7 investors discuss why edtech startups must go back to basics to survive

In retrospect, edtech’s spotlight feels like a fever dream. In the early innings of the pandemic, top companies turned into unicorns seemingly overnight as Zoom school became an actual reality for millions across the world, and a frenzy of check-writing seized investors.

Then, we slowly saw the spotlight focus and sharpen. The very companies building for any consumer who needed a better way to learn online began turning to stickier customers — enterprises — for more reliable sources of revenue. The companies that took their first venture capital during the craze decided to join forces with other well-capitalized competitors. And those that raised lots of cash in a short period of time have had to conduct significant rounds of layoffs due to the overhiring that followed.

We’re widening our lens, looking for more — and more diverse — investors to include in TechCrunch surveys, where we poll top professionals about trends and challenges in their industry.

If you’re an investor who’d like to participate in future surveys, fill out this form.

Which brings us to today — and tomorrow. To give TechCrunch+ readers a better understanding of what education investors are looking for today, seven leading venture capitalists in the category answered a series of questions about the sector’s future.

Here’s who we surveyed:

I’ll be honest, the diversity of the answers surprised me — ranging from how climate and workforce mobility are edtech’s next opportunities to how the departure of tourist VCs is playing out differently depending on company stages. The tone also felt balanced: Many admitted that things have changed, but opportunity continues to exist. Like everything these days, the vibe is nuanced.

Reach Capital’s Jomayra Herrera encapsulated the changing landscape well: “The deal pace has definitely slowed down in 2022 across most sectors. For context, we were closing a transaction every four days last year, and that has significantly dropped this year given the market conditions. I would say the past few years have been more of an anomaly, and we are getting back to a more sustainable pace.”

Emerge Education’s Jan Lynn-Matern, meanwhile, was quick to point out that edtech investment in Europe is growing despite the slowdown in the United States — the sector has secured $1.4 billion in Europe thus far in 2022, 40% more than a year earlier, reports say).

Investors are preparing for a time of going heads down, helping their existing portfolio companies that want to prioritize internal growth instead of raising more capital, and rethinking their metrics of success. But that’s all I’m giving away now; read the entire survey to see where investors are finding hope, what is no longer venture-backable, and what wave of edtech innovation they think we’re in today.

Ashley Bittner and Kate Ballinger, Firework Ventures

The early innings of the pandemic netted edtech massive investments of more than $10 billion in venture capital investment globally in 2020 and $20 billion in 2021. But the sector is now facing a downturn. How has this affected your edtech portfolio’s ability to grow, and how are you changing strategy?

It is important to acknowledge that this slowdown looks different from past downturns like the Great Recession. We have not seen a sharp increase in unemployment – as of May 2022, unemployment was just 3.6%, compared to 5% at the start and 10% at its peak during the 2008 recession – largely due to the tight labor market that emerged from the pandemic and the Great Resignation. We still see job openings and turnover at record highs, and many companies are not planning to cut back on hiring, let alone turn to layoffs.

These differences are reflected in the experience of our portfolio companies, many of whom sell into HR and learning and development. In fact, one of our companies had their best quarter on record in Q2.

When it comes to workforce learning, we believe companies are taking a different approach than they did in 2008. During the Great Recession, 1.5 million U.S. workers were laid off across over 8,000 mass layoff events. In an effort to further reduce spending, companies were quick to cut costs in areas like learning and development, which, at the time, were considered less essential.

We now know that decisions like these may have significantly contributed to the massive skills shortage we face today.

Over the past decade, many companies have grown to realize that investing in your workforce is essential to the success of the business – over half of companies facing skills gaps believe internal skill building is the most effective response, compared to one-third who believe hiring is the most effective.

Last year, we were price-disciplined and adhered to our investment strategy as we deployed capital, bringing many of the valuations we’re seeing today in line with our existing philosophy and expectations.

The pandemic’s spotlight on edtech led a slew of generalist investors to start looking at the sector and pouring money into it. This impacted the kinds of startups that got funding and the total capital in the market. Has edtech seen a slowing of the “tourism” from generalist founders and investors? If yes, what is the impact of a more focused sector?

We believe that category expertise is particularly important at the seed and Series A stages. Category expertise is key for an investor to identify product-market fit in the context of the nuances of the sector. We believe there is space for generalist investors to continue investing in the category at the later stages, once product-market fit has been achieved and a company shifts its focus towards scaling.

Edtech activity feels quieter. Is your deal cadence where you expected it to be one year ago? And are the pace of edtech exits today in line with your prior thinking?

Our deal cadence remains unchanged. Firework leads investments primarily at the Series A stage, a strategy that is more concentrated by design (and likely not as adversely impacted by a downturn as other models). We build relationships with founders over time, developing conviction in them, their team, and the company before investing.

This approach allowed us to avoid the investing frenzy of last year. It also means we are not feeling a slowdown in deal cadence this year. We are seeing a lot of companies looking to raise money, and have continued to spend time building relationships with impressive entrepreneurs.

How did the pandemic change your perception of what makes an interesting edtech company? How has that held up when deciding what is considered impressive versus normal growth?

The pandemic has not necessarily changed our thesis, but has accelerated many of its underlying trends. We saw millions of people move to remote work and learning overnight, opening up massive opportunities around remote and distributed training.

The economic recovery from the pandemic has been one of the most unequal in history, with a large number of women and other marginalized groups leaving the workforce altogether. This has only further emphasized the need to build solutions, in edtech and beyond, that are working to close these opportunity gaps.

As a Series A investor, we often look at companies with high growth rates. While strong growth is important, we are focused on ensuring that growth is durable over time. For example, a company could have achieved tremendous growth during the pandemic by tapping into COVID relief funds, but this source of funding may not be stable enough to sustain them for years to come.

What is no longer a venture-backable business model, in your view, in edtech?

We do not have a prediction about any one business model no longer being venture-backable. We continue to look for founders with a high capacity for growth, both personally and for their business, in exciting market opportunities.

