Schools and universities are ready to embark on summer break, but that’s not stopping venture capitalists and investors from pouring money into the ed tech sector.
Last year, investments in the global ed tech sector were on track to reach nearly $3 billion with an estimated 506 deals, according to a 2017 report by research firm CB Insights. Those figures would mark a 24 percent jump in the anticipated amount raised by ed tech startups and a 16.6 percent increase in the total number of deals over 2016 figures, CB Insights reports.
But, more importantly, it would signal a rebound in ed tech investments following a dip in the number of deals completed and funds raised in 2016, when $2.4 billion was secured in 434 deals, according to CB Insights.
During 2013 to 2015, annual ed tech investments consistently rose, reaching a peak of $3.4 billion in 2015 over 522 deals, the research firm noted. The 2017 rebound has been attributed to such shifts as a diversification in ed tech investments beyond companies that focus on online educational content, such as Udacity and Coursera, CB Insights noted in a report on 15 early-stage ed tech companies to watch.
The report noted ed tech investors are increasingly interested in startups that offer one of three solutions. First is a connection between students and teachers, parents and teachers, or students and employers. A second area of interest is startups that offer expertise, such as direct access to education experts. And a third area is entertainment, where companies can incorporate entertainment into their education products as a tool for learning.
Govtech Fund II is interested in those startups at the intersection of education and government technology, according to Bouganim. Most ed tech investors like startups that seek to improve the teacher’s teaching experience or the student’s learning experience, he noted. Meanwhile, gov tech investments tend to focus on modernizing internal operations for various agencies.
“The…intersection of gov tech and ed tech means we are investing in tools that modernize the internal operation of schools. The ‘customer’ here is most often school districts. A user could be the district superintendent’s office. One might think of the intersection as ‘school administration,’” he said.
The Govtech Fund is expanding its interest in the ed tech sector with its second fund, according to Bouganim. Initially, Govtech Fund I did not have an explicit focus on ed tech or health care because both sectors have so much nuance and complexity, he explained. But over the past two years, the investment firm has developed its thesis around the intersection of gov tech and ed tech.
The Govtech Fund II’s investment in Glimpse is an example of its interest in ed tech, for example. Glimpse’s technology is used to evaluate the return on investment (ROI) of products and initiatives used in the classroom.
“There are so many products and initiatives being rolled out every year,” said Bouganim. “The key questions as an administrator would be which ones are working? Which ones should we scale to more schools? Which ones should we sunset?”
Govtech Fund II, like its predecessor fund, will focus on seed and Series A, or first round investments. It’s typical investment will range from $250,000 to $500,000, according to Bouganim. The fund, however, will also continue to invest in its existing portfolio of companies up through later investment rounds, such as a Series C round, in order to retain the same percentage investment stake that it previously held before the startup embarked on another funding round.
With its two funds, the Govtech Fund has invested $15 million to date in 19 initial investments and follow-on investments, said Bouganim. He noted more than $200 million has also been invested into Govtech Fund’s portfolio companies by other high-profile venture capitalists, such as Andreessen Horowitz, Khosla Ventures, and Jim Breyer.
Although Bouganim declined to disclose the amount Govtech Fund II invested in Glimpse, the company, according to Crunchbase, secured $120,000 in seed money earlier this year from Y Combinator, which provides funding and support to early stage startups, prior to Govtech’s investment.
Bouganim, who is also a pioneer family member of Presidio Knolls School in San Francisco, said his experience with the Mandarin immersion school helped him understand the challenges school administrators face. That, in turn, helped him understand the problems SchoolMint and Glimpse were trying to solve.
“I have more sensitivity to that because of my own experience in the school,” he says.
[Ben Miller, Government Technology staff writer, contributed to this report.]
Editor's note: An adjustment was made to clarify Ron Bouganim's involvement with the Presidio Knolls School.
Dawn Kawamoto is a former staff writer for Government Technology.