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Edtech

Edtech backers rewarded as IPO pipeline heats up

Previously a sector that struggled to gain wide acceptance among venture capitalists, edtech has seen a series of notable IPOs during the pandemic.

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Edtech company IPOs used to be practically nonexistent—until this year.

Increased adoption of online learning technologies amid the pandemic, combined with strong public market conditions, has paved the way for a bevy of notable public exits in the category.

Learning platform Coursera debuted on the NYSE in late March with a valuation of over $4 billion. A few months later, foreign language education app Duolingo hit the Nasdaq with a valuation of $3.7 billion. And just last week, Udemy, an education marketplace that offers online classes focused on business and technical skills, went public with an initial market value of more than $4 billion.

In the meantime, Nerdy, the parent company of Varsity Tutors, went public via a SPAC in a deal valued at about $1.7 billion. And PE-backed PowerSchool, a software company serving K-12 institutions, was valued at roughly $3.5 billion following the pricing of its IPO.

These are significant outcomes for any newcomers to Wall Street, but especially for a sector that struggled to gain wide acceptance among venture capitalists before the pandemic.

Soon after the start of the shutdowns, many VCs recognized that there could be massive opportunities in the edtech sector, and that the shift from offline to online learning could continue after students are allowed to return to the classroom.

And indeed, the edtech boom has not waned now that most schools and universities are again meeting in person.

During the first 10 months of 2021, investors funneled $13.8 billion into edtech startups, surpassing the sector’s global venture funding for all of 2020, according to PitchBook data.

This capital has also helped mint 14 new edtech unicorns, representing nearly half of 35 edtech companies valued at $1 billion or more.

 


The latest additions to the unicorn class include companies that have become household names during the pandemic, like Outschool and MasterClass, which raised $225 million in May at a reported valuation of $2.75 billion.

More edtech companies are likely to hit the IPO pipeline soon, but none are more highly anticipated than Byju’s. The India-based online learning platform has recently raised $300 million at a valuation of $18 billion, and some investment bankers reportedly believe it could fetch a valuation of $40 billion to $50 billion if it chooses to be listed.

Byju Raveendran, founder and CEO of Byju’s, has said that the company aspires “to be in kids’ learning like how Disney is to kids’ entertainment,” according to Indian news provider Rediff.

Raveendran has been working toward this goal by scooping up edtech startups around the globe. This year alone, Byju’s has bought Singapore-headquartered Great Learning for $600 million, US-based Epic for $500 million, and India’s Aakash Educational Services for about $1 billion.

If investors previously had doubts about investing in edtech, they need look no further than Byju’s to realize that the sector has an enormous total addressable market.

Featured image by vladwel/Getty Images

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    Written by Marina Temkin
    Marina Temkin covered the venture capital ecosystem from 2021 to 2024, based in San Francisco. Previously with Venture Capital Journal, Marina wrote about the VC industry, and she was a reporter with Mergermarket in New York and San Francisco. She also has been a financial analyst and is a CFA charterholder. Marina received an economics degree from the University of California, Davis, and she attended the CUNY Graduate School of Journalism.
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