That’s a Rap! Nearpod Buys Educational Hip Hop Creator, Flocabulary

Mergers and Acquisitions

That’s a Rap! Nearpod Buys Educational Hip Hop Creator, Flocabulary

By Tony Wan     Apr 8, 2019

That’s a Rap! Nearpod Buys Educational Hip Hop Creator, Flocabulary

It’s out of the ordinary when Nearpod buys a company.
Today it’s adding Flocabulary, to bring hip hop to the library.

If Alex Rappaport, the co-founder and CEO of Flocabulary, had to bust a rhyme about the deal, that’s how it might go. (We asked, but he declined.) The Brooklyn-based company best known for fusing hip hop with educational content in music videos and instructional activities, has been acquired by Nearpod, which helps educators beam digital content to students’ devices.

Combined, the two companies claim they will reach more than 7 million U.S. students, with at least one paid contract in 97 out of the 100 largest U.S. school districts. (These contracts may be district-wide deals, or cover a handful of schools within a district.)

Founded in 2012, Nearpod started as an “interactive lecture” platform for iPads that has since evolved to support all devices. Teachers can create, distribute and manage multimedia content and assessments on students’ devices. They can also choose from more than 7,000 interactive lessons via a marketplace of materials provided by over 30 Nearpod content partners.

Through this deal, Nearpod will add one of the more unique, coveted collections of online educational resources to its library.

Flocabulary has built a loyal following among educators and students with hip hop videos that cover K-12 subjects, life skills, and “The Week in Rap” that summarize news and current events. Since 2004 it has created more than 1,100 clips that have amassed an estimated 50 million views. The company also offers reading exercises, quizzes, vocabulary games, and tools that let students write and animate their own videos.

“We’re taking the youth and media culture of Flocabulary, and pairing it with the device technology of Nearpod,” says Rappaport.

The team of 60 at Flocabulary will all join Nearpod, and will continue working out of its current offices in Brooklyn. Nearpod’s headcount will surpass 200 as a result. Kovalskys promises no disruption to Flocabulary’s offerings, which will remain as a separate brand.

This deal also marks the first acquisition for Nearpod, which has raised nearly $31 million in venture capital. Its biggest institutional shareholder is Insight Partners, a private equity firm whose education portfolio also includes Chegg, Instructure and Pluralsight—three companies that have gone public.

From ‘A’ to Exit

Neither Nearpod nor Flocabulary disclosed the financial terms of the deal. But it almost didn’t happen.

Last fall, Flocabulary’s Rappaport was putting the finishing touches on closing a Series A fundraise. He received a couple of term sheets: one from a private equity firm, and another from Reach Capital. He signed the latter, a deal that would have netted the company over $10 million.

What happened next is now a part of the “company lore,” says Rappaport.

Rappaport attended an October retreat that Reach Capital holds annually for its portfolio companies. There, Rappaport went on a hike with Nearpod co-founder and CEO Guido Kovalskys. (Reach Capital is also an investor in Nearpod.)

It wasn’t their first encounter. In 2017, the two companies did a short-term partnership where Flocabulary made a dozen of its hip hop videos available in Nearpod’s library. It was an unusual arrangement for Flocabulary, which rarely licenses its videos to third parties. “Our content is our gold,” says Rappaport.

During the stroll, Kovalskys reminisced about that partnership, which “gave us a taste to our customers of how amazing the [Flocabulary] content was,” he tells EdSurge. During that 10-month deal, those videos were watched by about 200,000 students. When the videos left the platform, teachers expressed a desire to see them return.

Their conversation covered more than the past. Rappaport shared plans for how the Series A funding would support its next stage of growth. One of his priorities would be building out the company’s sales infrastructure, and put more boots on the ground to sell Flocabulary into schools and districts.

A K-12 sales force and distribution platform, it turns out, was what Nearpod already had in place, with salespeople in the major education markets in California, Florida and Texas. So Kovalskys countered with another deal: Instead of building a sales operation from the ground up, would Flocabulary want to leverage Nearpod’s—and join the company?

Rappaport was game. Building a sales team would be a challenge, for one. And his conversations with educators revealed to him that “the education market is hungry for efficiency,” he recalls. “We’ve been hearing from customers that they want these popular tools that teachers are using to somehow come together, and make it easier to use for teachers and students.” On their product integration roadmap is a single sign-on feature so that Nearpod users can more easily access Flocabulary content.

Tapping into Nearpod’s established sales operations, Rappaport adds, “was the most surefire way to scale for Flocabulary.”

It’s unusual, and generally frowned upon, to renege on a term sheet once it is signed. But it is not a legally binding agreement. A few months later, Nearpod and Flocabulary hashed out and signed off on the new acquisition deal.

According to Rappaport, what made it easier for Flocabulary to back out of the term sheet and agree to the new deal was that the company was largely self-funded and operating sustainably. Aside from a $1.5 million convertible debt note from Rethink Education in 2016, the company has been bootstrapped. It has been modestly profitable since 2008, and at the time of the deal was generating a little more than $10 million in revenue.

The ability to achieve profitability without relying on outside capital and investors meant Flocabulary remained in control of its destiny.

Being bootstrapped “made our path to growth challenging on the one hand, but on the other, it gave us a lot of freedom,” says Rapparport. “A lessons for entrepreneurs: if you’re able to bootstrap, you have all the options on the table.”

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