IK12-YC Merger EdTech Insider EDUKWEST

IK12/YC Merger – Investor Perspective

As a follow-up to our interview with Imagine K12 co-founder Tim Brady on the merger with Y Combinator we reached out to some of our investor contacts for commentary on the merger itself and its potential impact on the education technology landscape in North America and the EdTech accelerator scene globally.

The below named people were so kind to give us their statements, and we thank them very much.

In a nutshell, the majority of our panel sees the merger as a positive sign for the edtech accelerator scene.

“[The merger] demonstrates continued interest from the broader accelerator and venture community in education technology [and] allows IK12 to fully leverage YC’s network and resources and eliminate duplication. It is also a great opportunity for edtech startups and startups in other verticals to exchange ideas and share best practices.”, says Poulson.

Matt Greenfield even predicts a boost for edtech through the merger with Y Combinator as it is by far the most successful tech accelerator program to date. “The Y Combinator alumni network and ecosystem are incredibly powerful assets, and they will help some ed tech companies raise more money, hire better people (especially tech people), and make better decisions. Y Combinator seems to generate at least one unicorn in every cohort, and no one else is even close.”

Matthias Ick agrees and sees the biggest value in the exchange of founders from different verticals over the course of the program. “A second aspect is the potentially large overlap in a range of the mentoring activities across IK12 and YC. Attracting better and more effective mentors becomes easier. Founders, especially if they come from an education/teacher background, will benefit from the exposure to other business. Overall, I expect that this will increase the quality of the companies completing the program.”

Richard Taylor thinks that the merger was inevitable. “The rollup of StartUp Weekend was an early sign of some consolidation in the sector and given that IK12 was a fairly small operation it’s unsurprising to see them linking with YC. In the UK we had Springboard merge with TechStars sometime ago.”

Greenfield also feels that there are now a few too many vertical accelerator programs in edtech but he does not see a lot of harm in that. Matthias Ick does not feel that investors’ appetite for edtech companies has generally decreased. “But it is important to channel these investments into companies with great potential.”

All agree that it will be very hard for other vertical accelerator programs to follow the example of the IK12/YC merger. Poulson points out that many of those program simply don’t have a sister accelerator like Y Combinator.

Greenfield sees the problem the other way around. “I don’t think other ed-tech accelerators have the opportunity to do anything like what IK12 just did: there is no other general tech accelerator that would be worthwhile for them to merge with. […] As far as I can tell, Techstars has no good exits and no unicorns in any of its numerous accelerators. 500Startups is a bit better but still not great. Y Combinator helps their startups raise more high-quality investment dollars than the graduates of the rest of the accelerators put together.”

Matthias Ick, Richard Taylor and Frank Bonsal also pointed out some general problems with vertical accelerator programs like the process of choosing a cohort and the business model of accelerators.

“The key function of an accelerator is to attract and curate the best startups.” states Ick. “Specializing on a vertical (like education) narrows the filter for new companies. This makes it harder to consistently select and nurture top startups, that attract large funding rounds after graduating from the program.”

Taylor thinks that incubator and accelerator programs generally ask for too much equity in return for too little value. “They also have a fundamental flaw in their business model which is they spend far more on running their programs than they so choosing their cohorts. While selection has improved somewhat it is still underinvested in or even outsourced. This is what Pearson did with one round of their Catalyst program- it was done by 1766 which seemed odd given that as the largest edu company in the world you’d imagine Pearson were in a better place to do the selection.”

Frank Bonsal states that “a stand alone edtech accelerator is a tough model and no one has cracked the code on this, as we are early in the evolution.” Bonsal also points out that the success of the merger will largely depend on the business model, “for-profit vs nonprofit, accelerator fund only vs follow-on fund, etc.”

(*) Disclosure: Shauntel Poulson is a former Partner from NewSchools Venture Fund, which was an investor in ImagineK12’s Start Fund.

Kirsten Winkler is the founder and editor of EDUKWEST. She also writes about Social Media, Digital Society and Startups at KirstenWinkler.com.