Fundraising

Edtech stocks are getting hammered but VCs keep writing checks

Comment

Image Credits: Nigel Sussman (opens in a new window)

After years in the backwaters of venture capital, edtech had a booming 2020. Not only did its products become must-haves after schools around the globe went remote, but investors also poured capital into leading projects. There was even some exit activity, with well-known edtech players like Coursera going public earlier this year.

But despite a rush of private capital — which has continued into this year, as we’ll demonstrate — edtech stocks have taken a hammering in recent weeks. So while venture capitalists and other startup investors are pumping more capital into the space in hopes of future outsize returns, the stock market is signaling that things might be heading in the other direction.

Who’s right? One investor that The Exchange spoke to noted that market turbulence is just that, and that he’s tuning into activity but not yet changing his investment strategy. At the same time, the recent volatility is worth tracking in case it’s a preview of edtech’s slowdown.


The Exchange explores startups, markets and money. 

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


Let’s look at the changing value of edtech stocks in recent months, parse some preliminary data via PitchBook that provides a good feel for the directional momentum of edtech venture capital, and try to see if there’s irrational exuberance among private investors.

You could argue that it’s public investors who are suffering from irrational pessimism and that private-market investors have the right of it. But since public markets price private markets, we tend to listen to them. Let’s go!

Falling shares

We’re sure that you want to get into the private-market data, so we’ll be brief in describing the public-market carnage. What follows is a digest of edtech stocks and their declines from recent highs:

  • Compared to its 52-week high, Chegg stock has lost over a third of its value.
  • After reaching $62.53 per share in April, Coursera has shed about half of its value and is trading close to its $33 IPO price.
  • 2U closed at $33.92 per share yesterday, its shares also losing half of their value compared to their 52-week high.
  • Staying on that theme, Stride (K12) closed at $26.77 per share yesterday, which is about half of its 52-week high.
  • It wasn’t just U.S.-based companies facing some volatility. TAL Education, based in Beijing, is trading at $46.25, which is, you guessed it, about half of its 52-week high.

Public edtech companies getting nearly identical cuts in values is noteworthy because it gives us a peek into how retail investors are thinking at the moment. But does the general public pause on the future of edtech impact private market investors?

What about venture capital?

A dig into PitchBook data for private, U.S.-based, privately backed edtech startups’ fundraising activity paints the picture of a market on fire.

For 2020, PitchBook has 380 deals in its database worth $2.06 billion in total value. Quite a lot of the round activity came from seed deals, but with billions invested, quite a few bets were placed. Turning to 2021, the same data query yields 152 deals thus far. If that pace held up, we should expect to see around 417 edtech deals this year, a modest bump over last year’s pace.

However, in dollar terms, 2021 is far more exciting for edtech companies: $1.86 billion has been deployed into domestic edtech companies by private investors already. If we include what PitchBook describes as “Corp/Strategic M&A,” the total funds in play rise by $1.15 billion.

Just sticking with the venture capital numbers, we can forecast that if the current pace of edtech fundraising keeps up for the rest of 2021, VCs will deploy around $5.1 billion this year, up from $2.06 billion last year.

Edtech valuations aren’t skyrocketing, but investors see more exit opportunities

That huge figure is why we wanted to contrast bullish VCs and more blasé public investors. The difference between the sentiment they are Bat-Signaling into the air is stark.

When destiny is a drop

Edtech investors and founders have been waiting for a slowdown in their sector— any industry completely lit up by the pandemic was going to face some sort of difficult change as the world reopened. For edtech, thanks to the promising results of vaccinations in at least some parts of the world, that means there will be some pullback.

In September 2020, Larry Illg, CEO of Prosus Ventures, told us that edtech was filled with “tourists” and “faddish money,” making it a hard time to assess companies and find accountable bets.

“It’s quite dangerous,” he said. “We’ve seen over the years in geographic context at different points in time that people are attracted to India or are attracted to Brazil and they start pumping money in and then two or three years later, they exit with their tail between their legs.”

The investor then predicted that there would be carnage in edtech but noted, like many in the space, that the mindset shift among parents and educators alike was that edtech is the future — even if only a relatively small handful of consumers wind up paying for its products and services.

Similar to how telehealth faced declines as patients returned to in-person care, edtech will face similar drops as schools become a safer option for students and teachers.

