Knewton’s New Business Attracts New $25M in Funding. But Some Things...

Digital Learning

Knewton’s New Business Attracts New $25M in Funding. But Some Things Don’t Change.

By Tony Wan     Aug 21, 2018

Knewton’s New Business Attracts New $25M in Funding. But Some Things Don’t Change.

The company that set the bar for hyping adaptive-learning technology has had to adapt to new leadership and a new business model. But some things seem to stay the same—such as its ability to win new investors and capital.

Knewton has raised $25 million in a new funding round—the eighth since it launched in 2008. This new money was raised as debt financing, of which Triple Point Capital contributed $20 million. The rest comes from the company’s existing investors, including Accel, Atomico, Bessemer Venture Partners, FirstMark Capital, First Round Capital, Founders Fund and Sofina.

After a decade and $137 million in total funding (which the company has raised across six equity rounds and two debt financings), it’s rare to see investors pitch in new money. But Knewton’s newest backer, TriplePoint Capital, seems eager to offer a lifeline for the company’s new business model: selling digital courseware directly to higher-ed institutions. “We’re excited to support Knewton’s effort to put Alta into the hands of every college student in the U.S.,” Jim Labe, TriplePoint’s CEO, said in a statement.

First piloted last fall and publicly released this January, there are currently 36 Alta courseware products available, mostly for math subjects and including chemistry, economics and statistics. The company estimates that students at more than 250 colleges will be using Alta in the upcoming fall term.

Getting into the courseware business marks a major pivot for the New York City-based company, which originally licensed its adaptive learning technology to publishers. But last November, Knewton announced that it would directly offer digital curricula—and set itself on course to compete with publishers.

Alta at a Glance

With Alta, Knewton aims to combine third-party open educational resources (OER) with assessments and the adaptive-learning technology created by the company to inform how students progress through the content. The company says its materials are compliant with web accessibility standards, and shareable through a noncommercial Creative Commons license (CC-BY-NC-ND).

The company licenses content from OER providers including FlatWorld, a for-profit offering low-cost course materials, and OpenStax, a nonprofit housed at Rice University. With this move, Knewton says it is eschewing relying on expensive authors to write textbooks and, as a result, can pass on the cost savings to students. A two-year subscription to an Alta costs $44 per course for two years of access, or users can also opt to pay $9.95 per month.

“We’re at a state where the quality of OER is definitely on the level of content from any publishing company,” claims Doug Hughes, Knewton’s chief product officer in an interview with EdSurge.

Knewton Alta - Student View
Sample screenshot of what students see in Alta. Source: Knewton

From a student’s perspective, Alta works primarily by asking questions. Get a question right, and the system will likely offer something more difficult or advanced. Get it wrong, and the system attempts to finds whether there’s a gap in pre-requisite knowledge, and provide review materials.

Behind the scenes, there are two proprietary assets that Knewton has developed over the past decade. There’s a “Knowledge Graph” that maps out the learning objectives in any given course, along with the relationship between the skills and competencies that a student needs to demonstrate in order to master a concept. Then there’s the adaptive learning engine that makes the decision about which learning material a student should see next.

Not every student will see the same sequence or volume of problems. Those who struggle will have to answer more questions or watch additional videos than those who don’t. This provides an incentive for students to take Alta assignments seriously, says Andrew Moore, an assistant professor and interim chair of the math department at National Louis University, which purchased about 1,200 Alta student licenses for the upcoming school year.

“For students who don’t like homework and want to breeze through it, there is an incentive to get every question right,” Moore tells EdSurge. “For some students, the ‘let’s-just-get-this-done’ mentality aligns well with the mechanics of the adaptive product.”

On a dashboard, instructors can see a question bank of the problems that students may have encountered, and can drill down to see how individual students answered each problem—and the feedback they received. The tool will also flag frequently-missed problems for instructors to review in class.

Knewton Alta - Instructor Dashboard View
Sample screenshot of instructor dashboard in Alta. Source: Knewton

Humility and Hubris

Along with offering a new courseware product, the company also wants to course correct its attitude and reputation in the industry. Its past proclamations about the omnipotence of its technology attracted plenty of ire. Further fanning the flames was a lack of visibility into how—or whether—the technology really worked as advertised.

Kibby promises to be different. “You have to approach the market with humility,” he says. “You have to explain to people how this business actually works.” After taking over as CEO last June, he says he set out to transform the company from an “engineer culture” driven by technology to a “customer culture” that focuses on listening to faculty and instructors.

Yet in describing Knewton’s path forward, Kibby alternates between humility and hubris. On the one hand, he is quick to distance himself from the brash comments made by Knewton’s former CEO and founder Jose Ferreira, who suggested the company’s technology could be good enough to replace teachers and human intuition.

But Kibby makes grand assertions of his own. Part of his effort to be more transparent includes sharing what he calls a “7-point blueprint to win and disrupt Big Ed,” referring to the traditional educational publishing companies. (One of those points, he boasts, is a “secret sauce,” which in Knewton’s case is its “best-in-class adaptive technology.”) Kibby, a former executive at Pearson and McGraw-Hill, doesn’t shy away from saying that his former employers are now his direct competitors.

That aggressive posturing puts Knewton in an awkward situation because the company still licenses its adaptive-learning technology to some of the publishers it now competes with. Kibby acknowledges there’s an “interesting ‘frenemy’ dynamic” with them, and that “they know that we are going after their business.” (Pearson, however, has said it is phasing out Knewton’s technology in favor of using an adaptive technology built in-house).

A different transparency effort may be less contentious and help Knewton woo colleges and faculty members. By the end of 2018, Knewton will release results from Johns Hopkins University’s Center for Research and Reform about whether students’ use of Alta helped them master their materials.

Still, Kibby quibbles with how much these results can sway campuses in Knewton’s favor. “Even if I gave them a study, whether it’s from us or from some third party, colleges are going to do their own trial,” he says. Regardless of what the John Hopkins researchers find, he wants—almost dares—school officials to test and decide for themselves whether Alta works. Knewton has already conducted its own study, and it’s no surprise (or necessarily convincing, even to Kibby himself) that it found positive results.

The boldest claim that Kibby offered, however, may be this: “We are going to raise more capital.” He wants to triple Alta’s market adoption in 2019, and “right now we’re sizing what we need to pour more gas into the fire.”

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