Innovation in the education area may have a bright future after all, at least if one judges it by the exponential growth in venture capital interest. Overall, data out of Pitchbook indicate strong growth in deal activity and the total invested capital in U.S.-based education startups over the past ten years.
Total invested capital has grown from an estimated $109 million in 2005 to $739 million in 2013. The first quarter of 2014 came in at $295 million, already above where the total investment capital of $287 million came in at for the entire year of 2010.
Total number of deals have also gained strength, ending 2013 at 130, over 100 more than what startups saw from the VC industry in 2007.
Source: Pitchbook
Perhaps unsurprisingly, the average value of a deal has grown from around $3 million in 2006 to about $6 million in 2013. The current year appears to provide no stop to the growth in value.
How Long Can VC’s Interest in the Education Industry Keep Going?
As mentioned, the current year provides no evidence of a slowdown. If the remainder of the year continues similar to the first, VC interest in education innovation will have surpassed $1.2 billion, around $500 million more than the previous record. Of course, to reach the $1.2 billion, the industry would have to see some amazing valuations in the next eight months.
Top Five Education-Related in 2013 and 2014 To Date
The largest raise so far was Lydia.com at $103 million in January 2013. Lydia.com is followed by TutorGroup at $100 million, Coursera at $63 million, Knewton at $51 million, and Parchment at $45 million.
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1Q 2014 Education Statistics |
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| Company | Date | Series | Amount |
| TutorGroup |
2/18/2014 |
B | 100M |
| Parchment |
3/19/2014 |
D | 45M |
| General Assembly |
3/7/2014 |
C | 35M |
| AltSchool |
3/26/2014 |
A | 34.3M |
| GuideSpark |
3/5/2014 |
B | 15M |
|
2013 |
|||
| Lydia.com |
1/15/2013 |
A | 103M |
| Coursera |
11/23/2013 |
B | 63M |
| Knewton |
12/20/2013 |
Late stage | 51M |
| Sympoz |
12/18/2013 |
C | 35M |
| Synergis Education |
9/19/2013 |
A | 33.1M |
Source: Pitchbook
Overall, higher education appears ready for some serious creative destruction, changing an industry that has shown little change since the time of Aristotle. Part of the impetus for the innovation is the greater-than-ever disconnect between an ivory tower education and practicable skills useful in the business world. Both the business world and, to a lesser extent, higher education are behind the push for increasing the value of a Bachelor’s degree.
As a sign of the staying power of VC interest, the recession in 2008 and 2009 didn’t cause any decline in VC interest for education investments. Instead, VC investment grew by $33 million from 2007 to 2008 and by $17 million from 2008 to 2009. Value wasn’t the only thing that increased during the recession, the number of deals also grew, going from 34 in 2007 to 48 in 2008 and 53 in 2009. Overall, VC interest in the education industry continues to skyrocket.
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