Education Industry

How K-12 Schools Tamed Silicon Valley

Why ed-tech startups Clever and Nearpod are expected to sell for a combined $1 billion
By Benjamin Herold — June 09, 2021 10 min read
Clever co-founders, left to right, Tyler Bosmeny, Dan Carroll, and Rafael Garcia at the company’s San Francisco headquarters in 2015.

On the first Friday in May, Tyler Bosmeny called an all-staff Zoom meeting for 9 a.m. The sale of his company—ed-tech juggernaut Clever, founded in 2012 and now used by more than half the country’s 50 million public school students—had been announced the previous evening. The CEO planned on striking his usual optimistic-but-pragmatic tone. But when he saw the faces of his 180 employees staring back from the rectangles on his screen, he was overcome with emotion.

“We achieved more than we ever could have dreamed,” Bosmeny, now 34, explained in an interview this month. “When we launched, there weren’t many examples of companies in the K-12 space that had reached a milestone like this.”

This includes a sticker price that could hit $500 million, to be paid by the Norwegian game-based learning platform Kahoot! when the deal becomes official. The sale marks one of the largest K-12 ed-tech startup exits in history, surpassed in recent memory only by Renaissance Learning’s $650 million acquisition of Nearpod three months earlier.

Together, the transactions mark a coming-of-age moment for the ed-tech sector. Both San Francisco-based Clever and Nearpod, whose headquarters are in Aventura, Fla., emerged during the heady startup days of the early 2010s, when hordes of young tech entrepreneurs hoped to capitalize on the new computing devices, broadband infrastructure, and cloud-based learning software starting to pour into public schools.

Unlike many of their competitors, however, Clever and Nearpod shied away from hyperbole about transforming education, choosing instead to focus on solving the everyday problems schools faced in a fast-changing technology environment. The strategy was a hit, leading both companies to exponential adoption curves and value that was made plain when the COVID-19 pandemic forced districts to reach for easy-to-use solutions to support online learning.

Now, leaders in schools and Silicon Valley alike would be wise to reflect on what the moment means.

Flush with billions of federal stimulus dollars, many of the nation’s K-12 school districts are looking to make permanent the most promising online learning experiments of the past year. In response, the largest companies in the ed-tech marketplace are consolidating their positions, gobbling up smaller entities they view as complementary so they can offer a bundle of related products and services—not just in the United States, but to schools across the world.

“We don’t think this is a one-time spike,” said Todd Brekhus, the chief product officer for ed-tech giant Renaissance Learning, whose acquisition of Nearpod is part of a larger spending spree.

“This is the long-term transition that those of us involved in this sector for decades have been waiting for.”

‘We have to start a company’

Back in the early 2010s, Facebook was still preparing to go public, Twitter CEO Jack Dorsey hadn’t yet begun growing his signature beard, and the so-called platform economy was starting to transform industries like finance and retail sales, thanks in large part to a software tool called an application programming interface (API), which facilitates online transactions by allowing software systems to seamlessly share information.

As ever, though, America’s K-12 sector was behind the curve. Schools were starting to offer high-speed broadband connections and personal computing devices to every student, and hundreds of small companies were responding with new digital learning programs that whet the appetites of teachers eager to experiment. But all that new software couldn’t talk to the 100 or so different student information systems used by school districts to track enrollment, attendance, and grades. As a result, teachers and district administrators were forced to spend ungodly amounts of time manually importing and exporting spreadsheets every time they wanted to let their students try a new math app or reading program.

“The infrastructure just wasn’t there,” said Clever co-founder Dan Carroll, who was working as the tech director at STRIVE Prep charter school in Colorado at the time. “I was going crazy.”

In February 2012, Carroll took a trip to the Bay Area to compare notes with colleagues. His school’s travel budget didn’t include money for a hotel, so he slept on the couch of Bosmeny, a former Harvard classmate who’d caught the startup bug in San Francisco. By day, Carroll listened to other tech directors desperate for a simple way to get students rostered into learning software. By night, he listened to Bosmeny extol the Silicon Valley mantra he’d been absorbing: If the world doesn’t work the way you think it should, go improve it yourself.

On the day Carroll was to depart, the pair had a two-hour conversation in a rental car.

“What are you going to do next?” Bosmeny asked.

“What do you mean?” Carroll responded.

“We have to start a company,” Bosmeny said. “It’s the right time.”

A week later, they were back together in San Francisco with Rafael Garcia, a third friend from Harvard. After sketching out a business plan, they reviewed their bank accounts, then committed to quitting their jobs, jointly signing a napkin to make it official.

The basic idea was to launch an API for education. Instead of directly offering their own digital curricula or learning software, Clever would serve as a hub, doing all the back-end legwork necessary to integrate other ed-tech products with schools’ student information systems. Crucially, they decided to make their service free for schools; any revenue would come instead from charging companies to plug into the new platform.

At a time when other entrepreneurs were raising millions by promising to revolutionize education, it was a decidedly unsexy plan. But from the beginning, Carroll insisted that Clever staff eliminate phrases like “disrupting education” from their vocabulary.

“We saw our role as lifting up all the great teachers and uncelebrated tech directors who were the ones actually making stuff happen,” he said.

The first schools to sign up were part of charter networks with whom Carroll had personal connections. They showed the service could work. But it was an early conversation with Putnam City Schools, a by-the-book traditional public school system in Oklahoma, that convinced Carroll that Clever really was on to something. As soon as the call started, the district’s tech director launched into a lengthy lament about losing three years and hundreds of thousands of dollars to a faulty system that was supposed to automate his data integrations.

