This new startup is weeding out the weed-out classes, instead of students

Five years ago, entrepreneur Dan Sommer bet big on the adult learning space when he was building out Trilogy Education, an online and in-person bootcamp in collaboration with universities to train workforces on the latest tech skills.

In 2019, Sommer sold that company for $750 million to 2U in one of the largest edtech exits to date. And today, Sommer is launching a new venture-backed startup in education that goes a few steps earlier in the learning journey: high school.

Edge Pathways is a for-credit, first-year program built in collaboration with universities to help aspiring engineers navigate entrance into the confusing, and often intimidating, field of science, technology and education. Along with launching to the public today, Edge Pathways announced it has raised $6 million in a seed round led by First Round Capital, Emerge Education and Rethink Education. First Round Capital’s Bill Trenchard will take a seat on Edge Pathway’s board of directors.

Instead of helping employed techies stay sharp, Sommer’s new startup is helping aspiring techies get a degree in the first place. When asked what changed between his two startups, he says it boils down to one single insight: the point in which a founder has to start helping support students to be ultimately successful.

“A lot of companies over the last two years are looking to group talent and looking at the old class of engineers,” Sommer said. “Starting earlier in this stage of the process is a way to help resolve the skills gap and help capture more students at a time when they’re impressionable, willing to learn and willing to support new kinds of pathways.”

Edge Pathways helps schools offer a program for credit that replaces the first year of college. Inspired by co-op programs at Drexel and Northeastern, Edge connects students to project-based learning and internship opportunities to replace a traditional lecture-style education. The startup is ultimately a services provider to colleges that want to open their doors to incoming engineering students.

Edge Pathways is more than a trial-run at college since it is for credit. To help colleges, the key stakeholder for Edge, stay happy, that means that the startup lets institutions make decisions on which students get admitted to the program, which faculty are involved and how the curriculum is created. Edge’s involvement is simply in the execution and daily support.

After the first year is completed, Edge stays with students to provide coaching and job opportunities throughout the college experience.

For the program, the startup charges students around $15,000, slightly lower than the price of in-state tuition. As numerous studies have shown, attrition rates in STEM fields are high due to changing majors or leaving the degree as a whole, which doesn’t help the some 3.5 million job openings out there for engineers, Sommer tells TechCrunch.

Edge’s largest challenge will likely be finding product-market fit with consumers. While it has created a curriculum in tandem with colleges, the startup needs to make sure the program fits a student’s wants and needs too — and those key decisions shouldn’t be without its end-customer in the room. Sommers, naturally, is optimistic that he’s on to something.

“So many students, particularly today, don’t see the relevance of what they’re learning in the classroom and don’t see how it ties into the world,” he said. “It’s hard to make that connection, so we designed a model to help universities support this gap.”

The other large challenge ahead for Edge is finding universities to work with. Sommer declined to share information about its inaugural partner, but said he will announce it “very soon.” Notably, the founder thinks early adopters will be transfer institutions because about 40% of students that get STEM degrees are transfer students.

“So many institutions today are really focused on the transient population of students,” he said. Edge hopes to “support more students through these hard disciplines, through hard subjects, and give them a reason to have inspiration.”

It’s an ambitious play, but by weeding out the weed-out classes themselves, Edge could make a big difference in the opportunity some students see for themselves in the world of STEM.

12 investors say lifelong learning is taking edtech mainstream

The venture potential of a startup that caters to individual students — instead of a slow-moving, small-pocketed institution — has a bullish aura that attracts investors.

Add in a pandemic that forced many to embrace remote learning overnight, and it makes sense that we have seen companies like Outschool and ClassDojo turn first profits while startups like Quizlet and ApplyBoard reached $1 billion valuations.

Last year brought a flurry of record-breaking venture capital to the sector. PitchBook data shows that edtech startups around the world raised $10.76 billion last year, compared to $4.7 billion in 2019. While reporting delays could change this total, VC dollars have more than doubled since the pandemic began. In the United States, edtech startups raised $1.78 billion in venture capital across 265 deals during 2020, compared to $1.32 billion the prior year.

In today’s survey, a dozen top edtech investors shared their thoughts on how growth of lifelong learning is reshaping the industry. Given the sudden extinction of snow days and yeast shortages brought on by student bakers in the early days of the pandemic, it’s easy to see how remote education extends beyond traditional school hours. As learners become more multi-layered and nuanced, so have the edtech companies that back them. 

This was a recurring theme in today’s survey, signaling a shift in how investors approach hybrid learning. The evolution of post-pandemic education will be complex, if not aggressively competitive among the growing cohort of well-capitalized edtech companies. While we asked investors about their post-pandemic tastebuds back in July, much has changed since. Higher education didn’t combust like some expected today, and today, many predict that K-12 students will return to pre-COVID formats after vaccinations are widespread. 

