We had a tip about, and have now confirmed, latest acquisition: , the education startup that started life as a hardware business and later pivoted into software" specifically via apps that let students read interactive versions of digitized textbooks. Why would Intel, the world(tm)s largest semiconductor chip maker, acquire an education company?
First off, Intel Capital was among Kno(tm)s laundry list of investors" the company had raised some in funding since being founded in 2009" leading its Series C round in 2011 (in the $37.5m round, Intel ).
I can confirm Intel has purchased Kno,a spokesperson told us just now. The company is not disclosing deal terms but we(tm)ll hopefully going to speak to John Galvin, the GM of Intel Education, to get more details. Since then, Intel has published a more on its site.
He writes:
The acquisition of Kno boosts Intel(tm)s global digital content library to more than 225,000 higher education and K-12 titles through existing partnerships with 75 educational publishers. Even more, the Kno platform provides administrators and teachers with the tools they need to easily assign, manage and monitor their digital learning content and assessmentsWe(tm)re looking forward to combining our expertise with Kno(tm)s rich content so that together, we can help teachers create classroom environments and personalized learning experiences that lead to student success.
Although the pricing of the deal remains unclear, we have learned that the entire Kno team will be joining Intel as a result of the acquisition" with one notable exception. Osman Rashid, the co-founder and CEO (who is also a co-founder of Chegg), will not be joining the company. His plans after the exit remain unclear, but we(tm)re trying to find out and will update when we learn more.
Why isn(tm)t Rashid heading over to Intel?
He was definitely the figurehead behind it,Galvin admitted in an interview, but ultimately the two did not see eye to eye about the direction of Kno under Intel.That was something that Osman and I talked about early in the process,he said.But where I wanted to take Know and where Osman wanted to take it were two different things. His direction was to continue with a North American focus and I want to go international, and for us to go international, that(tm)s about integrating with Intel(tm)s sales teams, working on bringing this to new markets.
Using Kno for an international education play is not an out-of-left-field idea. The two companies had already been working together in markets like China on textbook digitising initiatives.It became more attractive to me to have them be a part of the portfolio rather than just a partner,says Galvin. He pointed out the company(tm)s ingestion engine as a particularly interesting aspect of the business to help Intel work more closely with the publishing world.
There are also some aspects that play into Intel(tm)s bigger investments into areas like AI and natural language processing.It(tm)s a very nice e-learning platform, and perhaps eventually also a natural language support platform, with an analytics engine. The capabilities are there. We can perhaps push them into areas they weren(tm)t ready to go in on their own.Although he declined to talk about the terms and pricing of the acquisition, Galvin did say that there is still some IP left from the company(tm)s previous incarnation as a hardware play, though for now the focus will be on more software development.
But a few important questions remain: What(tm)s Intel doing buying an education company, why now and how positive is the outcome?
You may not have heard" and you wouldn(tm)t be alone" but Intel has an education business, and a fairly new one at that. The deal is the latest development in the company(tm)s wider efforts to build out its new business. Galvin mentions that part of the reason he didn(tm)t quite see eye to eye with Rashid is because he wants to focus on international growth.
Why is that? Well, because Intel is building . The biggest chipmaker in the world wants to take on Apple and Google in the classroom" or the iPad and the Chromebook, respectively. Asia has started to become a big growth market for Google in the education department, and it also is a stronghold for Apple in terms of manufacturing for its own tablets.
It(tm)s just speculation, but it wouldn(tm)t be surprising if China held interest for Intel, as a chipmaker, and as a company attempting to expand the production and distribution of its budding education tablet business.
Importantly, Kno started out as a hardware company and was making an education tablet. Perhaps coincidentally, perhaps not, it pivoted" meaning it stopped making its education tablet" after Intel invested in its Series C round. It began to focus on software.
With this acquisition, it essentially becomes the software platform for Intel(tm)s hardware shell. It(tm)s the Android operating system to Samsung(tm)s smartphone, if you will. What(tm)s more, hardware companies have started to realize the importance of content platforms as they try to capture market share in education, and this is likely a part of Intel(tm)s move to catch up with Apple(tm)s 94 percent share in the school market.
It(tm)s the same motivation that led Amazon to acquire an education company, TenMarks, last month, and it wouldn(tm)t be surprising to see Microsoft next, says BenchPrep CEO Ashish Rangnekar of the market. (BenchPrep operates in the same space.)
However, when we talk about the outcome of this deal, it(tm)s likely not a huge win for Kno. Most of the funding Kno received was for its hardware business. Why? Because distribution is a really difficult problem to solve in the education technology space, and a lot of great products die because they can(tm)t get to scale in time. In the end, a few sources we talk to said that Kno(tm)s gross margins weren(tm)t exactly sky high, and though its product evolved and it continued to add great strategic partnerships, the business wasn(tm)t blowing the roof off.
Rumors have been swirling for several months now that Kno(tm)s principal investors have been pushing for the company to find an exit opportunity, and we(tm)ve also heard from sources that this deal came together fast. It may not have been a huge financial victory for Kno or its investors, but ultimately Kno is better off in the hands of a company like Intel, which has enormous distribution scale behind it.
Kno itself has not yet issued a statement about the deal but its site posted a note a little while ago saying that it would go down for maintenance later today" possibly to post details of the acquisition. [We'll update when we learn more.]
To date, Kno has partnered with 75 publishers and has some 200,000 interactive titles, from kindergarten through to university-level textbooks, that can be accessed via its iPad, Android and Windows 7 and Windows 8 apps.
They are the same books, only smarter,the company notes on its site. The main idea is that the books are not only digitised but also include additional features to help students and teachers assess their progress, share information with others and generally get more engaged in the content.
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