2024 Year-in-Review

It has been a long 4 years in the education world. The COVID-19 pandemic set children’s academic progress back by years, roughly doubled the rate of chronic absenteeism in schools, and welcomed Gen Z into the workforce with Slack rather than in-office mentorship.

The pandemic was, briefly, a financial boon for education businesses. But the spike in valuation multiples was, mostly, a mirage and much of the industry has been nursing a financial hangover for the past ~2 years. The demise of FEV Tutors a few weeks ago was an extreme - and extremely public - example of the incongruity between pandemic-driven valuations, and a market reality that simply hasn’t lived up to growth expectations. Many others continue to fight this valuation hangover privately.

On the brighter side, the market for mature education companies remains robust. Private Equity funds committed ~$30B to the sector across 25 buyout deals over the course of 2024, including $14.5B for Nord Anglia Education - the largest private equity transaction ever in the education industry. In the public markets, Kaplan and Bright Horizons grew roughly in line with the S&P 500 while Stride substantially outperformed it.

We also have an idea of where the next wave of innovation will come from - AI. Day-to-day usage remains low for most people, especially teachers, but hardly a day goes by without a major announcement in the field. Of the 150 early-stage education venture rounds (where < $20M of capital was committed) this year, 62% mentioned AI in their funding announcements. (A stat gleaned by an app Replit’s AI chatbot built for me while I sat on the Peloton.) Most of these startups will not pan out, but a shift in rhetoric this dramatic usually means something.

All of which is to say that 2025 looks to be a year of…mostly waiting patiently. I expect it will take another 6-12 months for growth-stage companies (Series A to pre-IPO) to finish resetting investor expectations around more measured growth and, in turn, lowered valuations. It will also take at least 6-12 more months for us to see significant AI use cases beyond question-answering and language practice, building on investment seeds sown over the past few years.

With that as a framework, let's dig in on the data that informs my view of the market.

For the past 3 years, I have tracked publicly announced financial transactions in the education sector, adding a custom taxonomy to each deal to help me understand the business side of education in a more quantitative way.

This exercise is not without subjectivity. Is the company behind a video game that received FDA approval to treat ADHD an education company? What about the company that is developing a chatbot to cure adult loneliness? There are no simple answers to these questions, and both the companies and investors involved in the education sector continue to grow more complex and sophisticated in their operations.

To keep tracking simple (albeit conservative relative to other resources), I use the following criteria to populate the deal database:

1. For all deals: Does the business currently have a product that is directly connected to learning, provide vertical-specific support to learning institutions, or contribute to the talent function of the modern workplace

2. Venture funding: Company must raise $1M or more in primary equity funding from named, institutional investors

3. M&A: Combined entity must employ 50 or more people.

4. Private equity funds: Both VC and buyout, must include $15M or more of assets under management

Click the link below for the underlying dataset, which you can explore on your own. Please note that this is a live resource, with deals - both new and historic - being added to it on a daily basis. Please also feel free to send me a note with questions/comments.

2024 By the Numbers

• I tracked 352 financial transactions in the education sector over the course of 2024. These transactions ranged in size from $1 million (the minimum for inclusion in the database) to $14.5B, with 206 venture funding rounds, 118 acquisitions, and 25 private equity buyouts in between.

• Although transactions took place in 47 different countries, more than half of deals (by both dollar volume and number of transactions) occurred in the US.

  • India took second place in dollar volume of funding, in large part due to the funding $100M+ funding rounds raised by PhysicsWallah and Eruditus, the 2 largest traditional venture rounds of the year.

  • Europe continues to be the second-most funded market by deal volume - consistent with the region's growing number of early-stage venture funds - but saw a substantial drop in the number of companies funded and the dollar-volume of funds raised.

• The venture market for education also continues to skew towards investment in workforce development, with 46% of venture rounds raised by companies in this category. Of note, this trend does not hold in the market for mature education companies, where both the largest deals by valuation and transaction volume were in the K12 sub-sector.

• Of course, no discussion of the education funding market would be complete without a list of the Top 10 venture rounds and Top 5 M&A deals (all of which were PE buyouts or part of a PE-led roll-up). Anthology’s $250M financing technically takes the top spot for most funds raised in a non-change-of-control transaction, but this funding was subsequent to a private equity buyout and, thus, not comparable to traditional venture rounds.

In sum, 2024 continued a run of tough years for the education sector. Objectively, there are a disproportionate number of companies and individuals who continue to pay for COVID’s market exuberance. But! There was some good news too - 2024 also included the largest education transaction ever. And there were hundreds of education companies in healthy enough positions to raise capital from institutional investors.

I don’t think we have reached the end of this market downcycle, but it does feel like the light at the end of the tunnel is growing brighter.

Whiteboard Advisors is the leading policy-related diligence partner for education investors, advising on most major private equity transactions in education over the past 15 years. Our specialty is translating complex policy/political dynamics into financial models. Reply to this email to learn more.