Topics This Week:
Topics This Week:
Alexander Sarlin 0:05
Welcome to Season Two of Edtech Insiders, where we talk to the most interesting thought leaders, founders, entrepreneurs, educators and investors driving the future of education technology. I'm your host, Alex Sarlin, an edtech veteran with over 10 years of experience at top edtech companies.
Ben Kornell 0:28
Hello, everybody, it is August 26. And welcome to the weekend ed tech. I'm in Cornell with my co host, Alex Sarlin. Alex, it's been an incredible month of August, we're back to school news headlines are hitting left and right. What's on the radar for Ed Tech insiders this week?
Alexander Sarlin 0:49
Ya know, it feels like education writ large is just on everybody's mind. There's so many headlines about it in various ways. This been a bunch of m&a this week bunch of funding. And, you know, we wanted to kick off the show with some front page news out of the education world, which is that as of right now, the news is finally out that what the Biden administration is actually planning to do in terms of student debt loan forgiveness. So we thought we wanted to jump in, you may have heard it here first, you may have heard this days ago, depending on when you listen to this. But let's go through it and talk about what it might mean for edtech.
So, Ben, let me just give some of the facts. And I'd love to hear your take on where this all gonna go. So the plan, as of all news sources, this was in the Times Inside Higher Ed, Politico, everybody today, Bloomberg, is to cancel $10,000 in student loan debt for all borrowers earning less than $125,000 as an individual or 250 as a family, and then an additional $10,000 for those who went to school through Pell Grants, as well as to extend the debt payment moratorium from September until the end of the year. And it was an interesting note, they said that this is likely to be the final extension. So you know, student loan debt in the US has been on pause throughout the pandemic for the most part, but now they feel like it's going to be to the end of this year. So 10,000, up to $20,000 of student loan debt being forgiven. We've talked about this on the show for months as this has been anticipated. Ben, what is your initial reaction?
Ben Kornell 2:31
Well, I think Biden team has really tried to thread the needle here, and ensure that the loan forgiveness are affecting people who really are economically burdened with that loan debt. They're making some people in their own party unhappy, because many Democrats pushed for 50,000 in loan forgiveness, not 10. And they're making some people in Republican Party upset overall, like forgiving loans to people tends to be an issue that Republicans feel is unfair. The total of $10,000 may sound underwhelming to most people. But if you're earning, you know, 50 to $75,000, which the Democrats claim 90% of the borrowers affected are in that earning range. This is a big deal. It also interestingly comes with the backdrop that consolidating loans or refinancing loans is no longer a good option for people given that the borrowing rate is higher because of interest rate rise. So this comes at a really critical time where that 10,000 servicing might cost you even more if you had to refinance it or rolling it. The other interesting part about this is it disproportionately affects millennials. And these are voters that are kind of coming into their prime as a critical voting bloc. This is also a group that is having kids and really questioning the value of college education. So I think it captures the zeitgeist of what we've talked about several times in the show, most notably last week, where we talked about the real soul searching around the cost of higher ed and the value. So do we think that the $10,000 off, you know, college actually gets the, you know, cost versus payback equation? Right? Probably not. But I think the administration should be applauded for doing something and taking some action, and I think they tried to get it right with the middle row. Yeah, I
Alexander Sarlin 4:39
think that's a great take. I agree with a lot of that. I think there's sort of three readings of this one is the sort of pure political reading, which is the millennial voters. The idea that, you know, we're heading into midterms in a couple months in the US, and it's a moment for the Democrats to show that they are, you know, on the side of education borrowers of people middle income or lower, I think there's a political angle to this. There's also this sort of moral angle. And I think coming off of Miguel Cardona, the Secretary of Education speech last week about how you know, higher education is being questioned about how it's out of reach for too many people. I think this is a sort of trying to slightly balance the scales ethically, in a system that so many people have started to lose faith in the sort of value of college and starting to say, you know, what, we know that maybe we haven't had the calculation, right, we know that student loans have gotten out of control. This is a acknowledgement sort of semi symbolic acknowledgement that we know that so we're going to do something about it. And then lastly, there's the actual finances the actual $10,000, or up to 20. For a Pell Grant students, that is a lot of money. If