What fraction of your companies plan to raise this year? What percent are raising extension rounds and how common is that proving in edtech?

We do not have companies raising extensions of their previous rounds, but we have heard from many founders who are. This move toward extension rounds illustrates a level-setting of expectations from founders around fundraising in the current economic environment.

Understanding the venture context is incredibly important for founders looking to raise capital. We work closely with our portfolio companies ahead of when they are looking to raise their next round to help them understand this context (along with their specific company context), and set goals for the fundraise accordingly.

Some edtech’s unicorns have had to cut staff to deal with the looming recession and the downturn. What should edtech companies do to optimize their runway for the next couple of years?

Edtech isn’t special anymore, and that’s a good thing

Edtech’s day in the sun wasn’t too long ago. As the pandemic struck, consumers became hungry for new virtual-first tools, Zoom school turned into a reality for millions, and it felt like every late-stage company was getting a chance to become a unicorn.

Fast-forward to today, and while the sector is still enjoying a boom in venture capital — I’m subtweeting Owl Ventures for closing a $1 billion fund at the beginning of the year — the sentiment has certainly changed.

To get a better feel for that sentiment, I spoke to seven edtech-focused investors about the seeming departure of tourist investors, what kind of edtech companies are venture-backable, and the general vibes within the sector. Surprisingly, my takeaway was simple: Edtech isn’t special anymore, and that’s a good thing.

Edtech is facing a reality check in the form of discipline. Investors explained that while the whole startup ecosystem is slower this year, edtech hasn’t escaped that trend. If anything, as USV’s Rebecca Kaden put it, “The boom in the category in the last couple years means most of our education-focused portfolio is funded quite well […] rounds would be opportunistic rather than out of need, and most are focused on building their businesses for the next couple years.”

“While the growth isn’t the same as it was in the heart of the COVID boom,” she added, “many education businesses now are at completely different scales, and in a different position than before, allowing for new opportunities and strategies.”

Other investors echoed Kaden’s thoughts, drawing on how edtech is primed to act in a more disciplined market.

Jomayra Herrera, partner at Reach Capital, said that the public markets nearly shutting down has impacted all sectors, but IPOs have historically not been the primary exit path for edtech companies anyway. “Strategic players are still acquisitive, and we have even had a successful exit already this year,” she said.

For those looking to navigate the downturn, the investors had a bevy of tips. Here’s one bit from Emerge Education’s Jan Lynn-Matern:

Plan for preservation. For growth-stage companies, this means ideally reaching profitability with current funding or having a credible narrative as to why and how you can reach it with the next round of funding. Early-stage companies need to prioritize strong user engagement and revenue retention over growth, because these are vital indicators of sustainability.

To me, this means that the absence of generalist investors, or at least their silence, helps companies readjust to more realistic growth goals.

Read the full survey for an inside look at the spicy questions and thoughtful answers from leading education investors.

Go1 nabs $100M at a $2B+ valuation to upgrade its curated enterprise learning platform

Online education continues to get a lot of attention in the wake of Covid-19 and the shift it brought to how people can learn. And to underscore that fact, Go1 — one of the rising stars in the world of enterprise learning, providing education and training to businesses in turn to offer to its employees or users — is announcing a significant round of $100 million, at over a $2 billion valuation, to fuel its growth.

The funding — which closed in May — is being co-led by AirTree Ventures and Five Sigma, with SoftBank Vision Fund 2, Salesforce Ventures, Blue Cloud Ventures, Larsen Ventures, Scott Shleifer and John Curtius from Tiger Global, TEN13, M12 – Microsoft’s venture fund – Madrona Venture Group, SEEK, and Y Combinator also participating. (The company was part of a Y Combinator cohort in 2015.)

For some context on that valuation, Brisbane, Australia-based Go1 has now $400 million to date. And when it last announced funding less than a year ago, a $200 million round July 2021 led by SoftBank, it was valued at half that amount, $1 billion.

That’s a notable increase, in particular when you consider not just the current constricted state of the funding market, but the fact a number of big players in online education have seen their fortunes contract in recent months compared to the booms they saw leading up to and during the pandemic (some perhaps due to overall market pressures, some as part of what appear to be wider macroeconomic and consumer changes).

The core of Go1’s product is a platform in which it brings in content from dozens of other providers — they include companies like Blinkist and Thrive as well as Skillsoft, Pluralsight and Harvard Business Publishing. Go1 aggregates and curates the content, the idea being that that its customers — which include companies that range from the likes of TikTok through to the Singaporean government — can ink a deal to be able to access that educational and training content without having to ink all of those agreements themselves.

At a time when there is a lot of fragmentation and many options for e-learning, that approach has seen a lot of traction, largely to fill needs in three categories: training, upskilling, and more general education to attract and retain talent. In the last year, CEO and co-founder Andrew Barnes told me in an interview that Go1’s revenues, customers and learners all doubled, and it now has some 5 million learners taking courses through its platform,

And while most of its growth to-date has been organic, it will be using some of the funding potentially to bring some inorganic growth into the mix. It’s already doing some of that: in April, it made an acquisition of French-Swiss edtech B2B edtech startup Coorpacademy to expand deeper into francophonic markets.

But Go1’s ambitions extend beyond that: it also plans to use some of the funding to further explore how it might extend its platform beyond corporate learning as well.

“Right now our learners come to us through their employers, but we want to have a relationship outside of that context,” Barnes said. That is dovetailing with another ambition, he added. “Internally, we are considering how to provide education to everyone without pricing them out. If we do something in consumer, we would want to make that a target. It would be quite a different product.”

Another area where it would like to use investment is to bring more technological innovations into the Go1 platform. One of these is likely to be more VR-based learning, Barnes said; another is to build out more live streaming to complement the existing catalogue, which is based today around asynchronous content.

