Education technology companies raised a record $1.36 billion from venture capital investors in 2014, up from $1.2 billion in 2013.
Will the trend continue in 2015? It may be possible to make a prediction within the next few months: The first quarter of 2014 was the busiest of the year, as judged by the number of ed tech VC investment rounds, at 63, and the number of investments dropped in each successive quarter. The investments came from more than 386 investors through 201 total funding rounds for the year.
According to an EdSurge analysis that broke down the 2014 ed tech investments into five categories, 60 investments worth $394 million were classified as products for postsecondary students and institutions. However, some of the products in other categories — including curriculum products, teacher needs, and an “everything else” category — could also be classified as pertaining to higher education. The K-12 school operations category had 30 investments worth $144 million.
A number of ed tech companies did particularly well, as evidenced by the following seven examples.
The top ed tech venture capital fundraiser in 2014 was Pluralsight, the online trainer of software developers, IT administrators, and other professionals, which announced in August that it had raised $135 million. The Cedar Valley, UT, company was founded in 2004 and is valued at about $1 billion. Also, in November, the company bought Smarterer, an online skills testing startup, for $75 million. Smarterer was Pluralsight’s fifth acquisition in about a year.
Social Finance, also known as SoFi, was the No. 2 ed tech fundraiser last year, with an $80 million investment round raised from Peter Theil and hedge funds. SoFi looks to capitalize on the student loan crisis by offering loans with better interest rates and services. The company targets lower-risk borrowers, such as employed graduates who want to refinance existing student loans. SoFi launched in 2011 and so far has made $600 million worth of loans to more than 7,000 borrowers.
Minerva Project Inc. wrangled the third-highest investment amount in 2014, $70 million, from a group led by Chinese investors. Minerva, founded in 2012, is forming an exclusive university that teaches students who are taught almost entirely in small groups via live video sessions and live together in residential halls that rotate every year to different major cities worldwide. The company aims to charge $10,000 tuition plus $18,000 for room and board, which will be passed through to the residential services providers.
Teachers Pay Teachers
Teachers Pay Teachers, an online marketplace for teachers to buy and sell educational tools and materials, raised a $64 million round of financing in 2014. The New York company launched in 2006 and has had 22 million exchanges worth $86 million, including $45 million worth of original content moving in 2013.
Craftsy, a kind of paid massive open online course provider for crafts enthusiasts, raised $50 million in November, its fourth round of venture financing. The round brought its total funds raised to nearly $100 million. The Denver, CO, company has 5 million users registered on its site and an estimated $48 million in revenue in 2014 — double that of 2013.
Altschool, a 2013 startup aimed at innovations in K-8 education, raised $33 million in March. The San Francisco company was founded by Google executive Max Ventilla to make “disruptive” advancements in elementary school education, particularly in reading and math skills. The basic idea behind Altschool is to use child-centered teaching, with specialized attention, and small schools that use a technology platform.
Currently free, Duolingo is an online language learning platform. The company uses interactive games to teach languages on mobile devices and other computers, and it has 60 million users. It raised $20 million from investors in February. Also in 2014, the company started a certification test for language proficiency.