you're thinking about starting a family, if you're thinking about putting a down payment on a house that will put money back into the pockets of a lot of American citizens, and ones who are sort of just beginning their life or, you know, people, there's so many stories about people just being buried by student debt for their entire adult lives. And I think this is, you know, I think there's an economic push to say, this is a way to get a whole swath of American people a little bit of a leg up in getting back into the economy at a time when inflation is high as at a time when, you know, interest rates are rising. How can we put money back in people's pockets in a way that feels fair and logical? You're totally right, threading the needle. I don't think you know, you had Raphael, Warnock and Elizabeth Warren as sort of leads fighting for this. On the Democratic side, they wanted much more forgiveness, you have lots of people on the other side, saying no forgiveness, especially if it's going to at all be money back in the pockets of people who don't need it, you know, quote, unquote, but I think this is a pretty good threading of the needle personally, and I think it's going to be interesting from the EdTech perspective, to look at whether this has, I think that sort of has an effect, which I think they want it to, which is to restore faith in traditional college,
Ben Kornell 7:02
threading the needle probably doesn't shake college as much as it could have had they said no forgiveness or had they said massive forgiveness, because either of those would have prompted a bigger discussion around we need structural change in higher education, because this is unsustainable. So the middle road kind of keeps status quo most protected. Likely, I will say the message also that this is kind of the last round of deferrals, that this is the last time they're doing it does still signal that the federal government is not going to be the white knight come in and save people with bad debt from schools. And, you know, if that message does get across, I think it will make, you know, college freshmen, much more conscientious about the loans that they're taking out. 10 years ago, it was like, whatever the price was, I'm not even gonna look, just give me the loans. Now, much more like I can go to college A, B, and C, what's the academic profile, but what is also the cost profile. And I think that's a cultural shift that has forever changed. Absolutely agree. Speaking of education markets, and how this public policy is affecting them. We also had a really interesting article from one of the founders of GSP. GSP is a venture capital firm. And it's one of the most prominent venture capital firms called stores through thunderstorms. And Lubin is the author of who've been pen pal off. And below. I hope I'm saying that right. I've not met move in before, but the article is just fascinating. It also has a little bit of investor speak. So there are a number of things that he's looking at from a returns profile. But the thesis of the article is that ultimately, the long term value in edtech, is actually proving out. And while we're seeing public trading, going up and down, much of that variation can be explained by the broader economic challenges and not by anything that has fundamentally changed in education. What he's really telling is a narrative that starts in 2009, and continues now, rather than one that really isolates the volatility of the COVID era. He also is pointing out that the leading companies are way more diversified than they used to be, which also reduces their volatility and vulnerability to impact but I think the part that really caught my attention was he has tables on valuations. And the summary is, you know, if you have a good business that's growing, and you have a good margin in terms of profit, you get a multiple on your revenue. And so sometimes that would be 10 times revenue. So if I make a million dollars a year and A high growth and high revenue, I get a 10 times multiple, that means that my company is worth $10 million. And entrepreneurs use that to raise money, they use that to give stock and equity to employees, it's really important in terms of how their finance, and what you basically see is that all of those numbers aren't cut by half. So if you were a company that's growing relatively slow, and with relative margins, maybe it was a Forex, and before and now you're getting a 3x, but for high growth companies, you know, according to his table, you might have been trading at 18, or, or even 20x. Before. And now it's down to 10x. When you read the numbers, and you kind of look at the math, what you realize is investors are valuing profitability more than growth that is unprofitable. And actually, that could be a really good thing, you know, because that's actually what a good business does, its profitable, and it has steady growth. And what we saw in the kind of spike during COVID, was a focus on top line or revenue growth at all costs. And so I do think that this new reality favors the larger incumbent long term players who've had a long journey to get to steady growth, but not astronomical growth, and steady margins, not astronomical margins. When you read this article, what were some of the things that stood out to you? Yeah, so