Online education definitely got a boost during the pandemic both for emerging as a necessary tool for students to continue learning; but also as a critical route for helping organizations keep their workers connected to company culture, trained in new skills, and more at a time when they too were less able to assemble in person. Interestingly, while Barnes acknowledges that the pandemic definitely brought remote learning into focus, the market for online education in the workplace was already a thriving one pre-Covid.

“Companies are embracing the opportunity to programmatically upskill, reskill and empower their workforces, and Go1 has emerged as the go-to provider of learning content to make that opportunity a reality,” said Craig Blair, Founder at AirTree Ventures, in a statement. “We’re delighted to be a part of Go1’s global journey in building an enduring company at the helm of the Learning & Development ecosystem.”

Similar to others in the same space such as Odilo (which announced funding just last week), Go1 positions itself as a kind of Netflix or Spotify, aggregating and curating content for its customers. Unlike Odilo, Go1 keeps its branding intact throughout the experience, more like a YouTube. Barnes said there are no plans to move into a completely white-label product.

UK’s Atom Learning picks up $25M from SoftBank for an AI-based online learning platform aimed at elementary school-aged students

The Covid-19 pandemic ushered in a new chapter for virtual learning, giving a boost of attention to existing tools and spurring the creation of new services and use cases as students of all ages were ordered to stay home and stay out of classrooms. Today, one of the startups that’s been a strong benefactor of that trend is announcing some funding to continue its growth. Atom Learning — a London startup that builds AI-based online education materials aimed at primary aged (7-11 years) children, their teachers, and their parents — has raised $25 million, money that it will use to continue its growth in the UK market, to start to look at plans to expand internationally, and to continue building out the data science and content that it provides to its users.

Specifically, Atom’s unique selling point is that it builds education materials that use machine learning and other AI tools to adapt to a users’ specific levels of knowledge; it also applies data science to build analytics and other tools to educators and parents to also work in more targeted ways to encourage more learning. All of these will also be getting more investment.

The funding is coming from a single backer, SoftBank, via its Vision Fund 2, and Aton claims that this sum is the largest-ever for Series A round for a UK edtech startup.

It is also notable for being Atom’s first outside funding. The company, founded in 2018, had been profitable and bootstrapped up to now, and it’s grown quite impressively in the last three years. Currently, Atom is used by 500 primary (elementary) schools in the UK, totaling some 100,000 students. (Given that there are some 22,000 primary schools in the country, it has a lot of growing left to do here.)

Co-founded by Jake O’Keeffe and Alexander Hatvany, O’Keeffe tells me that the two had their first taste of online learning when they worked as online tutors when still at university — very much a common side-gig for undergrads in the UK, where pre-university students face a battery of standardized tests as they go through their years in school, which each set narrowing the field for students and where they will end up for university, what they ultimately study, and essentially do with their lives.

(Indeed, as a parent of UK students who didn’t grow up here, I can tell you it’s a super stressful system that seems very far from perfect in all kinds of ways.)

Covering all ages and all subjects, the pair quickly saw the shortcomings in the model.

“We could see that no two private tutors were the same, even if the costs were always high,” he said. “We thought there was an opportunity to build a fully-automated platform to help standardize the quality and the price.”

They chose to focus on primary-aged children, he said, not only because there were already a number of online tutoring services out in the market for secondary-school students (aged 12-18), but also because they believed that the fundamentals of learning needed to be addressed at a younger age.

“If kids don’t learn those skills by the time they are 11, it’s hard to recover from that when you are older,” O’Keeffe said.

The obvious place for Atom was to start was online learning aimed at students. Specifically, it has built a three-tier model aimed first at teaching students the basics according to the national core curriculum (priced at £9.99/month); and then two subsequent tiers (£49.99/ and £59.99/month) aimed at students that are preparing for senior school entry exams — a system here in the UK for students going to private schools or for certain grammar schools.

Atom naturally evolved that then into content for teachers, with “question banks” for them to create better learning materials for students online and in the classroom, and then tools for parents to better track how everything progressed. The adaptive element means that the platform “reads” how students work to provide subsequent work tailored to each person’s individual level, but it also means that Atom can continually amass feedback on how those students are doing, useful for Atom’s own content library evolution as well as to create ways to track student progress.

These days, there are really a lot of online learning materials for all ages, a giant content trove made even bigger in the last two years with so many schools shuttering their doors and turning to remote learning. That means not only competition for Atom, but also a plethora of pedagogical approaches around what might work best in terms of acquiring knowledge, keeping it, keeping children engaged and so on.

Kahoot, for example, (another SoftBank-backed company) has borrowed heavily from the worlds of gaming, user-generated/creator content, and on-demand entertainment to create what it has been described at times a “Netflix for learning”: a huge library of educational modules, many of which have been created by Kahoot’s user community, which are built around the dynamics of gamification to motivate and engage pupils in a subject. Others, such as Microsoft’s tailoring of Teams for education or Zoom, are simply tools to make it easier for good old-fashioned humans to connect over remote distances and work together on white-board style interfaces to teach and learning.

For now, O’Keeffe said that Atom is focused on continuing to build out more content to bolster the approach it has taken: more adaptive content that complements the work that a school teacher puts in, with the bigger aim being to make sure that kids are, at the most simple level, learning according to the national curriculum (as set out by the government), and hopefully, exceeding that and developing an appetite to learn more.

That means: maybe some gamification somewhere down the line, but not for now. But it also means: Atom is bringing private tutors into the mix soon, too (right now there is a registration page for early access).

“The utilization of edtech and adaptive learning within established curricula has accelerated rapidly both in school and the home”, said Yanni Pipilis, managing partner for SoftBank Investment Advisers, in a statement. “Atom’s proprietary technology enables each child to progress at their optimal learning pace, and provides parents and teachers with real-time feedback on areas of strength and development. We’re excited to partner with the team in its vision to improve learning outcomes for every student.”

Abwaab raises $20M Series A led by BECO Capital to expand across MENA and Pakistan

Jordan-based online learning platform Abwaab has raised $20M in a Series A funding (following a $5M seed round in March of this year) making it one of the most funded edtech startups in the Middle East, North Africa and Pakistan (MENAP), a region that encompasses 160 million students.

