May 05, 2017
Mary Ann Azevedo is an Austin-based business writer who has written for Venture Capital Journal, San Francisco Business Times, Crain's and Silicon Valley Business Journal.
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A few years ago, Tyler Muse was eager to learn Spanish before he and his wife embarked to Cuba.

“I told my wife I wanted a private tutor that was available after 8 pm., a native Spanish speaker and wouldn’t cost an arm and a leg,” he recalled. “But it was difficult to find.”

Eventually, Muse found someone from Guatemala who taught him Spanish over Skype, and the idea for Lingo Live was born.

When it was first founded in 2012, the startup was a consumer-focused marketplace for learning Spanish. But the company evolved into its present-day focus on corporate English communication training via Skype. Its primary customers are tech firms such as Twitter, Eventbrite, and Google. Employees from other countries often desire improved skills both in speaking English and professional communication (such as telling a compelling story during a performance review). Ultimately, the company wants to develop its own video platform to use instead of Skype. Its revenue has grown an average 350 percent year-over-year, according to Muse.

Lingo Live caught the eye of San Francisco-based Owl Ventures, which led a $5.2 million Series A round in the company this January. The New York-based startup is an example of an increasing number of companies focused on education in one form or another that are raising money.

While broad, our research included any U.S.-based startup that had a focus on education. Many of those ed-tech startups utilized technology in some form or another. The sector includes online learning platforms, language learning companies, and next-gen schools.

Funding in education and education-tech related companies more than doubled from $817.63 million in 2012 to $1.85 billion in 2015. Investments slowed to $1.24 billion in 2016, but if the first half of this year is any indication, the sector appears to be bouncing back.

In one of the industry’s largest deals in recent years, Washington, D.C.-based Everfi on April 26 announced it had raised $190 million from The Rise Fund, TPG Growth, Main Street Advisors and Advance Publications. The company provides subscription-based digital learning to K-12 schools, universities, corporations, sports leagues and non-profits. Everfi is fueled by its Software-as-a-Service (SaaS) subscription model.

And, AltSchool – one of the sector’s most well-funded private startups – filed a $40 million funding round, raised just this week, with the U.S. Securities and Exchange Commission. The company declined to comment on the raise, but Maggie Quale, the communications officer for AltSchool, wrote via e-mail that the company will be announcing a Series C later this summer, which will include the $40 million that it just raised.

There have been smaller raises as well. In early March, San Francisco-based Kiddom brought in $6.5 million from Khosla Ventures. Founder and CEO Ahsan Rizvi describes the startup as a visual-collaborative system for K-12 classrooms.

“We believe teachers need tools to help them decrease their workloads so they can personalize and differentiate education for students,” he said. “They’re stuck with archaic tools and processes for antiquated ideas of how education should proceed.”

The Venture Perspective

Owl Ventures Partner Amit Patel believes the 2016 slowdown in education-related funding was more indicative of trends facing the venture capital industry as a whole rather than a reflection of the state of the education technology market itself.

The dip in education technology funding was lower on a percentage basis than funding in general last year, he asserts.

Owl Ventures has focused exclusively on education since its inception in 2014, when it raised its first fund of $100 million. Since then, it has invested in 10 education technology startups including Lingo Live, Newsela, and DreamBox Learning.

The sheer size of the education market translates into big opportunity for startups and investors, according to Patel.

“It’s a multi-trillion industry,” he said. “And with more schools having access to high-speed broadband Internet connection than ever, we think now is the time to invest in edtech.”

Patel also believes the potential for international growth is big.

“China now has two education companies with market caps north of $9 billion, and I think many of their companies are actively looking to partner with U.S. education companies,” he said. “Plus, I think international expansion is something many of our existing portfolio companies are focused on already.”

Disrupting the education industry is a challenge a slew of startups are eager to take on. There are also investors willing to place bets on the potential of education technology. But only time will tell which companies will forge ahead in a crowded field ripe for change.