Alexander Sarlin 11:36
you know, Lubin Panfilov is also the author of an article that that you and I both really respect in this space, which is about lifetime value over customer acquisition cost as sort of a core ratio for edtech companies. And I think one of the things that stood out to me here is the idea that, you know, lifetime value is increasing for a lot of these companies, they're having longer engagements with their learners, whether that means they're spanning across different age ranges, they're doing high school and college or college and workforce, or k 12. And, and college, or whether their subscription services like Duolingo get does really, you know, well, in some of these metrics, or Kahoot, you know, subscription services that just continue to re up year after year and continue to grow. That includes, you know, b2b businesses that grow year over year. And I think what stood out to me, you know, obviously, not to be naive, but you know, anybody who is a partner at Tech VC firm, is always going to just sort of generally be bullish on Ed Tech. So you have to sort of take that with a grain of salt. That said, I think this is a pretty fair minded article, and the fact that the valuations have dropped so much, but some of the companies that have hit that sort of escape velocity over the years, they've been around for a while they have serious sales forces, they have serious products there, they continue to grow. I think the way I sort of read the subtext of the article is that, even though in tech valuations may have been hit pretty hard, just now, the fundamentals of some of the bigger ad tech companies are really quite strong. And we shouldn't sort of overreact as an industry to the corrections or whatever you call them to the changes we've seen recently, and still should keep an eye on some of these big companies, you know, he has a list of companies includes Thinkific, and nerdy Instructure roadblocks, you know, the big public companies, in many cases Udemy, to you. Yeah, and basically evaluates them across a variety of different economic metrics, and sort of shows that there's really a they're there for a lot of them. So it's, I found it fascinating. Some of the numbers are a little above my head, you know, as somebody who is not deep in the investment world, myself, but I think there's something really, really interesting about taking a step back. And instead of just saying, Ed Tech is hot, everybody's doing great. Every valuation should be a high starting to parse some of these numbers and say, well, this ad tech company has this particular annual growth rate, this particular revenue rise, and that is very promising. And this one, maybe not as much. It's, you know, it's growing, but it's not profitable yet. So maybe that's a little on a different trajectory. I think that's a healthy sort of maturing of the space rather than seeing all of them as
Ben Kornell 14:14
uniform because they aren't. Yeah, I also think for those who are trying to understand which business models are going to thrive in the new world, this analysis is a great way of looking at different businesses. I mean, if you look at, for example, Kahoot, with incredible margins, I mean, gross margin of 95%, and a compound annual growth rate over the last three years of 130%. They're crushing it, and he introduces this concept of rule of 40, which is a it's kind of like in baseball when they do you know, OPMs it's a combination of recurring revenue and profitability with growth rate and EBIT down margin. So it's this combined For Kahoot is off the charts in terms of their growth, because basically, their product is infinitely scalable. And their cost of customer acquisition is really low. Now that they've got such momentum on the contrast you look at to you are check which have been really hammered by the markets. One is interesting that the gross margin of two EU is 70%, that's really solid gross margin or gross margin, and their three year compounded growth rate is 32%. So they're really growing, but they're only trading at point seven times their revenue in terms of price per share. So basically, you know, the revenue that you you get, that's what their share price essentially involves. So why is that? Well, that could be because the kind of fundamentals of their revenue growth and their profitability are in the low single digits or teams, not kind of in the 30s 40s, or even like who, you know, 60s and 70s. So this analysis really does show which business models are killing it. And the biggest surprise for me was Instructure, which is the parent company of Canvas, they score really, really well, their profitability is really good 35% EBIT margin, that means basically, even if you look at all their overhead, and all the costs they incur across all of their business, minus their debt, and their depreciation and amortization, every dollar that they get, they're making 35 cents on that dollar, which is really, really healthy business returns Power School. Also, similar dynamics, just goes to show that these high customer acquisition cost businesses with relatively slow but steady, you know, kind of tortoise and the hare there, the tortoise, Rove, they're selling b2b to school systems and universities is like a really good long term business.
