquired has undergone a significant shift.

Recent Acquisition Activity

Recent events clearly demonstrate the accelerating consolidation within the edtech market.

Companies that demonstrated success during the pandemic are actively acquiring talent at an accelerated pace.

Kahoot, preparing for a listing on the Oslo Stock Exchange, has completed three acquisitions in the last year.

Quizlet, achieving unicorn status almost a year ago, recently made its inaugural acquisition.

Insights from Industry Leaders

To gain deeper insights into this activity, discussions were held with Quizlet CEO Matthew Glotzbach and Kahoot CEO Eilert Giertsen Hanoa.

These conversations explored key trends shaping the sector, including the rise of lifelong learning and self-directed learning.

Further analysis revealed evolving strategies and future directions within the edtech space.

The Growing Value of Question & Answer Platforms

According to Glotzbach, achieving academic success in recent years has increasingly demanded independent learning. He succinctly stated that Quizlet’s platform actively supports and empowers these self-directed learners by providing essential tools for achievement.

To further enhance this support, Quizlet recently completed the acquisition of Slader, a problem-solving resource. While the financial details of the deal remain undisclosed, further information will be available shortly.

This move signifies Quizlet’s strategic shift towards becoming a comprehensive, technology-driven tutoring solution, moving beyond its origins as a simple flashcard application.

Currently, Quizlet leverages data from flashcard sets and questions, combined with advanced natural language processing, to anticipate student responses. Artificial intelligence provides the company with increased adaptability in recognizing various correct answers to the same question.

The integration of Slader will bolster these capabilities, adding detailed step-by-step explanations and contemporary examples to address challenging questions. Approximately 20 members of the Slader team will be joining Quizlet as a result of this acquisition.

Glotzbach indicated that Quizlet is currently developing an integration strategy for Slader’s services. It remains to be determined whether access will be limited to paying subscribers or extended to the free user tier.

Quizlet employs a freemium business model, offering a base level of service at no cost while charging for premium features.

These integrated services will be available under the Quizlet Learn umbrella, which the CEO identifies as the company’s most utilized product. Quizlet Learn also incorporates features such as progress monitoring and personalized goal setting.

Looking ahead, the CEO stated that while no specific acquisition targets are currently in place, the company is actively seeking opportunities to assist students in overcoming feelings of being overwhelmed during self-study.

The company is also exploring gamification strategies to enhance user engagement, utilizing evidence-based techniques to provide encouragement and maintain motivation.

This discussion naturally leads to Kahoot, a platform for user-generated e-learning, which has acquired three times as many companies as Quizlet as it prepares for a potential public offering.

The Continued Dominance of Enterprise Training

Following a $215 million investment from SoftBank last October, Kahoot articulated plans to leverage “nonorganic growth” to capitalize on existing business momentum. Essentially, the $2 billion-valued startup intends to aggressively acquire numerous companies, a strategy it has already begun to implement.

Within a span of under six months, Kahoot has completed the acquisition of three distinct entities. Actimo, a platform dedicated to employee training and education, was secured for $33 million in September. Subsequently, in October, Drops, a language learning service, was brought into the fold for $50 million. Most recently, in February, Whiteboard.fi, an online whiteboard solution designed for educators and students, was acquired for a potential $12 million.

Kahoot’s trajectory clearly indicates a move towards becoming a major consolidator within the industry. During a conversation with Hanoa, the underlying motivations for this strategy were revealed: fostering engagement, promoting lifelong learning, and building a strong community.

“We are actively seeking companies and teams demonstrating a capacity to cultivate engagement with educators through user-friendly, compelling services that establish a localized ecosystem,” Hanoa explained. He cited Whiteboard.fi as a prime example, highlighting its “straightforward online whiteboard solution enabling teachers to monitor student activity in real-time on individual devices.” The addition of Drops, with its 14 language courses, similarly aligns with this ecosystem-building objective, allowing Kahoot to “broaden the overall platform experience and scope.”

Although Kahoot is widely recognized for its educational games utilized by teachers and parents, Hanoa disclosed that 60% of the company’s revenue originates from its enterprise-focused product, targeting corporate clients and organizations. This validates the existing demand for technological solutions aimed at reskilling the workforce, a trend Kahoot is actively capitalizing on. The acquisition of Actimo, a reskilling platform, underscores Kahoot’s investment in businesses directly contributing to revenue expansion.

“Maintaining a connection between employees – whether they work in amusement parks, retail stores, or any service-oriented role – and the central organization is a key priority for us moving forward,” Hanoa stated.

The CEO emphasized that Kahoot’s acquisition strategy centers on startups that can demonstrate proven revenue generation and commercial viability, with a strict focus on companies offering entirely virtual services.

“We believe the foundational infrastructure within edtech will be provided by established manufacturers like Apple, Samsung, or Google, alongside public cloud service providers,” he asserted. “Investing in this underlying groundwork is not a sensible use of our resources, given the high quality of services already available from these major players.” Google recently announced a series of updates to its own edtech offerings, mirroring this sentiment. However, Hanoa’s disinterest in startups focused on infrastructure contradicts the view held by some in edtech, who consider such services crucial for development.

Furthermore, Kahoot is preparing for a listing on the Oslo Stock Exchange. Currently, the company’s shares are traded on the Merkur Market in Oslo, a transitional step towards full public listing. Coursera, which recently priced its IPO at the higher end of its projected range, acquired only one startup prior to going public. In contrast, Kahoot has already acquired five startups, according to Crunchbase data. Chegg, for comparison, completed 16 acquisitions throughout its history as both a private and public entity.

In late 2020, I posited that edtech companies must adopt a more expansive vision to succeed in the post-pandemic landscape. This necessitates strategic partnerships, unexpected acquisitions, and tools designed to support learners facing new challenges, rather than simply catering to the traditional student. The actions of Quizlet and Kahoot suggest that this shift is underway. Ultimately, the next generation of successful public edtech companies will be built not on the efforts of a single team, but on the collective achievements of many.