Summer is Hot and so is EdTech

EdTech firms continue to generate high investor interest – both from early stage VCs and later
private equity firms. In 2015 & 2016, venture-backed EdTech companies received $2B in equity
financing (Dow Jones VentureSource). Over 50% of those deals have occurred through seed and
angel rounds demonstrating the growing nature of the space (CB Insights). The EdTech market
size is expected to reach $94B globally by 2020, up from $43.27B in 2015 (Markets and
Markets).

Several factors will drive a robust future deal market in the EdTech space. 2016 included 79
acquisitions, up from 35 total in 2010 (Capstone). Furthermore, 2016 valued two new EdTech
companies at $1B+, Age of Learning and Pluralsight (CB Insights). Fragmentation within the
market space serve as a catalyst for increased deal volume. Without a clear market leader,
investors can expect consolidation as large corporations attempt to host a one-stop- solution at
competitive prices. The increased use of big data has also been implemented in educational
software, allowing EdTech firms to provide highly efficient and personalized programs tailored
to their consumers’ needs (US News). This month at Pharus, we saw a continuing trend of
consolidation.

The most notable transaction occurred on May 2, when 2U acquired Get Educated, a provider of
online education and training courses. The transaction values Get Educated at $123M, and 7.2x
Revenue. The deal will complement 2U’s efforts to launch online graduate degree programs
with several American universities including New York University and Syracuse University
College of Law.

On May 2, A Book Company (DeVito) acquired Rafter, a cloud-based software company focused
on hosting a course materials and resource management system tailored to secondary and
tertiary educational institutions. The deal improves Book Company’s position as an online
resource marketplace.

On May 16, Bartragh Services acquired C4i Training and Technology, a software company
specializing in simulation training solutions and custom software development services.
Bartragh Services will enhance its market position as a simulation, training, intelligence, and
aviation support services company. Bartragh targets international military and emergency
management teams.

Pharus maintains an active education technology practice, with several notable transactions in
the sector. We look forward to speaking with you about our experience and thoughts on the
sector.