Math is a hot subject right now—especially in the world of mergers and acquisitions. Last week, DreamBox Learning raised $130 million to grow its online K-8 math software. A few days earlier, that company’s competitor Reasoning Mind was acquired by Imagine Learning, a private equity-backed curriculum company.
Today, a different digital math program, KnowRe, is switching owners. The Seoul, South Korea-based education company was purchased by Daekyo, an operator of after-school learning centers and academic enrichment programs in the country. As a result, Daekyo will own approximately 80 percent of KnowRe, which will continue to operate under its original brand. Financial terms of the deal were not disclosed.
Founded in 2012, KnowRe started as an after-school math tutoring center before refocusing its effort on building math educational software. The company describes its tool, which currently covers math curricula for grades 1 to 11, as an “adaptive” program focused on identifying knowledge gaps. When students get a problem wrong, the program walks them through different operational steps to diagnose what concepts they may need reinforcement for. Students then are given additional practice materials related to those skills.
In early 2014, the company set up a second headquarter in New York and launched a version of this online tool for the U.S. schools market. It went after the nation’s biggest school district, even winning the “Best Instructional App” award in an education technology competition organized by the New York City Department of Education.
But selling to schools proved tough, and after a few years KnowRe pivoted its sales strategy. “We learned that the school market is a very difficult business proposition,” KnowRe’s co-CEO, David Joo, tells EdSurge in an interview.
Instead of selling directly to schools, the company began licensing its software to other educational service providers. One such partner is Sylvan Learning, which operates a network of tutoring centers across the U.S. These partners account for the majority of KnowRe’s business today. Joo estimates that selling to U.S. schools makes up “probably less than 10 percent of our total revenue.” He declined to share how many students are currently using the platform.
In tandem with these efforts to grow the U.S. business, KnowRe also expanded its footprint back home in South Korea. In 2015, it partnered with Daekyo—now its majority owner—to offer a different program, Summit Math, to millions of students at Daekyo’s learning centers. KnowRe also licensed its technology to EBS, the country’s national educational broadcasting media group.
Building on its existing partnership with Daekyo, “this sale is a natural extension of the already close relationship between the two companies,” Joo said in a prepared statement. Although the Daekyo will own a majority of the company, he says KnowRe’s operations and product development teams will largely remain the same.
The deal comes in the wake of growing interest among South Korean education companies to acquire strategic assets. Earlier this year in February, Woongjin ThinkBig invested $5 million in return for a 10 percent stake in Kidaptive, a Redwood City, Calif.-based startup that licenses its adaptive-learning technologies to educational content providers. Last year, ST Unitas, another Korean publisher, paid approximately $87 million to acquire Princeton Review, one of the largest standardized test prep providers.
These dealflows don’t strike Joo as a surprise. South Korean “companies like Daekyo will need to introduce more technology and more personalized services,” he says, in order to remain competitive in an education market that’s become increasingly global and digital.
Across the globe, he adds, many education companies and incumbent market leaders “are realizing that a lot of these technologies are difficult to build in house. Making acquisitions or strategic investments are a much more efficient way to acquire those types of institutional knowledge.”
