Hello hello! 👋
This summer is getting increasingly more hot 🔥🔥🔥. Last week, China ruled that any company operating in the school curriculum (not university) must go non-profit, cannot be acquired, go for an IPO or be listed on the exchange, employ foreigners or use foreign curricula. The main intention was to ease the financial burden on students and families. There were some mentions of too much advertising and a play on the emotions and fears of parents, something along the lines of… if you don’t get this tutor, your kid will be stuck in a dead-end job 💆🏻♀️. What does this mean and why is it making waves in the edtech world:
📉 Well, if you hold up some edtech fund or ETF (like LERN), then you probably saw it continuing to plummet *badly* last Wednesday; the three top listed Chinese tutoring edtechs lost 60% of their market value. They’ve gained some of it back as more details emerge. They could probably spinout the tutoring business and continue to trade normally.
👩🏻🏫The prohibition on listing, raising foreign capital or foreign acquisition means that these edtechs are no longer attractive for venture capitalists. This is huge, because most of the edtech investment is currently going to language and school tutoring (and corporate learning). Out of the 8 Chinese edtech unicorns, half are tutoring and online curriculum and 2 for language learning.
🧐 I am not completely clear on the link between the ‘not-for-profit’ and ‘decreasing the financial burden for families’. A non-profit still makes revenue, they just don’t have a profit because they spend it up or reinvest it back in the company. Doesn’t mean fees will necessarily be slashed or no more ads! Someone please enlighten me!
Do not despair, the first half of 2021 was amazing for edtech: a record of IPOs, records in investments (in edtech and most other verticals as well) 🎊 🎈though don’t open the 🍾 just yet.
Investors might shift fully towards India. And if India is looking more into higher ed, this is all I am hoping for!
The Indian tutoring firm ByJu is making another move with the acquisition of Great Learning for $600M. Great Learning works with HEs to offer upskilling data and computer science. This is part of the $1B that ByJu’s comitting to their strategic entry into corporate learning and HE.
Duolingo listed and is up almost 40% from its debut price of $102 last Wednesday.
PowerSchool also listed on Wednesday and its price is up, but not by much. The software covers about 70% of K12 students in US and Canada.
And to close up this post, Nesta looks back at their work in edtech, tons of really interesting reads, especially around their work on evaluating edtech startups.
Have a wonderful week! 🥂