Alexander Sarlin 17:08
Yeah, you know, for anyone out there whose head may be spinning by any of these acronyms, we will, of course link to this article in the show notes for this episode, we highly recommend reading it maybe two or three times to truly, it's very dense with very, very specific economic information. But there's a lot in there, and I think it's it feels, this is one of the first articles I've read, maybe ever, that really, really cuts apart the EdTech space, you know, very, very, sort of like, really looks at them as businesses rather than sort of like businesses slash missions slash, you know, ventures slash experiments. Like, if you look at these as businesses, they take on these really interesting shapes. And so
Ben Kornell 17:51
transitioning from that there are implications for edtech in the broader space, like which companies are getting incubated, and which companies are accelerating and which ones are ultimately going public. And lumens framework, you know, comes from a lot of data around these large public entities. But we also had some news this month from the earlier stage, Y Combinator announced cutting their startup batch size by 40%. Amid economic downturn, Y Combinator is a really well known accelerator, they provide some financing for a small portion of equity. And then they support entrepreneurs in their growth. And just a year ago, they had announced that their equity positions would be moving up from 250,000 to 500,000, or even above. Now, this feels like a pullback in terms of volume of ventures that they're supporting. And generally speaking, about 10 to 20% of their portfolio has some sort of element of ed tech or learning. And so the reason behind that decision was the startup funding environment is pretty bleak. And so having, you know, 500 companies instead of the 250, that they will now have, it was hard for all those founders to get their initial round, you know, seed or series A rounds of investment. And so Y Combinator needs their companies to get foreign funding. So they're cutting it. It does also kind of coincide with a bunch of layoffs of tech workers who, you know, what are their options might be, let's start a new startup. Well, it's not as easy to get funding from accelerator as it was before. And also this is a space that Alex and I watch very intently full disclosure, we support a nonprofit accelerator called cambiar. But we also know about five or six different accelerators in the space. They've been trying to help incubate and support new companies. And it's just hard to you cross that bridge right now when you have an unproven business model or your pre revenue, or you haven't really figured out how to get to that first million or 2 million in revenue. So it does suggest this news does suggest that it's not just hard for the publicly traded companies as lumens article, you know, attests to, but it's also a challenging environment for early stage. What was your takeaway from all this news? And as you've looked at the accelerator space?
Alexander Sarlin 20:31
Yeah, it's a really interesting topic. So I mean, I think first off just to connect, you know, I agree that connecting the article we just analyzed from living Panfilov. And connecting it with this sort of space, it feels, you know, at risk of overstating this, it feels like Ed Tech is sort of beginning to really enter a little bit of a new phase of its life cycle where you have now a number of companies that are really incompetence that have been around quite a while a lot of the public companies that were listed there were started in either Europe between basically 2011 and 2013, or 2014. So they've had years of growth, years of testing and trying this and trying that and pivoting to this and who knows what they're going to do. And to get to sort of study business models to get to often, you know, many business clients or many school district clients, and then they become, you know, businesses that can continue to really scale and profit. And then you have this enormous swath of early stage companies. And they're, you know, in all different stages trying to sort of break in, including ones that are absolutely brand new. And I had a fascinating conversation this week with Sandro all of URI who's runs a really amazing tech community called Project found dead for edtech founders can't recommend that enough. And we talked a little bit about edtech accelerators. I don't want to say anything he said that he wouldn't want me to. But yeah, I think the real crux of some of what he was saying is that there have been a lot of attempts at really good at tech accelerators, he ran an 18 T Aspire accelerator for seven years where we see amazing stuff happening with started, which has some great events coming up xe to use supercharger. Alberto are and Aza transcend is like one of our close allies, you know, in this space and big friend of the podcast, a number of interest studios have sort of popped up in the last few years, especially in this really thick and, you know, funding environment. And I think there's now a question as as funding for smaller startups slows down a little as you know, Y Combinator is the accelerator. So that sort of poster child, the original one that put this whole model on the map, I think there are some really interesting questions about what can edtech communities do? What can edtech accelerators do, because in the space where the incumbents are sort of continuing to grow, and where the funders are getting a little more picky and choosey are just not investing at all, and we're not at tech investors are sort of moving out of the space, which we've seen, you know, what does it really take to help a small company get to that sort of trajectory to actually grow get their first users get their first clients? I don't know if I have an answer to it. Other than I think it's a really interesting time