The round was led by existing investor BECO Capital (UAE) and joined by 4DX Ventures (USA), GSV Ventures (USA), Watar Partners (KSA) and others. Founded in late 2019, the startup has expanded from Jordan into Egypt and Pakistan.

Founders Hamdi Tabbaa, Sabri Hakim, and Hussein AlSarabi, position their platform at secondary school students, offering content tailored to local curricula, filling the gaps in educational resources available online, while tackling the region’s high dependence on offline tutoring.

On Web and native apps, students participate in lessons, get feedback, and join discussion boards.

Abwaab says it has experienced strong growth during the pandemic-halted lockdown where children were unable to attend normal schooling.

Abwaab on tablet

Abwaab on tablet

In Jordan, where it has an active freemium subscription model, students are paying a one-off subscription to unlock access to the platform for the whole academic year.

It claims to have grown by 10x in the number of active users throughout the 2020/21 academic year. It previously acquired Pakistani edtech startup Edmatrix.

Hamdi Tabbaa, Abwaab’s Co-founder & CEO said, “Our mission since inception has been to make learning more accessible, affordable, and fun, by building a comprehensive ecosystem that changes the way students learn, while also equipping them with the tools needed to get ahead in life.”

BECO Capital’s Abdulaziz Shikh Al Sagha said: “Abwaab is on a clear path to establishing themselves as market leaders within the region and we are proud to have had the chance to further deepen our partnership with Hamdi, Sabri, Hussein and the whole Abwaab team.”

Peter Orth, Managing Partner at 4DX Ventures added: “We believe very much in Abwaab’s mission to make high quality, outcome driven education more affordable and accessible, and we believe that they are poised to become the dominant in the MENAP region.”

Its competitors include offline tutoring centers; Noon Academy (a Saudi based social learning platform; EdKasa (Pakistan based test prep app); Ashtar (Egypt based learning app).

Abwaab says it competes on the basis of offering micro-lessons that match every country’s national curriculum in bite sizes; assessments for test prep; chat or video tutoring; and a low annual USD15 subscription, which compares to the cost of one hour of tutoring.

TechCrunch+ roundup: 3 flavors of BaaS, growth marketing fixes, NerdWallet IPO

Most of the people who poured into California during the Gold Rush have been long forgotten.

We remember Levi Strauss, however: Before he and Jacob Davis patented those denim jeans, he sold shovels and other supplies to fortune-seekers.

Today’s banking-as-a-service startups are similarly placed — instead of digging for treasure in the crowded consumer financial services marketplace, BaaS companies offer fintech companies access to APIs, compliance tools and other software needed to move money around.

In recent weeks, Ryan Lawler has been mapping the landscape of BaaS companies. For his latest report, he studied three different strategies:

  • Turnkey banking as a service
  • Playing matchmaker between banks and fintechs
  • Buying a bank to get into BaaS

“If you’re looking to spin up a new fintech app or want to add banking, debit cards or other financial services to your existing business, knowing how each of these competitors is positioned to work with customers and bank partners is key,” he writes.

Full TechCrunch+ articles are only available to members
Use discount code TCPLUSROUNDUP to save 20% off a one- or two-year subscription

On Tuesday, October 19, at 3 p.m. PT/6 p.m. ET, I’m hosting a Twitter Spaces chat to discuss TechCrunch’s guest contributor program.

If you’re interested in submitting a post to TechCrunch or TechCrunch+, please read our guidelines and join the conversation. Bring your questions!

For a reminder, please follow @techcrunch on Twitter.

Thanks very much for reading!

Walter Thompson
Senior Editor, TechCrunch+

How I went from a college dorm brainstorm to leading edtech

student dormitory room with bed, desk & chair

Image Credits: Catherine McQueen (opens in a new window) / Getty Images

Earlier this year, note-sharing network StuDocu raised a $50 million Series B, but Marnix Broer, the company’s CEO, says he didn’t initially intend to co-found an edtech startup.

“It was more of a project to create a tool that we could use while studying in school,” he writes in a TechCrunch+ guest post that explains how the company scaled up from storing notes on a USB thumb drive to serving more than 15 million users.

Selling into the enterprise: How Slack and other startups get it wrong

Going up against large enterprise companies may be daunting for a startup, but Scribe CEO and co-founder Jennifer Smith says you’re never too small to start.

Much to their detriment, many early-stage companies wait too long to spin up strategies for competing with industry leaders, she writes. One example: 12 years after its founding, Slack exited to Salesforce for $27.2 billion.

“The question is, if Slack had considered selling into the enterprise sooner, could it have survived as an independent public company?”

NerdWallet’s IPO filing reveals high-margin content business, accelerating marketing spend

A casual observer might assume that NerdWallet was a fintech company with a strong marketing game, but after perusing the company’s S-1, Alex Wilhelm concluded that it is “essentially a weaponized content play.”

In his analysis for The Exchange, he looked at how well NerdWallet has fared during the pandemic, its profitability, growing revenue, “and how the company manages to stay trustworthy, a question that we’ll address through the lens of editorial independence.”

Fintech founders can learn a lesson about frugality from these industry leaders

US Paper Money Flying out of Man's Hand

Image Credits: Jeffrey Coolidge (opens in a new window) / Getty Images

Dave Mullen, a fintech-focused investor with SVB Capital, takes a look at how well leading fintech firms are allocating their mountains of cash.

“There are now a slew of fintech startups approaching or far surpassing $10 billion in value … so we can glean some insight into their capital allocation strategies by considering how they have spent to achieve their position in the ecosystem,” he writes.

In a guest column, he unpacks data from Coinbase, Robinhood, Affirm, Chime, Marqeta and others, offering suggestions to founders in the fintech space.

“Dollars may buy growth, but they can’t guarantee a good business.”

