Classroom community tool Edmodo and online learning platform Knewton have each received funding from five separate smart money VCs.
Venture capital funding to education technology startups passed $1.6B last year, across 217 deals. With ed tech startup investing becoming so competitive and crowded, it’s important to know where top VCs are placing their bets.
Ed tech deals completed by the top 20 smart money VCs have trended downward between Q3’13 and Q1’15, although activity ticked up from 4 deals in Q1’15 to 7 in Q2’15. Funding, however, has been relatively strong recently. In the past four quarters (Q3’14 to Q2’15), the 24 deals in which smart VCs participated led to a total of $669M in funding, which is 54% higher than the previous four quarters.
The quarterly dollar funding for deals in which smart money VCs participated ranged from $100M to $200M in the last four quarters. This contrasts with the 2010 to 2011 period, in which the average quarterly amount invested was ~$35M.
(For more on how we selected our top 20 VCs, see the note at the end of this post.)
One useful way to visualize smart money strategies is to use CB Insights’ Business Social Graph, which shows how top investors and target companies are related.
The graph, pictured below, shows that Accel Partners, Felicis Ventures, and New Enterprise Associates are the most active smart VCs in ed tech, with more than 10 unique portfolio companies each in the area. The least active investors are Index Ventures and Battery Ventures. Two startups had the most unique smart VC investors, with 5 each: classroom-based community tool Edmodo and online learning content platform Knewton.
We identified six different ed tech markets that smart VCs are moving into.
- Online language learning: Companies providing online and mobile software to learn foreign languages or English as a second language. Firms in this category that have received smart money VC deals include Mindsnacks, Duolingo, and Open English.
- Teacher-student collaboration & communication: These companies connect students and teachers through online and mobile software to share content, manage assignments, and communicate both in and out of the classroom. Firms that have received smart money investments include Piazza, Instructure, Remind, and Edmodo.
- Education data and analytics: Companies providing data analytics software and solutions in and around the education industry and student performance. This category encompasses a few firms that have received smart money funding, including Civitas Learning and Declara.
- Coding and programming education: Companies offering digital offerings aimed at coding, programming, or engineering skills and techniques. Companies with smart money VC backing include Codecademy, One Month, and Bloc.
- MOOCs & online classrooms – Companies offering free or accredited online courses or tutorials in assorted subject areas. Two companies in this area with smart money VC funding are Udemy and Coursera.
- Tutoring and Test Prep: Companies offering tutors, textbooks, notes, or study materials for specific standardized tests. Smart money VC companies include WyZant and Desire2Learn.
Note: To analyze smart money trends, we looked at the activity of the top 20 VC firms, selected according to portfolio valuations and CB Insights’ Investor Mosaic investor ranking model. Some of the investors are linked to relevant research briefs. Here’s our full list of 20 smart money investors:
- Accel Partners
- Andreessen Horowitz
- Battery Ventures
- Benchmark Capital
- Bessemer Venture Partners
- Greylock Partners
- Kleiner Perkins Caufield & Byers
- New Enterprise Associates
- Redpoint Ventures
- Sequoia Capital
- Union Square Ventures
- Spark Capital
- Index Ventures
- Khosla Ventures
- Founders Fund
- Google Ventures
- Felicis Ventures
- Floodgate Fund
- First Round Capital