to sort of be in that space, because the future is very unclear. I mean, if it is true that ad tech is evolving into a more mature sector, then it could go either way. Because you've seen accelerators in mature sectors do really well. I mean, in AI, you see accelerators like Y Combinator and TechStars. And Sequoia has an amazing accelerator now, do really do great and make take all these companies and take them off the ground. On the other hand, tech is just such a complicated space, that accelerators don't necessarily have an amazing record of success. There's many of them that have just not stuck around over the years. I know that it's sort of a wishy washy take, but I don't know what the answer is. I do think is exciting time to be an early stage tech person, just because if you can break through right now, I think you're in smaller number of companies, you're in good company, if you can break through, there are lots of people trying to, but fewer, who can actually get that funding can actually break through and I think that might be an amazing environment. If you can pass that
Ben Kornell 24:11
threshold. Yeah, we've definitely been in, like, let any flower bloom period, and the lawn mower has just cut across the field. And if you're still standing, or you're able to break through, you're doing well, I also think what makes it so uncertain is what are the big guys gonna do? You know, are they going to cut expenditure and just stick with their core, which is generally what education companies do and downtimes? Or are they actually going to take the opportunity to expand market share and roll up in which your little flower now has the canopy of these tall trees that is also blocking out the sun? And so that's our ecosystem. I also think people are questioning you know, A VC is not a perfect fit for all business models and timelines. Are there other funding models that are going to be better aligned to getting a startup from where they are today to long term success. And, you know, just for our conversation, some of these publicly traded companies that have really great fundamentals that live in talked about there 3040 50 years in the making, and it took them a long, long time to break through and a long, long time to generate those kinds of recurring business models. For our last topic, I want to switch back to college and K 12 is back to school time. And we've got a little bit of good news, bad news on college and K 12. enrollments. Why don't you kick us off on the college side, Alex? Sure. I
Alexander Sarlin 25:51
just want to say I'm really appreciating all these summary metaphors been with a lawnmower and the flowers and the canopy of trees. It's just it makes me feel like I'm outside smelling the grass, a wonderful vocabulary word
Ben Kornell 26:03
of the podcast that kind of played my friend.
Alexander Sarlin 26:09
Exactly. So you know, there are headlines all over the place right now about this sort of back to school season. And one of the big things that people are really trying to keep their eye on is what is happening with higher ed enrollments. So we have a good news, bad news kind of structure here, because some of these articles are feel really optimistic. There's a really neat piece in Forbes, from a former president of a university of Missouri about how some colleges are seeing record size enrollments of freshman classes. The University of Georgia, South Carolina, Oklahoma, Arizona State, and his read is, we're finally sort of getting back to a time when people can expect to actually be in college, if they go to college, be on campus. And there's an excitement and there's there's really a sort of a back to normality back to normalcy feeling in the college world. And you're seeing bigger classes than ever before. Also higher diversity classes than ever before, which is really exciting to see, there are different reasons for each of these schools doing that kind of enrollment. But it was a very positive article. Let's keep up the good news. You know, there's also a neat article about Lynn University and Inside Higher Ed that basically says their enrollments up 59% In the last 10 years because of holistic admissions, where they're actually looking at a much wider variety of different types of student signals than other schools are and choosing people not at all based on their test scores. And that's increased enrollment, but also had all sorts of, you know, add on effect for the university. That's really exciting. And there are a bunch of colleges starting to think about how to bring students back into the fold, who have dropped out who have left without completing a degree, there were four UC campuses, including Davis, Riverside, Santa Barbara, that are basically taking state funding and re enrolling students, by waiving application fee waivers, bringing in more services and trying to sort of bring back some of those students who who didn't finish, these are all really good things, right. As we know, students who leave college without a degree usually have debt with not a lot of upside. So definitely want to bring them back. I love the idea of holistic admissions, and we're seeing SATs and AC T scores, not as important as they were ever, you know, as they were before, in many cases. So that's the good news, holistic admissions record enrollments at some schools and bringing back stop outs people who have lost, you know, who had left school without degrees and finding a way for them back in. But there's also some pretty serious bad news in the higher ed space. And I don't think anybody in the higher ed world feels sort of like they're wearing rose colored glasses. Axios had a great piece about college enrollment continuing to drop nationwide, in many cases in Ohio, the statewide enrollment has dropped more than 10%, more than 11%. In the last couple of years, the cost of attending university has