Private equity is ready to take MSP consolidation to the next level

A combination of drinking straws in two cups

Image Credits: Richard Drury (opens in a new window) / Getty Images

Good news: Businesses of all stripes are digitizing their operations faster than ever before, creating huge advantages for companies that start the work now.

Bad news: Many technical workers are already looking for new jobs, and companies must compete to find the right people who can build robust, secure IT environments.

Managed services providers (MSPs) are filling the gap, and private equity firms are paying attention.

“MSPs have all the ingredients that private equity loves,” write Mike McGill and Kevin Jolley of Cowen and Company, LLC.

“A strong demand trend, low risk of obsolescence, a ‘sticky’ service that attracts long-term customers and high recurring revenues, strong cash flow margins and a relatively ‘asset-light’ business.”

5 common growth marketing mistakes startups make

Red and blue darts in wall around red, white and blue dart board

Image Credits: Jeffrey Coolidge (opens in a new window) / Getty Images

We don’t run many articles that call out mistakes or describe dysfunctional processes; most of us have a fairly good handle on what’s going wrong at any given moment, so we focus on solutions.

With that in mind, growth marketer Jonathan Martinez shared a guest post with strategies for tackling these endemic issues:

  • Low testing velocity
  • Reliance on incorrect measurements
  • Focusing only on top-of-funnel traffic
  • Lack of incrementality
  • Insufficient product-growth integration

Venture capital is going to need a record-breaking run of IPOs to clear its own decks

Global venture capital is flowing so freely, there are unicorn herds in more regions than ever before.

“Which, in turn, boosts the scale of unexited private-market value that will eventually need to exit,” writes Alex Wilhelm in this morning’s The Exchange.

“And with some U.S. tech giants limiting acquisitions as a way of playing defense against antitrust concerns, there is an implicit expectation that the IPO market will eventually have to make room for a stampede of unicorn debuts.”

Entity Academy, an edtech startup that trains, mentors and places women in tech roles, secures $100M

Women have made great inroads into the tech world in recent years, but there remains a long way to go before we reach a truly equitable state of affairs in workforce numbers, remuneration and product development. An edtech startup called Entity Academy — which provides women with training, in areas like data science and software development; mentoring; and ultimately job coaching — has raised $100 million on the heels of strong growth of its business, and an ambition to improve that ratio.

The financing will be used to help students finance their Entity Academy tuition, which typically costs $15,000. It’s coming from Leif, itself a startup that provides financing services to edtech platforms so that they can offer their students income share agreements (otherwise known as ISAs, arrangements where students are not required to pay back tuition loans until they find jobs).

Jennifer Schwab, the founder and CEO of Entity, has built the business since 2016 on virtually no outside funding, but said that this latest financing is a precursor to the company working on its first, more traditional VC-led equity round.

Entity does not build e-learning content itself but aggregates online courses in data science, software development, fintech engineering and technology sales in “bootcamp” style courses that range from 24 to 33 weeks in length, from providers that range from Springboard and Lambda School through to Columbia University (courses from the universities tend to be presented as created by the institutions, while the others are tailored by Entity itself to its students).

Its technology play is not just related to Entity’s curriculum being focused on tech; as you might expect in an edtech startup, Entity also leans heavily on the data that it has amassed to build its strategy and its business.

That data is based not just on feedback from past and current students and student outcomes, but also other channels. Its “content arm” Entity Mag has quite interestingly gone viral on social media and has more than 1.1 million followers across Instagram and Facebook, which becomes another major channel for engagement (not to mention future students).

Entity uses all this to curate not just what courses it provides and what goes into the curriculum, but also how best to supplement that learning. Today, Entity courses also include targeted mentoring from people working in the tech industry, as well as career coaching en route to finding a job.

Entity’s sweet spot is a bifurcated one, Schwab said in an interview.

It’s women who are either new (typically aged 19-23); or those newly-returning or rethinking their careers (typically aged 30-39, Schwab said). Women in both categories are coming to Entity because they would like to consider tech jobs or more technical promotions, but have found their expertise lacking to do so. Mostly likely, they studied humanities or other non-technical subjects in college, and typically they don’t have the support in their work environments to simply retrain to open the door to those more technical roles.

Added to this is the diversity mix among those women, which also poses a different kind of challenge for that cohort, but also a great boost for Entity for helping them address that. Some 55% of the 19-23 group are women of color; as are 62% of the 30-39 group. Entity aims to provide its tools to address all of these women with all of their different challenges around breaking into tech jobs, in what it describes as a “wraparound” strategy.

“A number of our students would not have pursued STEM programs in the past,” said Schwab, “so we are building skillsets from the ground up.”

With some 80% of students on the courses taking some financing to pay for them, you can see why Entity is now ramping up the means to help them do that.

Since 2016, some 400 students, almost all women, have completed the course. But originally it started as a much shorter (six-week) program, was all in-person and cost $5,000. Now with a number of the courses lasting eight months and all virtual, that spells more costs and more people. Schwab said there are another 300 students going through the course, and it’s on track to have 1,500 next year.

Entity’s growth has dovetailed with bigger edtech and “future of work” trends. Covid-19 foisted a hefty set of expectations on the e-learning industry, with companies building tools to help teach people remotely suddenly finding themselves in unprecedented demand. That was not only because traditional learning environments needed to go virtual, but also because the pandemic led so many — willingly or by force — to rethink what they were doing with their lives, and online education was one key route for doing something about it, at a time when little else could be done.

Entity’s own story fits into both of those story lines.

The company was started originally in Los Angeles by Schwab on the back of her own experiences when she was an advisor at Ernst & Young early in her own career.

“My original goal was to change how women approach careers globally. How to mentor women better was the impetus because I did not have female mentors when I started at Ernst & Young,” she recalled. Feeling “like you are on an island” is bad in itself, she said, but it was a quick evolution into education and job placement alongside that mentoring because “we identified these [as other reasons] why women don’t pursue tech careers.”

