As schools continue to look for new ways to cut costs while at the same time reboot their curriculum to better tap new innovations and improve understandings of how children learn, e-learning startups are attracting attention, both from educators and the VCs that fund them to fuel growth.
In the latest development, Newsela — which has created a platform that packages together different third-party content like primary-source documents, news articles and more to help teachers and students learn about a particular subject, more or less as a replacement for more traditional textbooks — has announced that it has raised $50 million in a Series C round of funding led by TCV.
The New York-based startup said that it plans to use the money to get more penetration within the schools where it is already being used, as well as continue expanding the subject areas that it covers.
The company — which currently focuses primarily on K-12 but does cover other learning environments like English-as-a-second-language courses and adult education — covers mostly social sciences, science and English, but also some math. It currently has more than 20 million students and 1.8 million teachers using its the platform, and that it has some representation already in some 90 percent of all schools in the US.
The startup is not talking valuation, but as a rough guide, prior to this, Newsela had raised about $38 million and was valued at about $86 million in its previous round, according to PitchBook, with some notable backers already on its cap table, including Mark and Priscilla Zuckerberg and Kleiner Perkins, as well as education-focused funds like Owl Ventures, Reach Capital and New Schools Venture Fund.
It’s a long way to come for a company that was started by two founders, Matthew Gross (CEO) and Dan Cogan-Drew (the chief product officer), who cut their teeth working in more traditional educational environments, including via Teach for America.
Newsela first got its start, as you might guess from the name, aggregating interesting news articles that could be used to supplement learning plans around particular subjects, with a specific focus on “ELA” — English and language arts. It was after a year in beta that it started to see that there was potential to expand outside of that focus and into adjacent areas. “We’ve outgrown our name,” Gross said.
The company, founded in 2012, was born out of the idea that computers — used not just for learning coding, but for doing research and communications — have become a cornerstone of how children get information today in the classroom. Broadband penetration in schools is now at over 90 percent (compared to 30 percent when Newsela first started). And with many schools in the US already providing each student a dedicated laptop, that presented an opportunity to rethink how they could be used to harness a wider and more fluid set of materials than what students might be able to get in a traditional textbook.
The material shift in comes at a time when we are tapping the internet as a first port of call for all our information outside the classroom. We carry a library in our pockets, using our screens to view the US Constitution, a specific work of art, the sequence of battles in the Civil War and writings from people at the time, modern takes on what it all meant, or new scientific discoveries.
“We can see an unprecedented opportunity to rethink content,” Gross said. “Textbooks are being pushed aside, and even where they are still being used, many are no longer making textbooks core curricular purchases.” And the shift to interactive also means that other things can now also be measured. “Educators are looking for more engagement in their learning outcomes,” he added.
Indeed, that has had a big knock-on effect already in the textbook publishing world. Just last month, Pearson sold its entire K-12 textbook division to a PE firm, Nexus Capital Management, in a fire sale: for $25 million plus $225 million in the form of a vendor note due in the next three to five years, with the understanding that Nexus may also sell it (in which case Pearson would get a cut). Pearson said that it will be focusing its education publishing efforts now on digital.
Gross estimated to me that the textbook market, however, is a $10 billion business annually in terms of collective budgets that are allocated for buying them, which represents a big market for it — and others looking to replace textbooks, including the publishers themselves — to tackle.
The format that Newsela follows somewhat fluid: it provides a set of materials that are constructed around learning a particular subject. It doesn’t create the coursework around that: this is left to teachers, departments, schools and districts to build. Sometimes a district will provide Newsela with a more targeted request of what it would like to see covered, and Newsela will build a collection to those parameters, Gross told me.
What Newsela does behind the scenes work with more than 100 different sources that have inked licensing agreements with the startup. The licenses allows Newsela to republish content on its own platform, and also rewrite content into five levels that are adaptive to age, reading ability and so on.
It’s work that would be very time-consuming, and potentially expensive (or even cost-prohibitive), for individual teachers, schools and districts to do on their own. Working with a team of editors, Newsela gives educators the assurance that there has been some vetting done to provide accurate and complete sets of materials.
“It’s a wild world when they search in a Google box,” Gross said of the challenges to be able to predict a consistent level of quality in results and resources when people sometimes turn to the Internet to build similar bundles of content on their own.
All of this comes at a price. There is a free tier of Newsela that provides the ability to browse and assign content; create classes and give students access to that content, alongside quizzes and activities. Two further paid tiers provide a number of extra features. One, teacher-focused, covers monitoring reading activity and quiz scores, assignment planning, annotations, writing prompts, and more teaching resources. The second aimed at schools and districts adds admin visibility, teacher training, live support, and more customised learning plans. In both paid tiers, Newsela does not publicly disclose pricing.
The expansiveness of the platform, and future potential of where it can go, are two reasons why TCV — which has backed the likes of Capella Education, Open English and Varsity Tutors in the education sector, but also very huge consumer internet startups like Airbnb, Facebook, LinkedIn and Netflix — was interested in backing Newsela.
“At TCV we focus on finding transformative EdTech companies, and Newsela has proven to be a tool that boosts learning outcomes,” said Woody Marshall, General Partner at TCV, in a statement. “Our investment will help extend the platform and make it more accessible and even more valuable to students, teachers, and administrators. We are especially excited by the great engagement and feedback that Newsela already has with their users.” Marshall is joining the board with this round.
Newsela is far from being the only edtech startup that has tapped money from the VC world to grow. In the K-12 sector alone, others have included Byju’s in India, which is now valued at over $4 billion (and just this week appears to have started to raise more money from Tencent and General Atlantic); ClassDojo; Age of Learning; VIPKID, and Kahoot to expand their businesses amid a surge of interest from students, parents and teachers.
At Newsela, meanwhile, Gross said the startup is hiring and has grown staff 50 percent in the last year, and expects to grow as much again this year.
“We might have attracted more interest if we had raised $100 million instead of $50 million,” he said in a comment about what seems to turn people’s heads in the tech world these days, “but we happen to be a very capital efficient business, and we heeded a warning I got early on not to raise more than what you really need. We’re proud of being a fiscally sound business that is also mission driven, and making an impact.”
That doesn’t rule out raising more for M&A, he added, or indeed fielding inbound interest themselves: the company has already been approached by interested parties, although he declined to say who. But when you consider that education publishers are all looking for their next move to serve the classroom of the future; and tech companies like Google, Amazon, Apple and Microsoft have all made huge plays to court the education sector, the longer-term picture is a bright one for Newsela.