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Russian billionaire invests more than $20 million in online education platform

The financial terms of the deal have not been disclosed, but East-West Digital News has learned that Netology Group was valued in the deal at $50-$60 million

Aug 24, 2017
Illustrating the growing interest of Russian corporations in online education, Severgroup, a group of companies controlled by steel magnate Alexey Mordashov, has just acquired a 40% stake in Netology Group. The shares were sold by previous Netology investors, the Russian funds Buran Venture Capital and InVenture Partners, which fully exited the company.

The financial terms of the deal have not been disclosed, but East-West Digital News has learned that Netology Group was valued in the deal at $50-$60 million — which means that Severgroup’s investment amounted to more than $20 million.

In addition to this transfer of shares, Severgroup injected a few million US dollars to support company development, a source close to the deal told EWDN.

Netology was founded in 2009 to provide online courses in the fields of Internet projects, web development and e-commerce. Five years later, the company merged with Foxford, a provider of online courses for secondary school students, to form the Netology Group. The deal valued the joint venture at $14.1 million.

Currently, the group offers 187 education and training programs, which have been attended by more than 1.2 million people in Russia and beyond, according to the company. Netology Group’s ultimate goal is to build "a unique model of full online education cycle in Russia" covering "15 to 20 years of an individual’s life."

The Russian online education market is currently estimated at some 21 billion rubles (approximately $3 billion), according to a recent study involving East-West Digital News and a pool of researchers and industry players.

The market is expected to exceed 50 billion rubles by 2021. Netology Group hopes to see its market share grow from some 1.5% today to 5% in 2021.

The company considers expanding to new markets outside Russia — but these are plans for the middle or long term, Netology Group’s founder and CEO Maxim Spiridonov told EWDN.

Growing corporate interest, modest venture activity

After years of passiveness, Russian corporations made their first significant moves in the field of online education in 2016. In August of that year, Mail.ru Group acquired GeekBrains, an online education platform for developers. "We are extremely interested in

"We are extremely interested in edtech and ready to make further acquisitions," Alexander Gorny, Strategy and Analysis Director, Mail.Ru Group, said in an exchange with East-West Digital News.

Another important move came in October 2016, when the Russian textbook publishing house Prosveshchenie (‘Enlightenment’ in English) agreed to support edtech projects via the startup accelerator of the Internet Initiatives Development Fund (IIDF, or FRII in Russian). The publishing house, which is headed by billionaire Arkady Rotenberg, announced its intention to invest in the program up to 3 billion rubles (approximately $48 million at the exchange rate of that time).

Corporate interest in education technologies has also been illustrated by several in-house projects. Last year Yandex, the Russian Internet search giant, announced ‘Yandex Lyceum,’ an education project intended for schoolchildren.

ABBYY, a Russia-based global provider of artificial intelligence and linguistics solutions, launched ‘ABBYY Monitoring.’ This platform, in which ABBYY reportedly invested more than $1.5 million, has been designed for local administrations to assess the performance of local schools and other teaching organizations.

Another move came in 2015 from Genome Ventures with the launch of Profilum, an online assessment tool for child development.

Meanwhile, venture investment amounts in education technologies have been very modest so far. The above-mentioned research identified only 66 deals in the course of three years (2014, 2015 and 2016). Only a few of these transactions exceeded $1 million — including sizable investments in Netology — and less than 20 of them exceeded $100,000.

Yearly investment volumes never reached $10 million over these years. In 2016, identified edtech deals reached a low point at $2.1 million.