tripled. We've reported on the podcast that many, many people have been many students are just are saying, Hey, this is just too expensive for what I'm getting. I'm not sure it's worth it. The demographics are not great, either. So that people are looking ahead. Nathan Grawe, who is a writer who writes a lot about the demographics of higher ed just published a new book, basically, for higher education leaders saying, Okay, we know they're going to be fewer high school graduates, we know that people are going to be moving in different ways. Here's what you can do to even you know, maintain your enrollment in this world where demographics are just continuing to shift. So, you know, the macro themes are still a little weak, I would say in terms of enrollments over time, and we are seeing universities merge, we're seeing them lay people off. There's a lot of things happening there as well. There's a great article in the Hechinger Report this week about basically, you know, college learning from pandemic days and learning what its true value offering actually is really trying to make sure it doesn't snap back to the same old things that it's done that have led to exactly the problems that we've seen. So I think that, yes, there is some good news. And that's exciting as we get back to school for higher ed. But we should definitely I'll speak for myself here. I think the bad news outweighs the good a little bit. I think if higher education leaders don't see the last two years as a existential shake up more than last year's last five years, 10 years, to what they're doing and what they're offering to students. If they say, Hey, look, record enrollments were good, let's just go back to exactly what we were doing. It will be one of the biggest missed opportunities in you know, 200 years of us higher ed tech, so exciting, but very weird time. Let's go to K 12. Then let's do good news. And bad news about back to school in K,
Ben Kornell 30:52
forego to back to school, and K 12. Just on the higher end need, I will say it is important to acknowledge that the next phase of higher ed is going to play out quite differently for different sub segments of higher ed. And what you're seeing is a large state universities which tend to cost less, and tend to have like solid brands, but maybe not like always the greatest brand in the world, who also are viewed to be of like reliable quality tend to be outperforming small liberal arts private colleges. And you might like take the ivy League's and treat them separately, and you might take kind of your top 40 Publix and treat them separately. But the fact that Oklahoma and Oklahoma State is like going gangbusters is probably a sign that people are retreating to that reliable value that those schools provide. I think the other question is also is this a little bit of a surge, that because people held off going to higher Routledge during COVID times, and also in recession times people tend to go back to school. So there might also be a one time surge here that has to do with, you know, just the generational, you know, the vintage of 2020, or the vintage of 2021 was down because of COVID. Coming to K 12. I think we've often reported on enrollments being down, we had a report from 24/7 Wall Street, that nationwide there's 1.7% Decrease in public school enrollment. Since 2019, Michigan, New York and California, three of the largest public school systems are projected to see the largest declines between 3% and 4.6%. And generally speaking, those states that imposed our enforced really strong COVID measures, including remote and distance learning and maths mandates, had the biggest decline. And those that did not, ie in red states, those had the lowest decline or even net gain. The other kind of challenge hitting K 12 right now is labor disputes. The good news on the labor front is that teacher pay has across the board gone up and it's outpaced inflation, even though inflation is high. And the broader public support for increase, teacher pay is up. But what you're seeing also is other union groups, other bargaining units that represent school bus drivers or custodians, etc, are really feeling left out and are struggling with the pay. You know, if you look at the average paraprofessional, there in California here in the Bay Area, they're making something like 20 bucks an hour, and they can go to Chipotle and make 25 or 30 bucks an hour and get scholarships for college. So there's a degree to which the kind of full support staff in the 12 schools are not able to make the kind of money that they need to based on inflation or based on the job market. Philadelphia is one of those areas where that the union representing 2000 employees of the district SEIU, they voted to authorize a strike over higher wages and also better training programs. And I think it's a little ironic, Alex that, you know, people in the corporate space now we've seen companies offering frontline workers, more and more packages that include pathways to promotion and, and learning programs. Schools themselves are behind in their ability to offer the same things. So a big dose of challenge in K 12. If you're hearing all the reports on your local radio show, this is not Got your warm and fuzzy back to school reporting season with like softball stories is much more challenging labor environment and enrollment environment for
Alexander Sarlin 35:10
