Pushing Back on the EdTech Investment Bubble Meme Via Slack’s $5 Billion Valuation

Earlier this month Slack closed a $250 million funding round led by Softbank.  This investment valued Slack at $5.1 billion.

This summer there were reports that Amazon was thinking about acquiring Slack for a cool $9 billion.  

I’d like to use the use this $5 billion Slack valuation to push back on the meme that we are in the midst of an edtech bubble. 

It has been about a year that I asked you to convince me to Slack.  My colleagues convinced me, and I’ve been using the platform ever since.

Do you Slack?

In the first half of 2017 US edtech investments equaled $887 million. In all of 2016 the amount of edtech funding was $1 billion.  

Having spent a year with Slack, I can say two things about the platform.  First, Slack is great.  Your team should try it if you are looking for a collaboration platform.

Second, I would not pay for Slack.

Slack may be a good way to get a team out of e-mail.  But Slack is not the only way to meet a team’s needs for a social/productivity space.  Moreover, Slack is not particularly sticky.  We don’t put critical files or conversations on Slack.  It could disappear, and we’d move on and find something else.

Many of the edtech platforms that we use in higher education are a different story.  We pay to use these platforms, and would find it challenging to switch.  They are valuable and sticky.

Let’s take Instructure – the company behind the Canvas learning management system (LMS) – as a comparative example.

Instructure has a valuation of just under $1 billion.  ($974 million).  The only reason that Instructure is not making money now is that they are furiously investing in expanding their footprint and improving their product.  Investing to sign up new customers makes sense for Instructure, as these will be long-term clients.

Slack has about 1.5 million customers paying $80 to $150 a year, and 5 million freeloaders.  At a $5 billion valuation each slack customer is values at somewhat above $3,000.  I’m having a hard time placing the lifetime value of a Slack customer at anywhere neat that dollar amount.  Especially since I place my lifetime value of paying for Slack at $0.

I am going to make the perhaps unpopular claim (especially in this community) that the edtech market is undervalued.

If I were not spending every last time that I had on paying two college tuitions (another story) than I would be investing in Instructure and other edtech companies.  (Actually, I believe in investing in index funds, as I’m definitely not smart enough to beat the market.  But if I did invest in individual companies then I’d invest in edtech).

How do you make sense of the world of edtech investments?

What do you think Slack is worth?

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