Chegg buys writing tools company Imagine Easy Solutions

Chegg paid $42 million for the company, which it will integrate into its solutions

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Writing has always come naturally to me. Even when I was a kid I was good at putting words together. I didn't realize until later that that was really hard for some people. When I got to college I was, frankly, shocked at the quality of the writing of some of the other people there. It wasn't inelegant, it was incoherent. 

Writing tools company Imagine Easy Solutions has been working on fixing this problem, and now its reach it about to get a lot wider, as it has been acquired by online textbook rental company Chegg for approximately  $42 million in an all-cash transaction, it was announced on Monday, before the release of the company's first quarter financial earnings report.

Approximately $25 million of the total was paid at closing and $17 million of it is going to be paid by April of next year. On top of that there are potential additional payments of up to $18 million over the next three years that remain subject to contingencies, which can be paid in either in cash or common stock, whichever Chegg chooses.

Founded in 2001, Imagine Easy is the the company behind of EasyBib.com, which generates citations in MLA, APA & Chicago formats for bibliographies, along with other tools, including Citation Machine, BibMe, Cite This for Me, and Normas APA.

 These tools are used by seven million monthly active users, creating approximately 1.4 billion citations using Imagine Easy's writing productivity tools since they launched. 

For Imagine Easy, becoming part of Chegg expands its reach and gives the company more resources. The company will remain in operation going forward.

"Chegg is aligned with our values and vision to improve student outcomes. Chegg is big, reaching nearly 50% of college students and 75% of high school students. It has become the most popular brand amongst students around education and learning. By joining Chegg, we can collectively build an even bigger brand, reach even more students and offer more services," the company wrote in a short blog post. 

In a conference call on Monday, where the company discussed its Q1 earnings, Dan Rosensweig, Chairman and CEO of Chegg, discussed why he acquired Imagine East. 

Writing, he said, has become a problem at the university, and employment levels, with the vast majority of recent grads not knowing how to write (thanks a lot, U.S. educatio system!). 

"This is an unattainable situation and we think our acquisition of Imagine Easy helps to address this market," said Rosensweig.

"The Imagine Easy portfolio of market leading online writing tool helps students with their writing structure, citations, bibliographies, grammar, and plagiarism checks. Their value is reflected in their popularity, as more than 7 million unique users accessed them globally in just the month of March alone. Writing is an obvious category that complements Chegg’s already very successful learning services portfolio, and we expect it will be a meaningful contributor to our business right away."

Imagine Easy’s capabilities will be integrated into Chegg's portfolio of services, including Chegg Study and Chegg Tutors, making it easier for the company to get new students on board.

"Given the expectation and the needs of this new generation of student, we think there is significant upside to grow all of our learning services. Riding an Imagine Easy has been on our radar for more than two years, and both companies realized that the opportunity is much bigger together than apart," Rosensweig said.

Shares of Chegg's stock rose 2.42 percent on Monday, ending at $4.65 a share. 

The EdTech space

The number of dollars in the EdTech space fell to their lowest level in seven quarters in Q1, with $361 million invested. The last time there was less funding put into EdTech  companies was in the the second quarter of 2014. 

Funding fell 75 percent quarter-to-quarter, though, to be fair, Q4 was something of an anomoly, with $1.3 billion invested. That was thanks to mega deals in companies like HotChalk , which raised $230 million; Tutor Group, which raised $200 million; HuJiang, which raised $157 million; and Udacity, which raised $105 million. 

In fact, that is the only quarter to ever see more than $1 billion invested. Combine that with the low funding for this past quarter and the dropoff seems more dramatic than it perhaps actually is. This is now the third quarter out of the last four, minus the historic Q4, to see funding drop, so Q1 i

The EdTech space is now projected to see $1.3 billion invested in 376 deals this year, which would amount to a fall of 57 percent in dollars, and 23 percent in deals. 

That was after activity EdTech startups hit record highs in 2015, when funding went up 64 percent, to over $3.1 billion, and the number of deals rose nearly 10 percent to 491. Now it is expected to the lowest amount of funding since 2013, and the lowest number of deals since 2012.

(Image source: imagineeasy.com)