It is sad to see another fabulous teacher chase stock valuation bubble money.

The latest Rajini movie, Vettaiyan, had a teacher-turned-fiendish villain as the main antagonist. Although it was a painfully exaggerated version of a real-life teacher-turned-businessman, some of it was based on reality.

Now, I am not someone who believes that teachers should live in poverty, depend on alms/charity, guru dakshina, etc.

A superstar teacher can/should become rich too. But how rich? And through what means? Having seen what happened to Byju’s, why is another teacher taking the same path?

Alakh Pandey’s Physics YouTube videos were fabulous. He loved the subject. You can feel the passion he has to teach. He used conversational Hindi to make the lessons accessible to students beyond the urban, English-speaking audience. All very good.

He also made some money. I believe he was making a few crores from the small online set-up he had. Why can’t a human be satisfied with that?

Next, he started full-scale offline coaching classes. That comes with problems which may not be in his skill-set to tackle. Hiring and retaining other teachers. Replacing the good teachers when they get poached. Administration.

Most importantly, academic rigor. Teaching, and getting students to be disciplined, are two entirely different things. Giving a lecture is not the same skill as making students do homework and study for 6 hours everyday.

You got into teaching for a good, genuine reason. Now you are doing something else.

The above screenshot is from a web series based on Alakh Pandey in which his elder sister is telling him not to forget that he is basically a teacher.

Unfortunately, instead of sticking to his roots, Alakh Pandey seems to have got sucked into the stock valuation game. He has raised hundreds of millions of dollars at billions of dollars of paper valuation. Probably without understanding how this system works. Haven’t we seen this story unfold before?

Now he is on a treadmill. He has to show rapid growth forever. Otherwise he will crash and burn.

That means he has to attract loads and loads of students to his coaching classes. False promises have to be made. After all, the number of engineering and medical seats is the same. Teachers will come from the same teaching pool. The same academic rigor and slog is needed to crack competitive exams. A great Physics teacher is not going to change this game even 1%.

What is the role of a good subject teacher? A good teacher can make a concept easy to understand for a specific type of audience. A good teacher can attract that audience to come back for the next lecture and pay attention. Very useful service.

But it can be no more than that. It is a narrow skill. Those who use that skill to chase other goals will end up being portrayed as a villain in some future movie.

BYJU’S doubled in market value, from $6 billion to $12 billion, including several acquisitions. The new round increased the value by 116% after 2019 year-end to its current level of $13 billion. If the organization can reach a $15 billion valuation, it will be a 150 per cent boost.

BYJU’S is now the most valuable edtech startup in the country. Between March and November 2020, the organisation welcomed 25 million additional students to its site, increasing the overall customer base to 75 million, including 4.2 million monthly paying subscribers.

The $13 billion financings round, which included Eduardo Savarin from Facebook's B Capital and others, was completed by Global Edtech Holdings. Additionally, Tiga Investments, TCDS India LP, Arison Holdings, XN Exponent Holdings, Baron Emerging Market Fund and Baron Global Advantage Fund invested 1.21% of the capital.

BYJU'S has authorised the allotment of 1,40,233 Series F compulsory convertible preference shares (CCPS) at a face value of INR 10 and a premium of INR 2,37,326 per share, according to the ministry of corporate affairs filings. MC Global, the company's lead investor, has placed INR 1,628 Cr (approximately $225 Mn) for a 1.73 per cent interest. B Capital invested INR 561 Cr (approximately $77 Mn) in the round by two companies in return for a 0.59 per cent interest in the firm.

To get a better hold on the Indian edtech market, the business has focused on major and impactful acquisitions. This year, the firm is rumoured to be in early talks to buy Mumbai-based K12 competitor Toppr and test prep behemoth Aakash Educational Services, which has over 200 physical coaching centres for engineering and medical entry test prep.

The acquisition of Aakash will be the largest in the Indian edtech area, and it will help BYJU'S develop a presence in both traditional and offline education.

While I spent ten years investing part and full time from a family (super angel) office in an extended apprenticeship alongside my father, Frank Bonsal, Jr, Co-Founder of NEA, New Enterprise Associates, I am currently out of the angel investing business.

Since 1998, with small, medium and larger bite sizes, while we Bonsals made many investments across a multitude of sectors, I have been involved in over a dozen investments in early child, K-12 and postsecondary ed tech and service companies.

