It’s the largest funding haul in the company’s history, according to Founder and CEO Matthew Gross, who took it as the latest sign that textbooks and paper-based instruction materials are on their way out. The lead investor was global firm Franklin Templeton Investments, with other money coming from TCV, Owl Ventures, Tao Capital Partners, Chan Zuckerberg Initiative and Waycross Ventures.
The size of the investment is noteworthy, but not unheard of — last month, digital courseware company Top Hat pulled in $130 million from Canadian investment fund Georgian.
Gross told Government Technology that around the time he founded Newsela in 2012 and launched its first product beta the following year, only 30 percent of all K-12 schools had broadband. By the end of 2019, he said, the figure was 99 percent.
“When we first started, it was very rare that the school would have a laptop for every student, but now that’s the norm,” he said. “There’s been this broad recognition that digital is a right for students, that we must get laptops and broadband into their hands, in school, and now increasingly there have been efforts to do it at home.”
According to its news release, Newsela is a software-as-a-service platform that hosts over 14,000 texts on various subjects, curated from over 175 major publishers such as the Associated Press and Encyclopedia Britannica, reproduced for different reading levels and including other materials such as lesson ideas, assessments and professional development. In a blog post on the company’s website, Gross said Newsela is now preparing to expand this catalog, add new media types, build new features and find new ways to disseminate its products.
The news release said Newsela's annual recurring revenue grew 81 percent from 2019 to 2020, to a point where it now serves 37 million students and 2.5 million teachers across 90 percent of all U.S. K-12 schools. Gross said one reason for the company’s success last year was that its products worked in physical classrooms and remote learning environments alike. They were adaptable.
He also pointed to an October report from education marketing firm MDR that found just 44 percent of teachers said they used a textbook during remote instruction, and only 22 percent reported using the digital companions that came with the books. Gross said Newsela’s own research found teachers on average reported using textbooks between two and six days a month, while the nation’s schools still spend $5 billion a year on textbooks. In his view, they’re a huge expense getting minimal use in many cases.
“While textbooks are essentially dead in the classroom, they’re still alive and well in district purchasing. At least they were up until the pandemic hit,” Gross said. “Fortunately, school districts are now seeing the light, but that $5 billion is a crazy level of waste that every policymaker should be paying attention to right now and saying, ‘How do we spend that $5 billion on things that teachers actually use and are actually moving the needle for our students?’”
The project of putting digital materials in students’ hands cleared another hurdle this week with the signing of the American Rescue Plan Act of 2021, guaranteeing $7.1 billion for school broadband connectivity and hot spots, routers and other devices. Gross said now that schools are seeing the advantage of adaptable, digital course materials as well as the funding to implement them, they have choices to make about what to buy and how to use it.
“A lot of our work over the next year is going to be supporting school districts consultatively, helping them through that transition,” he said.
