A company best known (and sometimes rebuked) for its plagiarism checker has just received one of the biggest checks in the education technology industry.
Turnitin, an Oakland, Calif.-based developer of software that uses artificial intelligence to scan students’ writing and code assignments to check for plagiarism, will be acquired by Advance Publications, a media conglomerate that also owns Condé Nast. The deal, which The Wall Street Journal estimated is worth nearly $1.75 billion, is expected to close in the second quarter of 2019.
Founded in 1998 by four university students, iParadigms, Turnitin’s previous parent company, launched with a vision to offer tools across different industries, from law to education and technology. Over the years, it saw the most success in education and the company shifted to focus specifically on that market.
The founders had to bootstrap the company in its early days. They “could not raise money, so they got the company to break even very early,” said Turnitin CEO Chris Caren, who joined the company 10 years ago. He said Turnitin has been cashflow positive since 2004.
The company has swapped hands several times over the years. In 2008, iParadigms was acquired by private equity firm Warburg Pincus. Then it was flipped and sold in 2014 to GIC, a Singapore-based wealth fund, an investment group affiliated with Insight Venture Partners and others, for $752 million.
Turnitin has made several acquisitions of its own. In 2014 the company acquired Ephorus, a Europe-based plagiarism detection tool, and Lightside Labs, which provides automated feedback on student writing. In 2018 it acquired a competitor in VeriCite, along with Gradescope, a Berkeley, Calif.-based software company that offers AI-assisted grading tools.
According to Caren, the company brought in “well over $100 million but less than $200 million” in revenue for 2018, a number that has been growing around 15 percent year over year, for the last five years.
At $1.75 billion, the deal is larger than the total amount that edtech startups raised in 2018, which reached a new peak last year at $1.45 billion. It’s one of the biggest sales in the industry in this decade, surpassing LinkedIn’s $1.5 billion purchase of Lynda in 2015. But it’s not the largest: Ellucian, a higher-ed software provider, was acquired for an estimated $3.5 billion in 2015.
Jason Palmer, a general partner at New Markets Venture Partners, an investment firm, says he wasn’t completely surprised that the buyer is Advance Publications, which also lists American City Business Journals, Sports Business Group and Stage Entertainment in its portfolio. “My understanding is that Advance Publications has been considering transforming themselves from a traditional media company into an education technology company for the past few years.”
Christopher Nyren, founder of education industry advisory and seed investment firm Educated Ventures, was surprised by the size of the deal. But he echoes Palmer in saying that Advance Publications isn’t a far-fetched buyer. “At the end of the day I think it’s inaccurate to call Advance a pure media company. The days of Conde Nast being the driver of Advance are probably far down.”
He’s not far off. Janine Shelffo, chief strategy and development officer at Advance, told EdSurge that the company is looking more towards education and other industries these days. “People often think of Conde Nast when they think of Advance,” she said. “It is only one of the companies in our broad and diverse portfolio of media, communications and technology assets.”
Shelffo was brought on about 18 months ago to lead Advance’s efforts to diversify its assets. “We are in a fortunate position at Advance with [multi-billions] of capital earmarked to invest in new opportunities and new companies,” she said. “Education and educational technology have been high on that priority list.”
Previously Advance led a $70 million round into the tech-skills training company General Assembly, (which was acquired by Adecco Group $412.5 million in 2018), and has also invested in online learning company Everfi.
“Turnitin is a great acquisition for Advance Publications, which has only invested in partial stakes in edtech companies in the past,” said Mary Jo Zandy, managing director at Berkery Noyes, an investment bank that also advises on mergers and acquisitions (but not on this one). “And it is a solid diversification from general media. Most likely, it also has the growth attributes that Advance may be seeking.”
Nyren predicts the move signals changes ahead for Turnitin, too. “You don’t buy a grading company for almost $2 billion just to keep focusing on grading,” he said. “So I have to think this is to build out a broader suite” of products.
Under the new ownership, Caren says Turnitin will set its sights on expanding its footprint beyond the U.S. The company has seen the most growth in the U.K. and Australia, and will be focusing on expanding in India, Latin America and the Middle East.
Turnitin is also planning to extend its grading and plagiarism tools beyond writing and into science and math fields, Caren added. It is also launching a new tool that aims to detect ghostwriting, or if students have hired others to write a paper for them.
While the edtech industry is applauding the deal’s check size, critics of the company are concerned.
“How much of that $1.75B do you think is going to the students who have fed their database for years? I have a pretty good guess: zero billion,” tweeted Jesse Stommel, executive director of the Division of Teaching and Learning Technologies at University of Mary Washington. He’s alluding to the fact that Turnitin’s tools are fine-tuned based on data provided by users who upload their text into its systems.
Stommel recently co-authored a book with Sean Michael Morris, titled “An Urgency of Teachers,” in which the two dedicate an entire chapter to making a case against using Turnitin. The two argue that Turnitin’s business model essentially relies on the suspicion of academic dishonesty—and that can be harmful for students.
“I am not surprised by the deal between Turnitin and AP. This is a pretty common end game for tech companies, especially ones that traffic in human data: create a large base of users, collect their data, monetize that data in ways that help assess its value, leverage that valuation in an acquisition deal,” Stommel said in an email. “The size of this deal has me even more concerned. In my view, Turnitin has manufactured a problem and is selling a solution.”
Michael Berman, chief innovation officer at California State University, shares Stommel’s concerns. “As a former professor and lifelong educator I find a product built on mistrust between teacher and student to be sad and somewhat distasteful,” he wrote in an email.
But Berman also acknowledges that the tool has supporters among educators looking to cut down on grading time. “I have no illusions that the many thousands of instructors who have heavy course loads and struggle to adapt to rapid changes in technology will change their pedagogy quickly enough to end their dependence on tools like Turnitin any time soon,” he said.
According to Caren, close to 20 other investors were competing with Advance to purchase Turnitin. Those other offers were “very tight” and within “a few percentage points” of the $1.75 billion offer the company ultimately accepted from Advance. Other bidders included private equity firms, pension funds and even other media companies that Caren says were “looking to diversify out of traditional print media into digital businesses.”
Advance approached Caren about a year ago to get more familiar with Turnitin, and the company didn’t formally start the bidding process until January of this year.
Today Turnitin claims 30 million students use its platform at 15,000 institutions around the globe. Caren said he will continue as CEO, and that Turnitin plans to grow its 425-person staff in areas such as international customer success and machine learning.