Cherry Tree & Associates | June 2020 | Volume XIV, Issue 12
Chegg Acquires Mathway for $115 Million  

Mathway, a math solver that reports having subscribers across 100 countries, has been acquired by Chegg (NYSE:CHGG) for roughly $115 Million. Mathway is widely used across the academic spectrum, including teachers and parents, but primarily high-school students and reports having solved 1.3 billion problems for learners. The deal was structured with $100 million at close and up to $15 million in contingent earnout. The total consideration of $115 million is 8.8x Mathway’s 2019 revenue of $13 million.
Nelson Announces Strategic Divestiture to Cengage

Longtime Canadian textbook publisher, Nelson, announced its plans to divest its Canadian post-secondary operations to Cengage, which will establish a new international division to provide direct services to the Canadian higher education market. This announcement comes shortly after Nelson’s strategic decision to exit its post-secondary operations and focus on K-12, and its subsequent sale of about 400 titles to Top Hat.
Degreed Raises $32 Million

Corporate education platform, Degreed, raised $32 million in a Series C extension round led by Owl Ventures. Degreed has raised $182 million to date and claims that is has well over 200 corporate customers including Ford, Fidelity Investments and South Africa’s Standard Bank.
Turning Technologies Acquires Knowbly

Turning Technologies, a provider of interactive learning solutions that provide immediate feedback and analytics, acquired Knowbly, an eLearning company known for its interactive authoring tool. Together, the products will offer an end-to-end workflow tool that can create content, administer delivery and collect real-time analytics.
Lumen Learning Acquires Faculty Guild’s Higher Education Assets

Lumen Learning, provider of low-cost open education Resource textbooks and courseware, acquired Faculty Guild’s higher education assets. Lumen will incorporate technology and other elements from Faculty Guild into Lumen Circles, a new professional development offering.
Chief Raises $15 Million

Chief, a social network dedicated to women in professional leadership positions, raised $15 million in a recent round. Its existing investors, General Catalyst, Inspired Capital, GGV Capital, Primary Venture Partners, Flybridge Capital and BoxGroup participated in the round. Chief reports having more than 2,000 members including leaders from Google, IBM, Visa and many more Fortune 500 companies.
Classtag Raises $5M

Classtag, a parent-teacher communication tool, raised $5 million in a seed round from Kevin Ryan, Contour Ventures, Founder Collective, John Martinson, Newark Venture Partners, Smart Hub and TMT Investments. To date, Classtag has raised $7 million in seed funding.
Intellispark Raises $2.3 Million

Intellispark, a SaaS platform designed to support preK-12 schools in evaluating and improving student outcomes, raised $2.3 million in a seed round led by GSV Ventures. The company is co-founded by Stephen M. Smith and Shaun Fanning, who previously founded Naviance, a leading college and career readiness platform now offered by Hobsons.
Carrick Capital Acquires Flatiron School from WeWork

WeWork, which acquired Flatiron School in 2017, is selling its 100% stake in the Flatiron School to Carrick Capital Partners as part of its ongoing efforts to divest a number of its non-core businesses. The Flatiron School, a coding academy that has 400 employees and reportedly has seen 140% growth in graduates since 2018, will operate as an independent business under Carrick Capital Partners.
Zuoyebang Raises $750 Million

China-based online learning application running online courses and live lessons, Zuoyebang, raised $750 million. Tiger Global and FountainVest Partners led the Series E round while exiting investors including SoftBank Vision Fund, Sequoia and Qatar Investment Authority participated in the round. Zuoyebang has raised $1.33 billion to date.
Kahoot Raises $28 Million

Kahoot, the Norwegian-based educational gaming company, recently raised $28 million in a private placement with US and European-based institutional investors. Existing shareholders sold nearly $90 million worth of equity in the private placement. Kahoot claims to have over 1.3 billion active users and over 100 million games. Kahoot is valued at nearly $1.4 billion.
Polaris Growth Fund Invests in TransACT 

TransACT Communications, a leading SaaS provider of engagement and payment solutions for the education market, received a growth investment from Polaris Growth Fund. Polaris Growth Fund is a software-focused affiliate of Polaris Partners, a Boston-based private equity firm.
Noodle Partners Raises $16 Million

Noodle Partners, which works with leading public univerisites to build out online and flexible programs, raised $16 million in a round led by ValueAct Spring Fund with participation from the Lumina Foundation and existing investors. Noodle Partners uses technology to raise engagement and lower costs. Noodle CEO, John Katzman, reports that “Noodle has doubled or tripled in size every year since we founded it.”
MPOWER Raises $9 Million

