A quick market analysis

We got a fast-growing and seemingly large market here with very little investment funding and deal activity

Odd.

I’ll dig in and suggest some reasons why that’s the case

First, what market?

The alternative education market

This is education models like homeschooling & microschooling

The market is growing quickly in the USA as shown below

Per the US Census Bureau, 1 of every 12 students is homeschooled

It peaked at 3.75M students in 2021 per National Home Education Research Institute (thanks Covid)

Microschools which are small learning environments for typically <10 students now serve 1-2 million students in the USA

Think of microschools as learning pods for a group of like-minded students led by a teacher (who may sometimes be a parent of one of the children)

So…In total, 5-6 million of K-12 students in the USA are not attending traditional public, private or charter schools

That means 10-12% of K-12 students in the USA are now attending school via these alternative education formats

Sounds like a big growing opportunity, right?

As a result, the investment $ must be flowing?

Nope.

Per CB Insights, homeschool and microschool companies saw a funding bump in 2021 right after Covid but after that good year in 2021 ($304M), deals and funding have declined

A look at the most well-funded companies highlights that most of the companies serving this market are early-stage

The outlier here is Age of Learning which sells its digital early learning programs to both traditional schools and also has a homeschool offering

So why isn’t the funding flowing even though the market is seemingly large and growing?

Some hypotheses below

* Fragmented customers & needs: Families choose homeschooling or micro-schools for various reasons, requiring tailored approaches. They’re also geographically dispersed. In short, microschools and homeschools are incredibly diverse.

This makes marketing & selling to this customer segment challenging

* Cheap customers: Parents or the small business owners behind microschools are frugal / budget conscious

The combination of a fragmented customer base that is cost-sensitive means CAC (customer acquisition cost) is likely high and LTV (lifetime value) may be low

That’s a brutal combination

There is some government funding flowing to these models via ESAs (education savings accounts) and other programs but those programs are not widespread yet and the level of reimbursement remains mostly modest to-date

If the ESA and similar programs grow materially in number and level of reimbursement and into states like California, NY, NJ, etc, that would be a tailwind for the microschool and homeschool movement

WDYT?

What’s hampering investment funding to the microschool / homeschool market?

Do you think venture scale businesses can be built in the near-term within the alternative education market?