The ‘Moneyball Moment’ for Education: Schools Continue to Leverage Data and “Learnalytics” as Growth Equity Antes Up

The education sector has seen an influx of companies whose aim is to completely revolutionize how students get access to content and ultimately retain that content, either by working closely with academic institutions to improve upon the existing infrastructure or by giving students direct access to content and technology which has heretofore not existed. We have seen that the latter of these categories, which lends itself more to the do-it-yourself model, is not the long term answer to the education revolution. While disruptive and innovative, things such as the “Massive Open Online Courses” (MOOC) model have seen embarrassingly low completion rates and a worsening in learning effectiveness when compared to traditional options. Outside of learning discreet skills such as programming, language learning or hobbies, emerging companies and students will be better off empowering the existing educational infrastructure to do its job better by utilizing technology. Investment activity in the past few years shows that private equity investors agree.

One of the more exciting areas within these efforts, and one which has seen a substantial increase in investment from the growth capital markets in recent years, is that of using data and algorithms (“Learnalytics”) to both measure student and teacher performance and to personalize learning to individual students (you can also see GrowthCap’s Education Investment Heat Map for more detail on private investment in the wider education software and services sector).

Much of the hype surrounding ‘direct-student’ platforms is that they connect those who otherwise wouldn’t have access to education. However, studies conducted by the University of Pennsylvania show that about 80% of those who have taken an MOOC already have a degree. Additionally, research shows that only half of the students who registered for these MOOCs looked at a lecture, and less than 4% successfully completed a course. Commenting on its effectiveness, a partnership between San Jose University and the for-profit MOOC Udacity resulted in approximately half of the students failing. While rising educational costs and a broad target market may have led investors to anticipate growth in this market and a change in the status quo of formal education, this poor performance has forced them to recognize the potential pitfalls of the technology and to come to the realization that its success is dependent on both associations with reputable institutions and a higher-touch approach rather than a complete adherence to do-it-yourself.

This is exemplified by 2U (TWOU), which went public in March 2014. 2U implements similar platform technologies as many of the larger MOOCs, but works in tandem with universities to provide accredited programs with, among other things, live instruction that demands greater engagement from the student. More broadly, the lack of engagement and effectiveness of MOOCs is causing many to rethink how to best leverage technology in all areas of education without sacrificing learning quality or engagement.

It’s important to start focusing on products that are adding value to the educational sector as a whole. Research from the Alliance for Excellent Education shows that the leveraging of student data can have a direct positive impact on student achievement for all students, and the National Council of Teachers of Mathematics found that “learning in classrooms where teachers were using short- and medium-cycle formative assessment was approximately double that found in other classrooms.” Simply put, personalizing each student’s curriculum and being open to adapting on the fly helps, and it helps a lot. The use of data empowers educators to personalize instruction, contributing to a more effective and expansive system of learning. While success depends on the type of data collected and how it is used, successful execution can allow students to receive real-time feedback from instructors who will be able to tailor their teaching style.

The benefit of such “formative assessments” isn’t news, but they have been difficult to implement in the past. This is changing through the introduction of various innovative products and technologies that help collect vast amounts of data to implement them. For example, Knewton is an adaptive learning company that uses its platform to personalize educational content. Its platform enables schools and other educational mentors to use interactive teaching methods with their students, and positive results have emerged across various universities including the University of Alabama, University of Nevada Las Vegas and Arizona State University, which have all seen higher pass rates and lower course withdrawal rates.

Another case is Renaissance Learning, an educational learning and analytics company, which has been active in providing cloud-based assessments, and teaching and learning solutions. With a strong presence in a third of American schools and 60 countries, Renaissance has one of the world’s largest databases of over 13.5 million data-driven assessments that measure student literacy, learning preferences and other valuable data points. Bright Bytes, a San Francisco-based developer of a planning platform and data analysis for schools, has leveraged its flagship product Clarity to translate research and analyses into action plans for schools to improve student learning by understanding the impact of technology use. BrightBytes currently has approximately 10,000 schools signed onto its platform.

The abovementioned companies are just a few examples of both already-successful and emerging companies who are leveraging data and analytics to help educators make more informed decisions. As technologies continue to improve and are increasingly adopted by educational institutions, data and the insights that can be gleaned from them will become even more meaningful and continue to contribute to the improvement of the overall educational system. Private investors will play a large role in this revolution, and many growth investors have already been heavily focused on building out the “Learnalytics” and educational data sectors.

Adaptive Learning and “Learnalytics” has been one of the hottest sectors in the growth Ed Tech investing space for the past few years, with 2014 alone having already seen many headline transactions. In August, student assessment and learning analytics company Desire2Learn closed an $85 million Series B. In March, BrightBytes received a $15 million Series B led by Rethink Education, Learn Capital and Bessemer Venture Partners. Google Capital invested $40 million into Renaissance Learning earlier in the year before the company was acquired by private equity firm Hellman & Friedman for $1.1 billion. Knewton also continued its success as it raised $51 million in a Series E funding while more recently announcing a partnership with Dutch scientific and publishing company Elsevier to expand Knewton’s technology into the health and nursing market. Elsevier publishes approximately 25% of the world’s clinical content so it should prove to be a valuable partner indeed. The education sector continues to see exciting innovations at an accelerated pace.

While the do-it-yourself models, particularly MOOCs, have been invaluable in demonstrating the possibility of putting top-tier content in front of students, it is important to note the lack of results demonstrated thus far. The majority of students need some form of a more formal environment to maximize engagement and make the most out of any potential technologies that can improve learning effectiveness, and the use of richer data to assess performance and develop personalized learning experiences can have a systematic impact that will help increase learning rates across the board. We have already seen many successes in recent years, and the outlook that this trend will continue is promising as technologies are developed and perfected, and as capital continues to be aggressively deployed in the sector.


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