The first incarnation of the company in 2016 was as a brick-and-mortar learning center housed in a 1920s building in LA — appropriately enough, formerly a men’s club. That was a compelling sell, with a shorter learning period and being in-person, it saw completion rates of 96% with jobs for more than 90% of the cohorts by the end. “There is a lot more accountability in person,” Schwab said.

The pandemic, of course, forced Entity out of that model, but also became the lever for how it would scale. When it relaunched as a virtual program in 2020, from a new company HQ in Las Vegas, the numbers grew, the company extended the length of the courses, and it increased the tuition to reflect the longer engagements.

And yet that has had a downside, too, with completion rates dipping, something that Schwab said is a priority for the company to work on improving.

The mentors on the program are another aspect of the business that has scaled with the move to virtual. Originally, all mentors were unpaid volunteers who either just wanted to help more women get a leg up in the industry, or more opportunistically use their exposure to the students as a hiring funnel. That, too, is evolving with online engagement.

“Now we pay mentors, and we bring in professional moderators to keep mentor-led discussions at a decent pace,” Schwab said. Often speakers will donate their fees to scholarship and childcare funds, she added. There are some 250 mentors in the Entity network now, with some focused on lectures to groups of students while others work individually with them, usually in connection to the technical subjects they are studying. That number is expected to double to 500 next year, Schwab said.

The job-finding aspect of the role is perhaps the least developed up to now — you can find, in small print, that “job placement is not guaranteed” at the bottom of Entity’s website, alongside the admonition that Entity Academy is a complement to, not a replacement for, traditional education.

But that also speaks to potential opportunities. In that vein, there are others, such as The Mom Project, that are eyeing up the opportunity of specifically targeting the female demographic, speaking not just to the huge female gap in the job market, but also the fact that there just hasn’t been much built to address that. Thankfully, now that appears to be changing.

Africa Roundup: Nigerian fintech gets $360M, mints unicorn, draws Chinese VC

November 2019 could mark when Nigeria (arguably) became Africa’s unofficial capital for fintech investment and digital finance startups.

The month saw $360 million invested in Nigerian focused payment ventures. That is equivalent to roughly one-third of all the startup VC raised for the entire continent in 2018, according to Partech stats.

A notable trend-within-the-trend is that more than half — or $170 million — of the funding to Nigerian fintech ventures in November came from Chinese investors. This marks a pivot in China’s engagement with Africa to tech. We’ll get to that.

Before the big Chinese backed rounds, one of Nigeria’s earliest fintech companies, Interswitch, confirmed its $1 billion valuation after Visa took a minority stake in the company. Interswitch would not disclose the amount to TechCrunch, but Sky News reporting pegged it at $200 million for 20%.

Founded in 2002 by Mitchell Elegbe, Interswitch pioneered the infrastructure to digitize Nigeria’s then predominantly paper-ledger and cash-based economy.

The company now provides much of the tech-wiring for Nigeria’s online banking system that serves Africa’s largest economy and population. Interswitch offers a number of personal and business finance products, including its Verve payment cards and Quickteller payment app.

The financial services firm has expanded its physical presence to Uganda, Gambia and Kenya . The Nigerian company also sells its products in 23 African countries and launched a partnership in August for Verve cardholders to make payments on Discover’s global network.

Visa and Interswitch touted the equity investment as a strategic collaboration between the two companies, without a lot of detail on what that will mean.

One point TechCrunch did lock down is Interswitch’s (long-awaited) and imminent IPO.  A source close to the matter said the company will list on a major exchange by mid-2020.

For the near to medium-term, Interswitch could stand as Africa’s sole tech-unicorn, as e-commerce venture Jumia’s volatile share-price and declining market-cap — since an April IPO — have dropped the company’s worth below $1 billion.

Circling back to China, November was the month that signaled Chinese actors are all in on African tech.

In two separate rounds, Chinese investors put $220 million into OPay and PalmPay — two fledgling startups with plans to scale in Nigeria and the broader continent.

PalmPay, a consumer oriented payments product, went live last month with a $40 million seed-round (one of the largest in Africa in 2019) led by Africa’s biggest mobile-phone seller — China’s Transsion.

The startup was upfront about its ambitions, stating its goals to become “Africa’s largest financial services platform,” in a company statement.

To that end, PalmPay conveniently entered a strategic partnership with its lead investor. The startup’s payment app will come pre-installed on Transsion’s mobile device brands, such as Tecno, in Africa — for an estimated reach of 20 million phones.

PalmPay also launched in Ghana in November and its UK and Africa based CEO, Greg Reeve, confirmed plans to expand to additional African countries in 2020.

OPay’s $120 million Series B was announced several days after the PalmPay news and came only months after the mobile-based fintech venture raised $50 million.

Founded by Chinese owned consumer internet company Opera — and backed by 9 Chinese investors — OPay is the payment utility for a suite of Opera developed internet based commercial products in Nigeria. These include ride-hail apps ORide and OCar and food delivery service OFood.

With its latest Series A, OPay also announced it would expand in Kenya, South Africa, and Ghana.

Though it wasn’t fintech, Chinese investors also backed a (reported) $30 million Series B for East African trucking logistics company Lori Systems in November.

With OPay, PalmPay, and Lori Systems, startups in Africa have raised a combined $240 million from 15 Chinese investors in a span of months.

There are a number of things to note and watch out for here, as TechCrunch reporting has illuminated (and will continue to do in follow-on coverage).

These moves mark a next chapter in China’s engagement in Africa and could raise some new issues. Hereto, the country’s interaction with Africa’s tech ecosystem has been relatively light compared to China’s deal-making on infrastructure and commodities.

There continues to be plenty of debate (and critique) of China’s role in Africa. This new digital-phase will certainly add a fresh component to all that. One thing to track will be data-privacy and national-security concerns that may emerge around Chinese actors investing heavily in African mobile consumer platforms.

We’ve seen lines (allegedly) blur on these matters between Chinese state and private-sector actors with companies such as Huawei.

