Edtech SaaS platform growth investment

Target company

• Primary and secondary school learning SaaS for use within classrooms and at home.

• Focused on English vocabulary and grammar.

• Strong market reputation for teacher support and reporting.

• Serving UK state schools and English-speaking private schools throughout the world.

• Proprietary SaaS platform and proprietary content.

• In-house product management, outsourced technology development.

Investment thesis

The objective of the investment was to fund technology development to introduce new services, including mathematics learning, additional pupil testing and enhanced classroom reporting.

The thesis projected 12x revenue growth through rapid scale-up in the UK market and (slower) expansion into additional overseas markets.

Key findings

1. Content infrastructure is a market differentiator

The technical architecture for content delivery and the operational processes of content creation enables dynamic repurposing of content for additional (revenue earning) services at near zero cost of delivery. The breadth of this proprietary capability is unusual amongst competitors and enables faster times to market for the planned new services.

2. Technology platform not capable of scaling

Database response times at scale will render the platform inoperable due to the use of stored procedures embedded within the database access infrastructure.

Requires redesign of the data architecture and data management infrastructure – low risk but probable re-engineering effort: £2.5m over 18 months, requiring additional technology FTEs.

3. Product release schedule too aggressive

Current in-house product management function and outsourced engineering functions cannot meet the proposed product roadmap timeline.

This can be mitigated by increasing spend on development by or maintaining predicted spend but delaying product feature releases. The latter option likely to delay accrual of 12.3% of projected revenues in years 1 and 2 of the investment.

Value creation: additional deliverables as part of our due diligence

1. Technology cost negotiations with SMT of the
target company

We calculated a fully costed engineering schedule to meet the proposed product release schedule, and to reengineer the data management infrastructure.

As the details of the technology effort impacted the acquisition price and reward structure, we supported the client in their discussions with the target company’s SMT.

2. Engineering delivery plan for proposed product roadmap

The delivery metrics of the outsourced developers clearly showed that it would not be possible to deliver the proposed product roadmap within the costs and timelines of the investment P&L.

In order to size the likely impact of this insufficient engineering capacity, and to gauge viable mitigation options, we built an engineering schedule which enabled modelling of variations in key factors such as ability to hire and the order of product feature release.