Discovery Education Acquires Mystery Science in $140 Million Deal

Mergers and Acquisitions

Discovery Education Acquires Mystery Science in $140 Million Deal

By Tony Wan     Nov 3, 2020

Discovery Education Acquires Mystery Science in $140 Million Deal

With billion-dollar fundraises on top of billion-dollar valuations, it’s no mystery that the education technology industry is attracting top dollars from investors. And as it turns out, edtech companies are attracting a premium from buyers as well.

The latest proof point is Mystery Science, a provider of elementary-grade science curriculum, which has been acquired by Discovery Education. Terms of the deal were not publicly disclosed, but EdSurge has learned that the transaction was around $140 million.

Mystery Science offers a library of 300-plus digital activities and lesson plans on subjects from astronomy to zoology, which can be used as a core curriculum aligned with the Next Generation Science Standards or as supplemental materials. Lessons are designed with an inquiry-based approach, where students and teachers explore science “mysteries” collaboratively through videos, reading and hands-on activities.

These materials are used every month by roughly four million students across half of all U.S. elementary schools, according to Mystery Science co-founder Keith Schacht.

Schacht credits the growing availability of broadband internet in schools for helping “get his product into the hands of teachers directly.” Much of the company’s growth has come through these channels. The company has not dedicated much staff to building relationships with officials at the district or central office levels, he adds. Instead, it relied largely on word-of-mouth referrals and an inside sales team to respond to inquiries and inbound interest.

In addition, Mystery Science established partnership deals with other digital education content providers, including Amplify and Newsela, to distribute its offerings. Talks with Discovery Education initially began with this in mind around the end of 2019, according to Schacht.

During the summer, discussions about a possible transaction emerged, says Philip Nanney, vice president of corporate development and strategy at Discovery Education. The deal, which closed last Friday, will “bring a brand that is really strong in the K-5 market, a product that teachers love,” and which Discovery plans to support through the company’s global relationships and reach, he adds.

With an established team of sales staff and distribution networks, Discovery can help Mystery Science reach the other 50 percent of the elementary-school market, says Schacht. “Focusing on serving students and teachers can take you to a certain point. To get to the next level of growth of our business, we realized we needed to build district relationships.”

Discovery Education was formed in 2003 as a division of its then-parent company Discovery Communications, known for its broadcast television programs. In February 2018, private equity firm Francisco Partners invested $120 million to acquire a controlling stake in Discovery Education.

Today, Discovery Education is best known for its digital textbooks (“Techbooks”) for math, science and social studies subjects. The company recently launched a video series, “Keeping You Connected to Curiosity,” that introduces science subjects through an inquiry-based learning approach used by Mystery Science. Across its products and services, Discovery says it reaches about 4.5 million teachers and 45 million students across over 140 countries and territories.

Mystery Science will operate as a subsidiary of Discovery Education and retain its brand. The team of 50 will also be joining the new owners. On the roadmap are plans to expand its offerings beyond elementary-grade science and into older grades and other subjects, including social studies, says Schacht. The team will also resume work to translate its materials into Spanish, an effort that started early this year but was interrupted by the pandemic.

Schacht and his co-founder, Doug Peltz, already have plans for their next business. Last year, the pair started a new venture, spun out of Mystery Science, that Schacht described as a “direct-to-consumer ‘explanation’ business … something to the effect of a video encyclopedia for children.” For the time being, the pair will juggle both jobs. “It’ll take at least six months before we have a prototype or product” for the new business, he adds.

Discovering New Assets

This deal marks the third acquisition in 15 months for Discovery Education. In August 2019, the Silver Spring, Md.-based company acquired Inspyro, a provider of augmented- and virtual-reality curriculum content. This past July, it purchased Spiral, a formative assessment platform. Both companies are based in the U.K.

When it comes to prospective deals, “there are two things we’re looking for: onboard leading products, and add important capabilities,” says Nanney. The Mystery Science deal falls into the former category; the Inspyro and Spiral purchases in the latter, he adds.

At $140 million, the acquisition price for Mystery Science is more than 30 times the $4.5 million in venture capital that the startup has raised since its launch in 2014. There were several other acquisition offers on the table, EdSurge has learned, which likely drove up the final sales price.

Jennifer Carolan, a general partner at Reach Capital, an investor in Mystery Science, says the deal multiple reflects a growing recognition among investors and established education companies that small edtech startups can quickly amass large followings and market share.

There are other transactions in motion in the edtech industry, “and we are seeing other companies get high valuations,” says Carolan. “That is in part due to what has happened since March [alluding to the pandemic], and a recognition that education technology is a large global market to be taken seriously.”

 

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