As OPera and PalmPay expand, they may need to do some reassuring of African regulators as countries (such as Kenya) establish more formal consumer protection protocols for digital platforms.

One more thing to follow on OPay’s funding and planned expansion is the extent to which it puts Opera (and its entire suite of consumer internet products) in competition with multiple actors in Africa’s startup ecosystem. Opera’s Africa ventures could go head to head with Uber, Jumia, and M-Pesa — the mobile money-product that put Kenya out front on digital finance in Africa before Nigeria.

Shifting back to American engagement in African tech, Twitter and Square CEO Jack Dorsey was on the continent in November. No sooner than he’d finished his first trip, Dorsey announced plans to move to Africa in 2020, for 3 to 6 months, saying on Twitter “Africa will define the future (especially the bitcoin one!).”

We still don’t know much about what his last trip — or his future foray — mean in terms of concrete partnerships, investment, or market moves in Africa from Dorsey and his companies.

He visited Nigeria, Ghana, South Africa and Ethiopia and met with leaders at Nigeria’s CcHub (Bosun Tijani), Ethiopia’s Ice Addis (Markos Lemming), and did some meetings with fintech founders in Lagos (Paga’s Tayo Oviosu).

I know most of the organizations and people he talked to pretty well and nothing has shaken out yet in terms of partnership or investment news from his last trip.

On what could come out of Dorsey’s 2020 move to Africa, per his tweet and news highlighted in this roundup, a good bet would be it will have something to with fintech and Square.

More Africa-related stories @TechCrunch

African tech around the ‘net

India’s Unacademy raises $50 million to grow its online learning platform

Big money continues to flow in India’s growing education market. Bangalore-based Unacademy, which operates an online learning platform to help millions prepare for competitive exams in India, has raised $50 million to further scale its reach.

The Series B financing round was led by Steadview Capital, Sequoia India, Nexus Venture Partners and Blume Ventures, with Unacademy’s own co-founders Gaurav Munjal and Roman Saini also participating in it. The new round means the startup has raised close to $90 million to date.

The four-year-old startup is aimed at students who are preparing for competitive exams to get into a college and those who are pursuing graduation level courses. Unacademy allows students to watch live classes from educators and then engage with the team in any questions they may have. It has 10,000 registered educators and 13 million learners — up from 3 million a year ago.

The startup said it will use the new fund to expand the number of educators it has on the platform, and also add more exam courses. It will also improve its product and expand the team.

Unacademy began its journey as a YouTube channel, but has since expanded to its own app where it offers some courses for free and others through a recently launched subscription business. The subscription service — called Unacademy Plus Subscription — has 50,000 users.

Unacademy also maintains an archive of all the classes, giving students the option to reference to older lectures at any time through the app. The startup says YouTube is still its largest distribution channel. Overall, the platform sees more than 100 million monthly views across the platforms.

“We are seeing unprecedented growth and engagement from learners in smaller towns and cities, and are also very humbled to see that top-quality educators are choosing Unacademy as their primary platform to reach out to students. In the last few months, we have taken bigger strides toward achieving this mission. We have more than 400 top educators from across the country taking live classes every day on Unacademy Plus. This is available to every student, irrespective of their location,” Gaurav Munjal, a founder and CEO of Unacademy said in a statement.

Unacademy competes with unicorn Byju’s, which is widely believed to be the biggest edtech startup in the world with its valuation nearing $4 billion. Unlike Unacademy, Byju’s, which has more than 2.4 million paid subscribers, covers primary school and high school courses as well in addition to competitive under graduation level courses.

In recent months, Unacademy has grown more aggressive with marketing. Last year it tied up with web producing house The Viral Fever to fund a show called “Kota Factory”, which revolves around the lives of students who are preparing to go to an engineering college. In the midst of it, Unacademy also offered low-cost, discounted subscription plans to attract users to its subscription platform.

Unacademy has presence in Indonesia as well, where as of last year, it had about 30 educators. The startup did not offer an update on how its international ambitions are holding up. A representative of Unacademy told TechCrunch recently that the platform does not rely on ads for monetization.

pi-top’s latest edtech tool doubles down on maker culture

London-based edtech startup, pi-top, has unboxed a new flagship learn-to-code product, demoing the “go anywhere” Pi-powered computer at the Bett Show education fare in London today.

Discussing the product with TechCrunch ahead of launch, co-founder and CEO Jesse Lozano talked up the skills the company hopes students in the target 12-to-17 age range will develop and learn to apply by using sensor-based connected tech, powered by its new pi-top 4, to solve real world problems.

“When you get a pi-top 4 out of the box you’re going to start to learn how to code with it, you’re going to start to learn and understand electronic circuits, you’re going to understand sensors from our sensor library. Or components from our components library,” he told us. “So it’s not: ‘I’m going to learn how to create a robot that rolls around on wheels and doesn’t knock into things’.

“It’s more: ‘I’m going to learn how a motor works. I’m going to learn how a distance sensor works. I’m going to learn how to properly hook up power to these different sensors. I’m going to learn how to apply that knowledge… take those skills and [keep making stuff].”

The pi-top 4 is a modular computer that’s designed to be applicable, well, anywhere; up in the air, with the help of a drone attachment; powering a sensing weather balloon; acting as the brains for a rover style wheeled robot; or attached to sensors planted firmly in the ground to monitor local environmental conditions.

The startup was already dabbling in this area, via earlier products — such as a Pi-powered laptop that featured a built in rail for breadboarding electronics. But the pi-top 4 is a full step outside the usual computing box.

The device has a built-in mini OLED screen for displaying project info, along with an array of ports. It can be connected to and programmed via one of pi-top’s other Pi-powered computers, or any PC, Mac and Chromebook, with the company also saying it easily connects to existing screens, keyboards and mice. Versatility looks to be the name of the game for pi-top 4.

pi-top’s approach to computing and electronics is flexible and interoperable, meaning the pi-top 4 can be extended with standard electronics components — or even with Littlebits‘ style kits’ more manageable bits and bobs.

pi-top is also intending to sell a few accessories of its own (such as the drone add-on, pictured above) to help get kids’ creative project juices flowing — and has launched a range of accessories, cameras, motors and sensors to “allow creators of all ages to start learning by making straight out of the box”.