MPOWER Financing, a fintech platform for education loans to high-promise international and DACA students, raised $9 Million from investors including Breega, Potencia Ventures, AI8, Cometa, Zephyr-Peacock, 1776, Fresco Capital, 1994 LLC, and Goal Structured Solutions. MPOWER reports working with 350 top universities and colleges to provide financing to students from over 200 countries.
APDS Raises $5 Million

American Prison Data Systems (“APDS”), a provider of education devices and instruction technology serving correctional facilities, raised $5 million in a Series B round led by New Markets Venture Partners and Rethink Education. APDS provides secure tablets, internet access and online educational resources to prisoners.
Create & Learn Raises $1.7 Million

Create & Learn, provider of project based, small online learning groups, raised $1.7 million led by GSV Ventures. Led by one of the founding members of Google Cloud Platform, Create & Learn teaches STEM to kids.
For-profit education comprises more than 5% of the roughly $1.3 trillion that is spent on education in the U.S. annually. Cherry Tree created the Education For-Profit 50 Index representing a group of publicly traded for-profit education companies.
The For-Profit Education 50 Index consists of companies in the Pre-K-12, Postsecondary Education, Training and Development, and Education Products and Services segments for-profit education industry.
* EV= Enterprise Value
Black Students Matter. 

Please indulge me with a non-business, non-capital markets column this month. Living in Minneapolis, ground zero for events that have shaken America to its core, many of us have been spending a fair amount of time thinking about and talking about what we can do to try to make things better. While you might not know it by watching various media outlets pandering to the far ends of the political spectrum, or reading Twitter, there are serious discussions happening here among thoughtful and well-meaning people, to address the problems and utter failings that led to George Floyd’s murder. 

Unfortunately, the structural and systematic obstacles to reform are not easily moved. I’d never advocate for defunding the police given the important and difficult job they have. But police unions, we have learned, have in some cases resisted reasonable reforms and I would argue betrayed their members’ broader mission to protect and serve the public, in the name of protecting their members, by limiting the institution’s ability to get rid of abhorrently problem employees. Sound familiar? 

Given the fundamental goal of eliminating racism, and the systematic aspects of our society that make it harder for some of our fellow citizens to enjoy life, liberty, and the pursuit of happiness, I can’t help wondering why more attention isn’t being paid to our education system. I would hope we can agree that the promise of the American Dream and the protections of the American Constitution should be available to all citizens, regardless of their skin color or religion, and regardless of where they live. Yet we know that many inner-city public schools, which are often predominantly filled with students of color, do not give their students the best chance of achieving their full potential. Why is this, and why aren’t we doing more to change that? The answer of course, is complicated. Well-meaning and thoughtful people can make strong arguments on a variety of variables. I wouldn’t pretend to have all of the answers, let alone try to state them in a 3-4 paragraph column. So I’ll start by simply asking that we do more to have that conversation, and that we seek to truly improve education in ways that serve students, not the system itself. 

If we could improve the educational system for the children in our most troubled K-12 schools, that wouldn’t be the end of the work we need to do. But it would be a worthy start.   

For a confidential conversation about your company’s strategic alternatives for exiting, merging, acquiring, or obtaining venture financing, and how trends in education affect your prospects, please contact us at 952-893-9012.
Prepared by:
Chad Johnson, Managing Partner | 952.253.6010

Follow me on Twitter @ChadEricJohnson

Cherry Tree & Associates is a private investment banking firm headquartered in Minneapolis. Our firm specializes in serving middle market companies and their owners, whether private, public, or divisions of larger corporations.
Important Disclosures

The information included in this publication has been obtained from public sources, and is not based upon private or confidential Cherry Tree information. Cherry Tree gathers its data from sources it considers reliable. However, it does not guarantee the accuracy or completeness of the information provided within this publication. Any opinions presented reflect the current judgment of the authors and are subject to change. Cherry Tree makes no warranties, expressed or implied, regarding the accuracy of this information or any opinions expressed by the authors. Officers, directors, partners of Cherry Tree and Cherry Tree proprietary investment funds may have positions in the securities of the companies discussed, and certain affiliates of Cherry Tree may recommend to specific clients the purchase and sale of securities discussed in the publication. This publication does not constitute a recommendation with respect to the securities of any company discussed herein, and it should not be construed as such. Cherry Tree or its affiliates may from time to time provide investment banking or related services to these companies. Like all Cherry Tree employees, the authors of this publication receive compensation that is affected by overall firm profitability. We undertake no obligation to update any information in this publication.  

The Education For-Profit (EFP) 50 Index is a hypothetical index, and does not reflect an actual investment portfolio. Comparisons between the EFP 50 Index and the S&P 500 are for illustrative purposes only. Correlations in performance information for the EFP 50 Index and the S&P 500 should not be relied upon as indicative of risks involved in owning or holding a portfolio of securities similar to the EFP 50 Index. Past performance should not be relied upon as indicative of future performance.