Dozens of venture-backed startups among edtech recipients of PPP loans

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Even the biggest names in the education technology industry, flooded with private capital, are seeking public support during the pandemic.

School districts are hardly the only ones in education below financial constraint caused by COVID-19. The ripple effect is also felt by the companies and organizations that provide tools and services for students and educators.

Like their counterparts in other industries, many private education companies and organizations applied for assistance through the Payroll Protection Program (PPP), which provides federal loans to help organizations keep their employees on payroll and stay in business. Loans are granted provided the recipients meet criteria this implies that at least 60 percent of the amount be used to keep their employees, while at least 75 percent of their current salaries are retained.

Last week, the Small Business Administration and the Treasury Department released data on 660,000 companies and nonprofits that have approved over $ 150,000 in PPP funding. Recipients in the education sector include private K-12 schools, colleges and universities, Charter school operator, Professional development organizations, technical and vocational schools and exam preparation centers.

A review of EdSurge’s data for major educational technology software and services providers found more than 60 for-profit and nonprofit organizations approved for loans of between $ 150,000 and $ 5 million. (ISTE, the parent company of EdSurge, has also been approved for a PPP loan.)

And while the program was designed to help small businesses, some educational organizations that received loans had previously raised hundreds of millions of private donors. Even an investment firm that has backed dozen of edtech startups made the list.

Education technology companies and nonprofits approved for PPP loans

Pitchbook, a market research company focused on private capital markets, was founded more than 8,100 companies on the list that had raised funds from venture capital and private equity firms. That’s just over one percent of the 660,000 organizations that have approved a loan of at least $ 150,000.

Still, privately funded companies have come with it criticism for taking out loans as “free money” to easily extend their financial careers. So are the investors themselves Splits on whether internet startups should leverage a vital lifeline geared towards local mom and pop stores doing personal business with no venture capital support or connections.

“In reviewing refundable loan applications under the Paycheck Protection Program, we encouraged our portfolio companies’ executive teams to reflect and discuss whether this is appropriate, if it has not already been done,” said Jennifer Carolan, co-founder of edtech Investmentgesellschaft Reach Capital in an email. “For many, these discussions continued at board level. We have seen how carefully the needs of their people, their values ​​and the larger context of this crisis have been considered. In the end, very few companies applied. “

Venture-backed or not, the fact that education companies have applied for the program “doesn’t surprise me,” says Sandro Olivieri, who runs Productive LLC, a strategy consultancy on impact investment programs. In April, he asked education companies about the impact of the pandemic on their operations. Of the 104 companies that responded, more than 60 percent said their financial careers had shortened, and 71 percent said sales would decline. More than a quarter had already laid off employees.

“When schools began to close, edtech companies started making money. Their sales pipeline was affected, their outlook for the fall changed and the runway was drastically reduced, ”says Olivieri.

Promotion for large fish

Of the venture capital backed edtech companies that have received a PPP loan, Altitude Learning has raised the most capital. Formerly known as AltSchool, the company had previously raised more than $ 176 million has significantly restricted its operations last year and renamed to its current name. The San Francisco-based company, now offering schools and families an online education platform, received a loan of between $ 2 million and $ 5 million.

Sphero started out as a consumer robot toy company and later has realigned its business in the education market. It has raised $ 148 million from investors – and has also been approved for a $ 2 million to $ 5 million loan.

RaiseMe, an online high school scholarship platform provider that previously raised $ 31.5 million, was also approved for a PPP loan in April. A few months later, that was the San Francisco-based startup acquired from CampusLogic. (RaiseMe declined to comment on whether these funds were used.)

The list also includes several high profile edtech nonprofits that have received millions from philanthropic donors. Including the Khan Academy, which has been approved for a loan in the same amount range as Altitude Learning and Sphero.

Khan Academy CEO and Founder Salman Khan told EdSurge said in April that spikes in traffic to his website could triple his server costs. The nonprofit already received $ 3 million in grants from AT&T, Google, and other corporate donors earlier this year. In an interview with Mountain View Voice last week, he said called the PPP funds helped the organization retain its 180 employees.

Code.org, a nonprofit that offers and sponsors computer science education programs in K-12 schools, has been approved for a $ 1 million to $ 2 million loan. Over the years, it has raised approximately $ 100 million in philanthropic funding, mostly from large Silicon Valley tech companies.

Min Yoo, director of marketing and development at Code.org, said the loan will be used to keep its current staff of about 80. The pandemic has forced the team to cancel its personal development programs and focus on creating online resources for students and teachers.

“The economic impact of COVID-19 – particularly when it comes to fundraising for programs and operations – has been and remains fairly uncertain. This loan will help mitigate that risk and support unexpected operational adjustments in response to the changing K-12 landscape, ”she said in an email.

Small business support

Not all private edtech receivers are so well equipped; many have raised much less private capital, and their workforce and presence match the types of small businesses the program was designed to help.

Smaller PPP recipients include companies like Listenwise, which offer online lessons, activities, and resources to help students build listening skills. The Boston-based startup applied for the PPP loan on the first day the applications were open on April 3, according to its co-founder and CEO Monica Brady-Myerov.

This decision was largely driven by uncertainty about how long COVID-19 would disrupt business. School closings occurred at the beginning of the typical procurement cycle, when officials usually plan what to buy for the following school year. In most districts, purchase decisions and budgets are finalized between April and June, and the actual purchases take place over the course of the summer.

The pandemic “turned the sales cycle upside down a bit,” says Brady-Myerov. “We knew that there would be delays in customers’ purchasing decisions.”

Like many other education companies, Listenwise made all of its offerings available free of charge for the remainder of the 2019-2020 school year in the wake of the pandemic. Almost 10,000 teachers have accepted the offer, but it remains to be seen how many subscribers will pay for the upcoming school year, Brady-Myerov said.

She says the company raised $ 170,000 in PPP funding, which has enabled Listenwise to keep its team of eight full-time employees at current salaries.

Education investors themselves have also been approved for PPP loans. GSV Acceleration, a backer to over two dozen edtech companies, has been approved for a loan of $ 150,000 to $ 350,000.

LearnLaunch, a Boston-based nonprofit, has also been approved for a loan in this area. The organization hosts events and operates a co-working space for education companies and is affiliated with an edtech business accelerator program that bears the same name (but operates as a separate entity).

In an email, Jane Swift, President and Executive Director of LearnLaunch (and former Massachusetts Governor) said the decision to apply for PPP loans was due to “the uncertainty surrounding our operating model and the closure of our co-working space which has created substantial financial resources ”. Losses and our commitment to continue supporting the educational ecosystem. “

LearnLaunch has reduced or waived the rent for start-ups that used its co-working space. But it doesn’t own that space. “We continued to make rental payments to our landlord, McGraw-Hill Education, which resulted in a significant financial loss for the organization,” said Swift. Your team has also canceled all revenue generating events for the rest of the year. The next annual conference, slated for January 2021, is up in the air, she added.

Swift said the PPP funding allowed LearnLaunch not only to keep its eight employees, but also to convert two of its consultants to full-time employees in August. “As our work with the school districts has increased, we are slowly starting to increase our staff as we are financially able to do so in a responsible manner.”


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