Investment Opportunity in EdTech

Technology is finally disrupting education

  • Schools are adopting digital products en masse.
  • Digital transformation in schools is accelerating. 2,000 districts are now 1:1 computing.
  • There is a massive open market share for the taking.

Technology has created enormous industry fragmentation

  • After decades of an industry dominated by a few large publishers, we are seeing an explosion of new digital products for schools.
  • The titans of educational publishing are falling, and early stage companies are quickly eroding their market share.
  • There is huge opportunity for growth in EdTech similar to digital advertising 15 years ago.
    • Teachers are fed up with school purchasing bureaucracy and are driving transformation from the bottom up.
    • Education reform is driving adoption of technology nationwide – e.g. Connect Ed.
    • Adoption of the Common Core Standards will require 100% online testing as well as require new ways of differentiating instruction.• Digital transformation in schools is accelerating nationwide.

Seed Stage Opportunity in EdTech

Series A stage and later is very crowded.

  • $1.1B invested in EdTech in 2012.
  • 70% of funds went to 10 companies (of 246 total investments).
  • Valuations are inflated at these later stages –> lower investment returns.

Seed stage investing is dominated by angel investors who don’t understand the education industry.

  • Education is a very complicated and nuanced Market.
  • Everyone thinks they understand education because they went to school themselves or have a child in school.
  • They don’t understand basic teacher and school problems.
  • They can’t help EdTech entrepreneurs. In fact, sage advice for a consumer-focused start-up can prove disastrous for an EdTech start-up (e.g. freemium model).

The EdTech Fund can better choose investments and also help start-ups become successful.

  • Proving out and testing the business model with feedback from schools, teachers, and our network of experts => reduced investment risk, higher returns.
  • Hands-on investment approach. e.g. leveraging personal networks within schools to walk entrepreneurs into a school to get a sale => reduced investment risk, higher returns.

What are our investment criteria?  We invest in products that:

  • Create greater student engagement,
  • Give teachers greater insight into what students know or are learning, on a real-time basis, so that teachers can better plan their lessons, break their classes into appropriate groups, and deliver differentiated instruction,
  • Make teachers and administrators more efficient so they can focus on teaching (not so that we can reduce the number of teachers).