EdTech Public Market Update

Before getting to today’s update: now that the two posts about Arnold Ventures (AV) role in the recent anti-OPM campaign have been published, there has been some outside coverage through Jeff Selingo and The Chronicle. The main area that has become more clear to me since publication (and that I need to be more clear on in future posts) is there was not a step function in 2018 with all AV grantees acting similarly. AV’s position has developed over the past five years, going from general support and quasi-research to using (effectively) wholly-owned subsidiaries filing law suits timed to support congressional statements. Put another way, I think that the funding of New America and The Century Foundation and The Hechinger Report is different than the funding of the Project On Predatory Student Lending and the National Student Legal Defense Network, et al. Both categories need to be understood, but there are differences to consider.

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One year ago I wrote a post about the public financial performance for academic EdTech companies (those working significantly in K-12 and postsecondary markets), arguing that company valuations were having an operational impact on various vendors. The latest update was in early December along with a post describing what I see as the drivers of the trend. Macroeconomic trends such as inflation and changes in capital markets, economic trends such as falling enrollments and shifts towards noncredit programs, and Covid hangover due to funding surges and expiration.

Now I would add the future and potential impacts of generative AI. Some of the media coverage on the valuation collapse of Chegg and Pearson is overwrought, but I think this driver is real and can be seen in recent activity.

Using the Coursera IPO in March 2021 as the baseline date, which represented an approximate peak of EdTech market exuberance, the following chart shows overall stock market changes for various EdTech publicly companies (for Instructure and D2L, their IPO dates in July and November 2021 are used as baseline dates). In a word, the overall EdTech market continues to be brutal, with a small number of exceptions. In the past two weeks all companies have dropped further in value, with the lone exception of D2L.

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