But Lozano emphasizes its platform play is about reaching out to a wider world, not seeking to lock teachers and kids to buying proprietary hardware. (Which would be all but impossible, in any case, given the Raspberry Pi core.)

“It’s really about giving people that breadth of ability,” says Lozano, discussing the sensor-based skills he wants the product to foster. “As you go through these different projects you’re learning these specific skills but you also start to understand how they would apply to other projects.”

He mentions various maker projects the pi-top can be used to make, like a music synth or wheeled robot, but says the point isn’t making any specific connected thing; it’s encouraging kids to come up with project ideas of their own.

“Once that sort of veil has been pierced in students and in teachers we see some of the best stuff starts to be made. People make things that we had no idea they would integrate it into,” he tells us, pointing by way of example to a solar car project from a group of U.S. schoolkids. “These fifteen year olds are building solar cars and they’re racing them from Texas to California — and they’re using pi-tops to understand how their cars are performing to make better race decisions.”

pi-top’s new device is a modular programmable computer designed for maker projects

“What you’re really learning is the base skills,” he adds, with a gentle sideswipe at the flood of STEM toys now targeting parents’ wallets. “We want to teach you real skills. And we want you to be able to create projects that are real. That it’s not block-based coding. It’s not magnetized, clipped in this into that and all of a sudden you have something. It’s about teaching you how to really make things. And how the world actually works around you.”

The pi-top 4 starts at $199 for a foundation bundle which includes a Raspberry Pi 3B+,16GB SD card, power pack, along with a selection of sensors and add-on components for starter projects.

Additional educational bundles will also launch down the line, at a higher price, including more add ons, access to premium software and a full curriculum for educators to support budding makers, according to Lozano.

The startup has certainly come a long way from its founders’ first luridly green 3D printed laptop which caught our eye back in 2015. Today it employs more than 80 people globally, with offices in the UK, US and China, while its creative learning devices are in the hands of “hundreds of thousands” of schoolkids across more than 70 countries at this stage. And Lozano says they’re gunning to pass the million mark this year.

So while the ‘learn to code’ space has erupted into a riot of noise and color over the past half decade, with all sorts of connected playthings now competing for kids’ attention, and pestering parents with quasi-educational claims, pi-top has kept its head down and focused firmly on building a serious edtech business with STEM learning as its core focus, saving it from chasing fickle consumer fads, as Lozano tells it.

“Our relentless focus on real education is something that has differentiated us,” he responds, when asked how pi-top stands out in what’s now a very crowded marketplace. “The consumer market, as we’ve seen with other startups, it can be fickle. And trying to create a hit toy all the time — I’d rather leave that to Mattel… When you’re working with schools it’s not a fickle process.”

Part of that focus includes supporting educators to acquire the necessary skills themselves to be able to teach what’s always a fast-evolving area of study. So schools signing up to pi-top’s subscription product get support materials and guides, to help them create a maker space and understand all the ins and outs of the pi-top platform. It also provides a classroom management backend system that lets teachers track students’ progress.

“If you’re a teacher that has absolutely no experience in computer science or engineering or STEM based learning or making then you’re able to bring on the pi-top platform, learn with it and with your student, and when they’re ready they can create a computer science course — or something of that ilk — in their classroom,” says Lozano.

pi-top wants kids to use tech to tackle real-world problems

“As with all good things it takes time, and you need to build up a bank of experience. One of the things we’ve really focused on is giving teachers that ability to build up that bank of experience, through an after school club, or through a special lesson plan that they might do.

“For us it’s about augmenting that teacher and helping them become a great educator with tools and with resources. There’s some edtech stuff they want to replace the teacher — they want to make the teacher obsolete. I couldn’t disagree with that viewpoint more.”

“Why aren’t teachers just buying textbooks?” he adds. “It takes 24 months to publish a textbook. So how are you supposed to teach computer science with those technology-based skills with something that’s by design two years out of date?”

Last summer pi-top took in $16M in Series B funding, led by existing founders Hambro Perks and Committed Capital. It’s been using the financing to bring pi-top 4 to market while also investing heavily in its team over the past 18 months — expanding in-house expertise in designing learning products and selling in to the education sector via a number of hires. Including the former director of learning at Apple, Dr William Rankin.

The founders’ philosophy is to combine academic expertise in education with “excellence in engineering”. “We want the learning experience to be something we’re 100% confident in,” says Lozano. “You can go into pi-top and immediately start learning with our lesson plans and the kind of framework that we provide.”

“[W]e’ve unabashedly focused on… education. It is the pedagogy,” he adds. “It is the learning outcome that you’re going to get when you use the pi-top. So one of the big changes over the last 18 months is we’ve hired a world class education team. We have over 100 years of pedagogical experience on the team now producing an enormous amount of — we call them learning experience designers.”

He reckons that focus will stand pi-top in good stead as more educators turn their attention to how to arm their pupils with the techie skills of the future.

“There’s loads of competition but now the schools are looking they’re [asking] who’s the team behind the education outcome that you’re selling me?” he suggests. “And you know what if you don’t have a really strong education team then you’re seeing schools and districts become a lot more picky — because there is so much choice. And again that’s something I’m really excited about. Everybody’s always trying to do a commercial brand partnership deal. That’s just not something that we’ve focused on and I do really think that was a smart choice on our end.”

Lozano is also excited about a video the team has produced to promote the new product — which strikes a hip, urban note as pi-top seeks to inspire the next generation of makers.

“We really enjoy working in the education sector and I really, really enjoy helping teachers and schools deliver inspirational content and learning outcomes to their students,” he adds. “It’s genuinely a great reason to wake up in the morning.”