Unrealized angel investments in education include:

• Apex Learning (2003, http://www.apexlearning.com)
• BetterLesson (2009, http://www.betterlesson.com)
• Flat World Knowledge (2007, http://www.flatworldknowledge.com)
• Inetoo (L Point Solutions, 2007, http://www.inetoo.com)
• Moodlerooms (2007, http://www.moodlerooms.com)
• Privo (Privacy Vaults Online, 2007, http://www.privo.com)
• Straighterline (2009, http://www.straighterline.com)

Realized angel investments in education include:

• APEI (2007 IPO, American Public Education, Inc.)
• bigChalk (2002 acq by Proquest)
• BBBB (2004 IPO, Blackboard, Inc.)
• CPLA (2006 IPO, Capella Education, Inc.)
• Headsprout (2011 acq by DYMO/Mimio)
• Smarthinking (2011 acq by Pearson/TutorVista)
• Spectrum K12 (2010 acq by Scantron)

Learning experiences in education include:

• Defywire
• Scenario Learning

My reason for quitting the angel platform in 2010 is my exclusive focus on venture investing as a GP at New Markets Venture Partners (http://www.newmarketsvp.com). We are an early and growth stage (NOT seed) investor, so if you are looking for seed angel capital, I may know some folks who could help out, but this is not my day time occupation.

Benchmark Capital (Grockit)
Founders Fund (Inigral)
Highland Capital (2tor)
Reid Hoffman (Grockit and Knewton)
Accel VP (Knewton)
FLOODGATE FUND (Kno and Chegg)
Bessemer VP (Knewton)
Atlas Ventures (Grockit)
First Round Capital (Knewton)
USV (Fred's been talking about the space for quite some time)
Startl (Education-focused incubator)

Then look at the investors in these companies: (From
What are some interesting startups in the education space? Why are they interesting?)

Ones that multiple people think are interesting:

• Chegg - Textbook rental
• Inigral - Facebook apps for higher education
• Inkling - Making educational content online, mobile, and social
• Grockit - Test Prep (SAT, GMAT, LSAT, etc.)
• Knewton - Ditto
• TeachStreet - Online community for finding classes and learning new things
• eduFire - Live, online & interactive video classes
• Academic Earth - Video courses from leading universities

Others:

• Guaranteach
• PrepMe
• Piazzza
• CarrotSticks - Math problems for elementary school kids
• Lumos Labs - brain games and has successful iphone apps
• 2tor - Working with traditional universities to put degree programs online
• IntelligentPapers
• SuperCoolSchool
• Careersters
• MyFit - Education analytics & predictions
• BetterLesson - curriculum-sharing social network platform for teachers
• Altius Education:Works with nonprofit universities launch for-profit online degree programs
• EdCrowd
• Time to Know
• Enzi
• GoingOn
• netTrekker
• Kaltura (powers 2tor's video platform)
• TeachersPayTeachers
• Curriki
• Pocket Tales - the "foursquare of reading" for kids
• Enrolled - http://enrolled.in/ - a Social Academic Network
• MindSnacks - social games on mobile devices for learning a foreign language
• Udemy - Allows anybody to create online course with on-demand and live classes
• Khan Academy - a non-profit org run by one guy. 1500 + free videos on a variety of subjects
• IntelligentPapers - First multi-platform, digital textbook and educational software company for Tablet PCs.
• Zinglbee (http://www.zinglbee.com/) - Quick, creative and reliable learning application.

Exits:

• Edusoft, bought by Houghton Mifflin in 2003
• Wireless Generation, bought by News Corporation (Rupert Murdoch) in 2010

A common valuation rule of thumb in the software industry is 4 to 10 times revenue (not earnings). If you categorize yourself as a software company this is a good place to start but is obviously going to vary depending on your specific business.

In the startup world today the rule of thumb is $1 million per engineer at your company. That is, a company with 20 engineers and 100 sales/marketing guys will be valued at $20 million. The reason for this is because of the shortage of engineering talent in the valley (and really all over North America right now).

However, even based on those rules of thumb a company's valuation will vary. An example is if Bill Gates or Sal Khan are on your board of advisors you could see a boost of a couple million.