“I said, ‘Sir, I think we’ll be able to get this done by tomorrow, and the cost to you is zero dollars,’” Carroll recalled. “He just laughed and said, ‘If you can do that, I’m gonna use you forever.’”

Within a year, Clever had 6,000 schools on board—including Putnam City, which remains a client today.

More than $43 million in venture capital soon came pouring in. The company launched a new feature that allowed students to use a single login and password to access dozens of different software programs, helping solve another huge K-12 technology headache. In 2014, Clever also rolled out a host of new partnerships, including an unlikely collaboration with the nation’s second-largest teachers’ union, many of whose members had previously been wary that Silicon Valley aimed to replace them.

“We’re starting to see fewer entrepreneurs going around teachers and instead starting to say, ‘How can we talk to them to find out what they really need?’” American Federation of Teachers president Randi Weingarten told Education Week in 2014. “Clever knew that from the beginning. And that’s one of the reasons they’ve been so successful.”

‘Demand went through the roof’

Friends from Argentina—Felipe Sommer, Guido Kovalskys, and Emiliano Abramzon—initially found success in the software industry with a company that specialized in customized digital marketing. Their $650 million ed-tech idea started with an attempt to synchronize corporate promotional pitches delivered to multiple mobile devices at the same time.

“After seeing the early prototypes, the potential of this technology for education became obvious,” Sommer told EdTechDigest in 2012.

All over the country, teachers were struggling to keep kids engaged and on-task in classrooms where nearly every student had his or her own personal mobile device. Within months, newly-formed Nearpod was rolling out a platform that allowed those educators to create digital lessons and presentations, deliver them to students’ iPads, control and monitor how students advanced through the material, and check for understanding with embedded quizzes, games, and polls. The company soon began adding a library of digital content developed by third-party publishers, positioning their platform in an intermediary-hub role roughly analogous to Clever’s.

Educators loved it.

“By 2015, I was jealously watching teachers flock to them in the ISTE hall,” said Renaissance Learning’s Brekhus, who at the time was promoting an ed-tech startup of his own at events like the annual conference of the International Society for Technology in Education.

That year, Nearpod hit nearly 2 million student users per month. Investors like Jennifer Carolan, a founder and partner at venture firm Reach Capital who would ultimately participate in seven rounds of investment in Nearpod and assume a seat on the company’s board, began making huge bets the company would keep growing.

By Spring 2020, Nearpod was in 1,800 school districts. Then COVID-19 hit, serving as an accelerant for the forces that had fueled the company’s success.

“From Day Zero, I knew we were in for a big moment,” said Pep Carrera, who started as Nearpod’s new CEO March 16, just as schools began their frantic search for solutions that would help teachers deliver lessons to students working remotely on digital devices.

“Demand went through the roof,” he said.

Roughly 1.2 million teachers would ultimately use Nearpod in 2020, a five-fold increase over the previous year. The company also saw huge spikes in the number of teachers looking for high-quality pre-made lessons, and its engineers worked round-the-clock to adapt features like interactive games so they could be used asynchronously, helping Nearpod dramatically grow its international footprint.

According to Carolan, the first acquisition offer came in late 2020. Before the process was over, she said, there would be approximately nine more, from a wide range of companies enticed by Nearpod’s tremendous popularity with everyday teachers who just want their classrooms to run smoothly.

Schools had changed the way Silicon Valley thought about education, not the other way around.

“When we started investing 10 years ago, people complained about ed tech’s ‘total addressable market,’”said Carolan, who not coincidentally is a former public school teacher herself, with a Master’s degree in education completed before she entered the world of venture capital.

“But by the tail end of COVID, there was great awareness of just how large these companies could get,” she said.

Consolidation and global aspirations now drive a vibrant ed-tech market

Nearpod’s decision to go with Renaissance Learning’s $650 million offer—which was not the highest dollar figure on the table, according to Carolan—reflects one of the big market trends poised to sweep through the post-pandemic K-12 sector.

Consolidation.

With existing offerings like Accelerated Reader and its Star line of assessments, the bigger company already had a strong position in key segments of the ed-tech market. Recent acquisitions of companies such as Freckle and Schoolzilla helped it expand into new arenas such as personalized math instruction and learning analytics. Now, Renaissance Learning wants Nearpod to help tie the pieces together, by doing what it’s always done, just on a bigger scale.

“We’re aiming to create a unified teacher experience,” said Brekhus, the chief product officer.

The sale of Clever, meanwhile, began with a friendly conversation between Bosmeny and Kahoot! CEO Eilert Hanoa about getting the company’s game-based digital content and quizzes onto Clever’s platform. The initial focus was on the benefits of Kahoot! expanding its U.S. footprint. Soon, though, the potential upside of taking Clever worldwide became evident.

“He said to me, ‘You know, we should be talking about something bigger,’” Bosmeny said.

That was in January 2021.

By early May, Kahoot! was formally announcing the news that had prompted that all-hands Clever staff meeting. Nine years removed from couch-surfing and quitting their jobs, Clever’s founders had decided to cash out, for a payday that will be at least $435 million and could go as high as $500 million, depending on performance next year.

Like Nearpod, the company says it will retain its brand and continue to function independently.

Eyes still on the future, Bosmeny described the transition as more like a 6th grade promotion than a full-fledged graduation, given how much room he thinks both the company he started and the ed-tech sector at large still have to grow.

“The industry is growing up,” he said. “Every CEO I talk to is trying to figure out how to serve a global market.”

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