schools 100%. You know, one article we looked at this week is about, you know, the cautious optimism for the new school year. And it just feels like this line feels like it comes out of some kind of, I don't even know, just like Monty Python. It's like, oh, the teachers and parents are concerned about mental health teacher shortages and monkey pox, along with, of course, COVID. But they still have hope, as they return to school more prepared, like, Wow, what an environment to walk back into teacher shortages, mental health concerns, COVID, and monkeypox. And, you know, everything else that plagues school, it normal times, like class management issues in class size, well, maybe not class size anymore. I don't know. It's a really wacky time to be covering education. And I think to be in the education field. You know, we've talked to some teachers, and educators on the podcast over the last few, you know, months that are trying to figure out what their role is in the education system. And it's so true, what you're saying that, you know, a lot of companies that weren't traditionally known for their labor practices like the Amazons, you know, Disney's The Chipotle is, at McDonald's are starting to offer more education benefits, more pasture promotion, more, you know, money for learning on the side. And it is a particularly strange irony that our education institutions are maybe not ending up treating their employees, not by choice, but as well as you know, as service industry, that's something we should really think about as a society.
Ben Kornell 36:43
That's right. Well, we're going to continue to monitor it. But this is a story that is playing out in your neck of the woods. So please feel free to post on any of our LinkedIn pages or send us an email what's going on with higher ed and K 12 in your area. All right, we're gonna wrap the show with a pretty busy funding an m&a week, on the funding side, Sunstone, raised $35 million, somewhat famously to use initial growth when targeted only the top 200 universities, and several other OPM players kind of, you know, went bottoms up, while Sunstone is taking a similar bifurcation, that in the Indian market, they're targeting the non elite segment of the market. So they work with 40 institutions. And, you know, we've seen OPM has kind of come back to Earth. But that doesn't mean that it can't work in other markets, like in India. And so Sunstone seems to be a pretty big player, their growth space also raised 25 million for corporate upskilling. And the idea is that they match employees with external experts or mentors. This mentorship model is becoming really, really popular. It reminds me of Springboard, lots of thoughts around, you know, the labor shortage, and how do you actually provide support to people and so mentorship seems to be this middle road where you can get high quality impact. And then Microverse has just raised 4 million. This is a peer to peer learning space. And I know you're excited about this one, we're kind of rooting for that the idea is remote boot camps where students supply the bulk of the training feedback themselves. And so peer to peer learning has been, you know, all the research has showed that it's really, really successful. And the company primarily focuses on Africa and Latin America in terms of students, and they claim a 90% postgraduate employment. So this was a smaller extension, after raising 12 and a half million series a about a year ago. Any comments on I know all three of these are in spaces that you care about anything that's standing out for you. I mean, I think the growth space one is is an interesting example of exactly the kind of park that is starting to be offered, you know, why would perk slash upskilling you know, opportunity that's starting to be offered across the board at companies, it's starting to be sort of expected I think, for many employees that the company is offering them meaningful learning experiences. Microverse just seems like an incredibly exciting space to be in a you know, African Latin America, student first growth first and peer to peer I have been waiting for a peer to peer company to really break through and sort of prove that this model can work. So um, so two other funding events that happen a know raise 2.5 million, and they're also known as hypothesis. I'm a big fan of this company. Dan Whaley is the founder. And they're based here in San Francisco. Basically, they believe in a world where there's an annotation layer on top of the internet, and original web browsers like mosaic, there was actually the ability for you to leave notes on any page in the internet. And what they found is that for colleges and universities, for publishers, for legal professionals, etc, having the ability to kind of transform any document, you know how in Google Docs where you're able to comment and at other people and so on, they basically turn any textbook or any publication into that kind of commentable space. And they've grown really solidly through universities, they raised 2.5 million what was really shocker to me is that JSTOR who many of you would know from your home college days, invested significantly in this round? So not only are they getting traction with universities, but they're also getting some major publishing chops behind them. And you know, this is the way in which you know, publishers ultimately can protect their IP. If you can take your digital textbook and add a conversational layer on top of it that can add you know, vastly outperform the kind of pirated version that is just the PDF where you're just reading solo. The last funding news we had is ready player me love the name raised 56 million and their series B. A Ready Player me basically allows people to create a avatar that sticks with you across your virtual worlds and your games. Ready Player knee was backed by Andreessen Horowitz, the co founders were from Roblox and Twitch, and Kevin Hart's venture fund is in on this one. That brings their total to 72 million raise, but they were founded in 2014. So this is a an organization that's been thinking about the avatar and digital presence for a long, long time. And it does kind of come back to our question, Alex, is there going to be one Metaverse or it will be many metamorphosis? This could be the way that they stitch it all together. Is your avatars, just fluid across all these different platforms?