So the short answer is that it depends :)

Here are a few VCs that have made at least three education related investments in the past five years:

• Lightspeed Venture Partners: Orbis Education, Tutorvista, Beifang/China Vocational Training
• First Round: Knewton, Roblox, Kno
• Maveron: Altius Education, Capella University, Livemocha, Latimer
• Spark Capital: Altius Education, 5min, 8D World
• Bessemer: investors in Knewton, Cornerstone, LearnBoost
• Atlas Venture: investors in Grockit, SimpleTuition, LearnBoost
• FirstMark Capital: Lumosity, Knewton, Schoology, Straighterline

I'll add that a few other VC firms have also made investments in the education space this year (e.g. Sequoia invested in Inkling, Highland invested in 2tor, FirstMark invested in Knewton...) but they don't make the "recent three startups" cutoff I established to narrow the list down.

Several other firms have at least mentioned privately that they're interested in the education space. But until they make at least a couple of successful investments in the education space, there is no way they should be on this list.

Here at Zane Education we use a Freemium model, where once a person completes the registration for a free Basic Membership they have access to all the resources (including the testing component of our curriculum-based Visual Learning solution) with the exception of our online subtitled video library which provides the teaching component, and requires the customer to upgrade to a paying subscription.

I'm afraid at this stage I would be hesitant to release those figures in a public forum like this only because we have deliberately adopted a marketing strategy that enables us to separate ourselves from others in the market, and a pricing strategy that enables us to maintain affordability while at the same remain free from needing to rely on external funding from investors, and hand outs from charities that will always turn that tap off at some stage.

Having said that, because as the founder and CEO I really care about making a difference for teachers, and particularly the children and students, we often donate the use of our resources where they, the teachers or the school, does not have the financial wherewithall to pay for the use of the resources we provide.

While many in education have expectations of the free use of online education resources, a huge part of what any EdTech company MUST provide is support, whether it be Tech Support or whatever, and that obviously comes at a cost.

I am always very happy to discuss this further privately if anyone is interested.

The answer you don't want to hear is "it depends". Sorry to disappoint.

How new/big is the company? Do you have customers? Are you making money? Are you trying to value it for investment, to incentivize employees with equity, or for an acquisition?

If you can add some details to your question, I'll try to be more helpful. If you want a general answer for a new company trying to raise a seed round, try this:

Don't talk or think about valuation right now. Think about how much money you need to get to the next stage, add 50%, and then go out and start generating investor interest. If you get asked about valuation, dodge the question for now.

After about 2 months, see where you are at with investor interest. If you have dozens of high calibre investors just dying to get in on your round, then you can presume that your company is valuable, and you can see to maximize your valuation (think high 7 figures). If you are having a really hard time getting any interest, consider giving a very fair valuation so you can close up your round and move on with growing the company. Try multiplying the amount you are trying to raise by 2 or 3 and use that as your premoney to start negotiations.

Education technology investments have been proven to be beneficial for schools in numerous ways. First, there is evidence that suggests the use of educational technology has improved student learning outcomes. Studies conducted by RAND and others have found that students who used educational technologies scored significantly higher than those who did not - especially in terms of reading and math abilities. Secondly, technological advancements have enabled teachers to teach more effectively with tools such as virtual classrooms, interactive whiteboards, learning portals and flipped classrooms-allowing them to interact with students remotely and increase engagement in class discussions or group work activities. Finally, research shows that educators at all levels are actively using educational technology to better integrate aspects of their teaching plans into the curriculum-including subjects like social studies or history where multimedia can help draw connections between various topics taught each year.

There is plenty of evidence showing that investing in education technologies pays off for schools due to improved student performance as well as better teaching methods supported by modern techniques like online collaboration platforms or digital courseware system integration which allow teachers greater control over how they implement their lessons into the classroom setting. Consequently, this leads to an increased focus on deeper understanding instead of traditional rote memorization strategies which further results in improved academic achievements for students across all grade levels.

I am not qualified to answer this question. However, I would recommend 2 websites where you can find information about your favorite existing online education brands. Look up the profiles on CrunchBase and AngelList they showcase who has invested in the companies, start your conversation on Twitter with these entities. Check out this as well Which Angel Investors or VCs are interested in education startups?

Update:

Education Technology Startups Raised Over Half A Billion Dollars In Q1 of 2014

50 Education Startups That Got Funded in 2013

Startup Investing Trends in Education Technology and Incubators in 2014

30 Of The Top Education Startups Of 2012

9 Ed-Tech startups investors love