However, even if telehealth doesn’t look like it did during pandemic highs, that model of care is more popular than it was before COVID-19. We argue that the same holds true for edtech: The near-term TAM peaked when tech-powered education was the only option, and while we might shed millions of dollars of value, its TAM might still be higher than it was before the pandemic.

To win post-pandemic, edtech needs to start thinking big

More TechCrunch

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI

Winston Chi, Butter’s founder and CEO, told TechCrunch that “most parties, including our investors and us, are making money” from the exit.

GrubMarket buys Butter to give its food distribution tech an AI boost

The investor lawsuit is related to Bolt securing a $30 million personal loan to Ryan Breslow, which was later defaulted on.

Bolt founder Ryan Breslow wants to settle an investor lawsuit by returning $37 million worth of shares

Meta, the parent company of Facebook, launched an enterprise version of the prominent social network in 2015. It always seemed like a stretch for a company built on a consumer…

With the end of Workplace, it’s fair to wonder if Meta was ever serious about the enterprise

X, formerly Twitter, turned TweetDeck into X Pro and pushed it behind a paywall. But there is a new column-based social media tool in town, and it’s from Instagram Threads.…

Meta Threads is testing pinned columns on the web, similar to the old TweetDeck

As part of 2024’s Accessibility Awareness Day, Google is showing off some updates to Android that should be useful to folks with mobility or vision impairments. Project Gameface allows gamers…

Google expands hands-free and eyes-free interfaces on Android

A hacker listed the data allegedly breached from Samco on a known cybercrime forum.

Hacker claims theft of India’s Samco account data

A top European privacy watchdog is investigating following the recent breaches of Dell customers’ personal information, TechCrunch has learned.  Ireland’s Data Protection Commission (DPC) deputy commissioner Graham Doyle confirmed to…

Ireland privacy watchdog confirms Dell data breach investigation

Ampere and Qualcomm aren’t the most obvious of partners. Both, after all, offer Arm-based chips for running data center servers (though Qualcomm’s largest market remains mobile). But as the two…

Ampere teams up with Qualcomm to launch an Arm-based AI server

At Google’s I/O developer conference, the company made its case to developers — and to some extent, consumers — why its bets on AI are ahead of rivals. At the…

Google I/O was an AI evolution, not a revolution

TechCrunch Disrupt has always been the ultimate convergence point for all things startup and tech. In the bustling world of innovation, it serves as the “big top” tent, where entrepreneurs,…

Meet the Magnificent Six: A tour of the stages at Disrupt 2024

There’s apparently a lot of demand for an on-demand handyperson. Khosla Ventures and Pear VC have just tripled down on their investment in Honey Homes, which offers up a dedicated…

Khosla Ventures, Pear VC triple down on Honey Homes, a smart way to hire a handyman

TikTok is testing the ability for users to upload 60-minute videos, the company confirmed to TechCrunch on Thursday. The feature is available to a limited group of users in select…

TikTok tests 60-minute video uploads as it continues to take on YouTube

Flock Safety is a multibillion-dollar startup that’s got eyes everywhere. As of Wednesday, with the company’s new Solar Condor cameras, those eyes are solar-powered and use wireless 5G networks to…

Flock Safety’s solar-powered cameras could make surveillance more widespread

Since he was very young, Bar Mor knew that he would inevitably do something with real estate. His family was involved in all types of real estate projects, from ground-up…

Agora raises $34M Series B to keep building the Carta for real estate

Poshmark, the social commerce site that lets people buy and sell new and used items to each other, launched a paid marketing tool on Thursday, giving sellers the ability to…

Poshmark’s ‘Promoted Closet’ tool lets sellers boost all their listings at once

Google is launching a Gemini add-on for educational institutes through Google Workspace.

Google adds Gemini to its Education suite

More money for the generative AI boom: Y Combinator-backed developer infrastructure startup Recall.ai announced Thursday it has raised a $10 million Series A funding round, bringing its total raised to over…

YC-backed Recall.ai gets $10M Series A to help companies use virtual meeting data

Engineers Adam Keating and Jeremy Andrews were tired of using spreadsheets and screenshots to collab with teammates — so they launched a startup, CoLab, to build a better way. The…

CoLab’s collaborative tools for engineers line up $21M in new funding

Reddit announced on Wednesday that it is reintroducing its awards system after shutting down the program last year. The company said that most of the mechanisms related to awards will…

Reddit reintroduces its awards system

Sigma Computing, a startup building a range of data analytics and business intelligence tools, has raised $200 million in a fresh VC round.

Sigma is building a suite of collaborative data analytics tools