The education technology industry is celebrating a record-breaking 2014, with companies having raised a collective $1.36 billion in the United States alone. Within that figure is another historic number, however — one symbolizing significant movement in the K-12 space.
K-12 ed-tech startups saw a 32 percent increase in venture capital over the previous year, securing $642 million in 2014, according to a blog post published by Vivek Murali, an associate partner at nonprofit venture philanthropy firm NewSchools. Helping fuel that growth were Desire2Learn, Harvard alumni-founded Clever and Remind, which raised $85 million, $40.3 million and $55 million in 2014, respectively.
Although NewSchools' focus is on the K-12 space, Murali makes a strong case for where the venture dollars have historically gone: to companies focused on higher education, such as massive open online course platform Coursera, which raised $63 million in 2013, or consumer-facing companies like Duolingo, a language learning app that closed a $20 million Series C in early 2014.
"With its long sales cycle and entrenched incumbents, venture capital investors have avoided K-12, considering it too challenging of a market to penetrate," wrote Murali.
Over the last two years, however, the K-12 ed-tech sector has seen the median Series B round size increase by 49 percent, with several founders focused on how they can tweak the freemium model in a way that benefits teachers, but also helps them turn a profit. There is an increase in companies offering options for free or low-cost teacher adoption that are accompanied by premium site- or district-wide licenses.
Related: 10 Boston Ed-Tech Startups to Watch in 2015
As noted by Murali:
The freemium institutional model is not without its challenges, but several companies have found success by offering compelling, cost-effective premium features such as onsite professional development or by leveraging data on free usage to encourage the institutional sale.
Trends shaking up the K-12 space, according to NewSchools, include: "home-to-school communication platforms," such as ClassDojo and FreshGrade, which streamline communication between parents and educators in an age where one in every five people in the world own a smartphone; and data analytics tools, such as Boston's Ellevation Education, which raised $2 million in July to help schools better assess English Language Learners' performance and readiness.
"Data products continue to perform strongly as schools demand more sophisticated tools to support decision-making around student achievement and resource allocation," wrote Murali. "Moving forward, data will remain a relevant storyline as states rollout the first generation of Common Core assessments."
Just last month, local ed-tech startup Gradeable unveiled features to make it easier for educators to adhere to the Common Core.
What didn't see a similar uptick were language learning tools, which attracted 21 and 18 percent of the venture funding in the K-12 ed-tech space in 2012 and 2013, respectively. That figure is now down 65 percent, ringing in at $31 million and accounting for just five percent of the sector's total financing.
Ed-tech companies operating outside the K-12 space that had a successful year include Pluralsight, the online training platform for technology professionals that acquired Boston skills assessment startup Smarterer in November for $75 million. The acquisition marked the fifth for the Utah company — which raised roughly $138 million in 2014 — in a matter of 15 months. Alternative learning programs Minerva, Udemy and Udacity also scored big rounds of funding, raising $45, $35 and $32 million, respectively, according to CB Insights.
With that, could the ed-tech industry experience another record-breaking year in 2015?
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