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By Sam S. Adkins, Chief Research Officer
Updated February 25, 2009 -- According to a new longitudinal study by Ambient Insight, venture capital is flowing into learning technology companies in response to the current recession and at the highest rate since the last recession.
"Private investment in 2008 totaled over $1 billion, higher than any other year in the last ten years except 2000," reports Sam S. Adkins, Ambient Insight's Chief Research Officer. "Investors are targeting companies and products that they believe will be successful during the economic downturn. This report identifies the types of companies, products, and services that are attracting that investment. Over 160 learning technology companies were funded in 2008, compared to 50 in 1999."
The report is available now and a free Executive Overview is available at:
http://www.ambientinsight.com/Reports/LearningTechnology.aspx
The report is called, "Private Investment Trends in the US Learning Technology Industry: 1999-2008 Longitudinal Analysis" and includes a detailed analysis of the funding amounts across eight types of learning products. It also analyzes the capital flowing to the Learning BPOs and training outsourcing companies. The analysis compares the funding activity in the last recession to the patterns in the current recession. There are some similarities, but investment trends are different this time.
"In the last recession, the vast majority of investment went to Self-paced eLearning companies," comments CEO Tyson Greer. "This time capital is flowing to companies that are 'innovating their way out of the recession' with second and third-generation products. Companies that are selling these products are attracting capital."
Key Findings in the report include:
- Relative to private investment, recession is good for the learning technology industry.
- The number of deals made per year has increased dramatically in the last two years.
- The average amount of funding has decreased significantly since 1999.
- Investment to Self-paced eLearning companies serving the corporate market dominated between 1999 and 2003.
- Investors are now diversifying their portfolios and capital is flowing to companies that sell new learning technology products and to companies that target non-corporate buying segments.
- Innovation is attracting capital now. Fundamentally new types of learning technology products are now on the market and attracting investment.
- There is a "disconnect" between funding activity and product revenue growth. Some products are over-funded and some are under-funded.
Key Questions answered in this report:
- What learning technology products are attracting the largest investments?
- Are learning technology products designed for particular buying segments attracting investment?
- What impact is the current recession and funding patterns having on innovation in the learning industry?
- What are the differences between the current investment patterns and the patterns over the last 10 years?
- Which learning technologies are venture capital and private investment firms avoiding?
The report includes a detailed analysis of the funding amounts across eight types of learning products since 1999 through all four quarters of 2008. The report also identifies the capital flowing to the Learning BPOs and training outsourcing companies. Learning Technology products covered in the report include:
- Self-paced eLearning
- Digital Referenceware
- Exam and assessment products
- Real-time Collaboration-based Learning
- Simulation-based and Game-based Learning
- Cognitive Learning
- Process-embedded Learning
- Mobile Learning
The research provides evidence that the current recession is now a growth catalyst for both the sales of learning technology products and the investment in learning technology companies. While no industry is immune from a recession, education is known to be "recession-resilient" and investment firms are moving money into the industry in response to the downturn.
"The recession has created a degree of 'irrational exuberance' for certain kinds of investments," adds Adkins. "There are discrepancies between total funding activity for specific product types and the product's potential revenue growth. On the other hand, there are clear revenue opportunities for both suppliers and investors that are targeting products with sustainable and long-term revenue streams."
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