This piece was published in Fortune on January 16, 2019.
India’s leading education app developer, Byju, is tapping a war chest that includes funding from Mark Zuckerberg and Priscilla Chan’s Chan Zuckerberg Initiative to go global.
The company is paying $120 million to acquire Osmo, a U.S. startup that makes learning games for young children. After the acquisition, Osmo will continue to offer its own educational games that combine offline and online components, while also helping Byju expand its online-only learning videos and games towards younger children and into the United States and other countries.
The move by Byju to go global comes as the education technology market remains mostly fractured and localized, but desirable to venture capital firms. U.S. startups in the sector raised almost $1.5 billion from investors last year, a 20% increase from 2017, research firm EdSurge says.
Former teacher Byju Raveendran founded Byju in 2011, originally called Think and Learn. He says he first encountered Osmo when his five-year-old son started playing some of the company’s games last year. Byju, which has 30 million users and 2 million paying subscribers, already had plenty of online games and videos, but wanted to add offline activities and appeal to kids under age nine–Osmo’s sweet spot.
“When we were looking at the learning habits of the next set of age groups we are going to target in the near future, we saw they’re learning from a screen, spending time on a screen, but combined with also using workbooks and books,” Raveendran tells Fortune. “Osmo has this offline to online interaction.”
Osmo was started in 2013 by former Google engineers Pramod Sharma and Jerome Scholler. Its games focusing on early learning activities in areas like math, coding and the arts are used in more than 25,000 schools. In a typical Osmo game, a child might arrange actual blocks with letters, which an app on a phone or tablet can sense and record, and then offer further encouragement, feedback, or instruction.
The purchase price comes out of the $540 million of venture capital backing Byju raised last month in a deal that valued the company at $3.6 billion, making it one of India’s most valuable Internet startups. The fundraising round was led by South African investment firm Naspers. Earlier backers of Byju include the Facebook (FB, +0.78%) founder’s Chan Zuckerberg Initiative, General Atlantic, IFC, Lightspeed Ventures, and Chinese Internet giant Tencent (TCEHY, +0.02%).
Raveendran says he will next look to expand by acquiring more startups, likely those offering free education products that have attracted a large base of users. “We might look at some distribution channels like the free products which are offered with a good number of users,” he said. “That could be the next set of acquisition options which we will explore a few months down the line.”