Smart Money VCs Lower The Grade On Ed Tech

Ed tech funding and deal activity have experienced a chill, slowing down in 2016 year-to-date, and smart money is no exception. The top smart money VCs have participated in over 160 ed tech funding rounds cumulatively since 2011, but have been decreasing their involvement in the industry over the past two years.

In fact, smart money VCs were ahead of the curve when it comes to the ed tech slowdown, since they started slowing down their participation in ed tech deals in 2015, while overall investors were still upping their activity in the category.

Note: For more on how we selected our 24 smart money VCs, please see the explanation and full smart money list at the bottom of this post.

Annual trends in smart money ed tech investment

Smart money VCs have decreased their ed tech activity since 2014, when they participated in a peak of 39 ed tech deals. That number dropped to 27 in 2015, and — with just four deals so far in 2016 — is on track to fall even farther this year.

On a funding basis, smart money VCs have only participated in ed tech deals totaling $86M in 2016 year-to-date (through 4/18/16), which means the year is on pace for less than $300M from ed tech deals with smart money VC participation, compared to some $740M the year prior.

Two mega-rounds with smart money participation boosted 2015’s dollar funding total: lynda.com’s $186M growth equity round, with participation by Accel Partners, and Udacity’s $105M Series D, with participation by two smart money VCs, Andreessen Horowitz and CRV. Andreessen Horowitz also participated in 2015’s $75M Series B to AltSchool, a San Francisco-based company building a system of K-8 “micro-schools.” Two other smart money VCs — First Round Capital and Founders Fund — joined Andreessen Horowitz in the AltSchool deal. 

Visualizing smart money ed tech investments

CB Insights’ Business Social Graph allows us to zoom in on the relationships between investors and target companies, and visualize smart money strategies. Accel Partners has been most active in ed tech, with over 20 investment rounds in some 15 unique companies, most notably adaptive-learning platform Knewton and IT learning platform Grovo Learning.

In second place, Social Capital has poured money into over 20 investment rounds and placed bets on more than 10 unique ed tech companies. New Enterprise Associates, rounds out the top three most active smart money VCs in ed tech.

Here are a few more takeaways from the visualization below:

• Edmodo is the smart money favorite in the space, and is backed by 5 firms on our list (Greylock Partners, Benchmark Capital, Union Square Ventures, Index Ventures, and NEA). Edmodo, a learning-management system for teachers and classrooms, has raised over $77M in disclosed funding.
• Personalized study platform Knewton has attracted the most rounds involving smart money VC’s (10+), and has raised over $157M in total.
• Here are a few other ed tech startups backed by multiple top firms, with their smart money backers listed: code-learning site Codecademy, which has raised over $12M from investors including Kleiner Perkins, Social Capital, Union Square Ventures, and Index Ventures; IfYouCan Company, which offers apps to teach children social and emotional skills and has raised $9M from investors including Andreessen Horowitz, Floodgate, Founders Fund, and Greylock Partners; classroom-communication platform Remind, which has raised $60M from investors including Social Capital, First Round Capital, and Kleiner Perkins; and language-learning app Duolingo, which has raised $83M from investors including Kleiner Perkins, NEA, and Union Square Ventures.
• Interestingly, some of ed tech’s most well-funded companies have become so without smart money’s help. This includes Shanghai-based English learning platform TutorGroup ($315M in disclosed funding) and California-based learning-management system HotChalk ($249M).
• The Foundry Group is the only smart money firm with zero overlapping investments with other smart money VCs, though it has funded at least five ed tech startups to date.

Note: To analyze smart money trends, we looked at the activity of 24 top VC firms, selected according to portfolio valuations and investment outcomes. Some of the investors are linked to relevant research briefs. Here’s our full list of 24 smart money investors:

1. Sequoia Capital
2. Benchmark Capital
3. Accel Partners
4. Greylock Partners
5. Andreessen Horowitz
6. Union Square Ventures
7. First Round Capital
8. Bessemer Venture Partners
9. Kleiner Perkins Caufield & Byers
10. New Enterprise Associates
11. Founders Fund
12. Lightspeed Venture Partners
13. Foundry Group
14. Index Ventures
15. Khosla Ventures
16. Social Capital
17. Emergence Capital Partners
18. True Ventures
19. Floodgate Fund
20. General Catalyst Partners
21. CRV
22. Spark Capital
23. Battery Ventures
24. Redpoint Ventures

Feature image credit: Brent Leimenstoll/Flickr

Want more data about top ed tech companies? Login to CB Insights or sign up for free below.