Alexander Sarlin 42:02
Yeah, and that is an explicit bet of this company that is not going to be completely unknown Metaverse that you can create an avatar and put it in many different Metaverse environments for lack of a better word. This is not technically an edtech company. But I'm excited to see there be serious investment in this space because I think that the education is such a first use case of the metaverse, which we say every week on his podcast, that having really really robust tools to do amazing things in the metaverse can accelerate that as well, which I'm pretty excited about. I have to say just in terms of No, we talked to go to Van Mulder and from Politico on the long form interviews for Tech Insider recently that just came out last week. And that social layer on top of the content layer is you know, we talked extensively about it. And it's really an interesting play. The idea that, you know, the Internet can be rotatable, or that your textbook could be a place where you could start a conversation with your professor or with other students around the world. That's a future I'd love to be a part of. So I'm rooting for no and PROLOGO. And, you know, anybody and redock proceed for that matter. And anybody who is sort of trying to make that space into a reality, it is really exciting. Nice call backbencher mosaic, by the way. Well, I haven't heard that name in a while. That's really interesting. There were only a couple of mergers and acquisitions that we caught our eye this week, so we wanted to go through them pretty quickly. One is in India, the bright champs, which is a company with a lot of attention is valued at $650 million. It basically creates certificate programs for K 12 Kids in topics like coding and mathematical thinking and, you know, non traditional school topics. It's grown really fast just bought acquired Scola, which is a Singapore based company that provides it sort of multi I think it's multilingual communication and public speaking courses. Yeah, with a focus on first generation English speakers. So that's a really interesting extension. They're obviously looking to expand to different languages and to people all around the world. Right champs I think is a company to keep an eye on I have heard that name through from a lot of different places in the last few weeks. And they referred to as a as a sooner corn in that article because their valuation is quickly heading towards billion dollars, and nerdy, which is the public company that runs our city tutors, acquired Chicago based company code verse which offers coding classes to K 12 students. So you can see the sort of synergy there. I would imagine that nerdy is getting a good amount of incoming requests for tutoring in everything coding and engineering. It is still a very hot topic that is under there were people there a lot of unfilled jobs. So they're expanding their ability to do coding, and they're probably going to compete with some of the other mega tutoring platforms like paper crowd of Montreal. So interesting acquisition at You know,
Ben Kornell 45:00
I think it's an example of the sort of big public companies that canopy you were talking about Ben being able to sort of reach down and pluck up, you know, very plucky and well structured, smaller companies and sort of incorporate them into their offerings, which is something we've we've seen a lot over the last couple of years. Yeah, in our article from Lubin, they actually highlighted varsity tutors are nerdy, as one of the highest performers and actually, you know, in terms of stock versus price might be undervalued. So it is really interesting to see them as an incumbent, you know, solidifying their their reach today, and we don't have an interviewer or interview and we don't have a game. So we're gonna wrap it up here. It's been a really great back to school season. So much good stuff going on, and so many challenges facing us as an edtech community. Thanks for sticking with us through it and season two here at the weekend ed tech, because if it happens in debt, you'll hear about it here first. Thanks.
Alexander Sarlin 46:03
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