It puts startups in a difficult spot: if 2020 was about enabling video-based teaching, what might emerge from 2021? Integration between different edtech apps? New student collaboration tools? Are employer-led up-skilling and a renewed interest in self-improvement enlarging edtech’s TAM?

Here are the investors we spoke to, along with their areas of interest and expertise:

  • Deborah Quazzo, managing partner, GSV Ventures (an education fund backing ClassDojo, Degreed, Clever)
  • Ashley Bittner, founding partner of Firework Ventures (a future of work fund with portfolio companies LearnIn and TransfrVR)
  • Jomayra Herrera, principal, Cowboy Ventures (a generalist fund with portfolio companies Hone and Guild Education)
  • John Danner, managing partner, Dunce Capital (an edtech and future of work fund with portfolio companies Lambda School and Outschool)
  • Mercedes Bent and Bradley Twohig, partners, Lightspeed Venture Partners (a multi-stage generalist fund with investments including Forage, Clever, and Outschool)
  • Ian Chiu, managing director, Owl Ventures (a large edtech-focused fund backing highly-valued companies including Byju’s, Newsela, and Masterclass) 
  • Jan Lynn-Matern, founder and partner, Emerge Education (a leading edtech seed fund in Europe with portfolio companies like Aula, Unibuddy, and BibliU) 
  • Benoit Wirz, partner, Brighteye Ventures (an active edtech-focused venture capital fund in Europe that backs YouSchool, Lightneer, and Aula)
  • Charles Birnbaum, partner, Bessemer Venture Partners (a generalist fund with portfolio companies including Guild Education and Brightwheel)
  • Daniel Pianko, co-founder and managing director, University Ventures (a higher ed and future of work fund that is backing Imbellus and Admithub)
  • Rebecca Kaden, managing partner, Union Square Ventures (a generalist fund with portfolio companies including TopHat, Quizlet, Duolingo)
  • Andreata Muforo, partner, TLCom Capital (a generalist fund backing uLesson)

Deborah Quazzo, managing partner, GSV Ventures

What will edtech look like when students finally go back to school in person? Now that remote has become familiar, what are other concepts that you could see becoming popular?

For k12, use of digital products and platforms will now be very “normal” – companies like Lexia and Dreambox and Nearpod. Maybe this drives home usage of some products traditionally used only in schools like Lexia. Students of all ages are now very facile with zoom, this can pave the way for more zoom based synchronous learning offerings including extracurricular learning like music, dance etc. schools are now fully wired – maybe we will see schools implement home based learning programs – it’s where students spend half their time.

What are the biggest hurdles ahead for early-stage edtech startups looking to scale? What opportunities are fading as the space matures?

Edtech cos need to stay away from the me too solutions. We have seen 20 creator led learning platforms across “preK to Gray” learning in addition to incumbents like Teachable and very few have an ability to build a moat in my view. Unless someone has a very fresh take, I think that ship has sailed. Hopefully as white spaces fill with competitors, new white spaces will emerge. Emerging tech – AI/NLP/ML/VR – will continue to push the envelope. We are still not driving enough people to competency whether in prek12, higher ed or workforce so the opportunity remains vast.

How has edtech’s boom impacted your dealmaking? Has the new interest from generalist investors made valuations too bubbly, or is the market growth helping everyone?

We met on zoom with over 800 founding teams in covid all over the world. We invested in 14 new companies and are just finishing rounds in 2 more. Valuation pressures are across tech sectors. Id argue that education still lags average tech. the question for edtech is whether there is potential for a $100B company in the sector – will TAMs support it.

Ashley Bittner, founding partner, Firework Ventures

What will edtech look like when students finally go back to school in person? Now that remote has become familiar, what are other concepts that you could see becoming popular?

As it relates to our thesis, I believe that the role of employers is changing. Pre-COVID, it was estimated that as much as 1/3 of the US workforce would need to change jobs by 2030. Employers cite skills gaps as a top 3 business concern to stay competitive. Our thesis is that employers will take on more responsibility for reskilling their current workforce, and that training will become job-embeded (rather than only trying to hire to address the challenge.) Degreed was the first wave of this… Learn In is an example of the next step in this evolution. As employers look to provide more skills training (rather than compliance training), we believe that more will come from external sources (CEOs say they are unprepared to meet the reskilling challenge with existing internal resources) and that much of this training will be provided online and during work hours (to address the time barrier that is an equity issue.) I also see an opportunity for modalities like VR to become more popular as we shift to more digital and remote solutions (e.g TRANSFR.) Stats from McKinsey research.

What are the biggest hurdles ahead for early-stage edtech startups looking to scale? What opportunities are fading as the space matures? In US pre-K and K-12, high customer fragmentation (16,000 school districts, 100K+ schools…pre-K even more fragmented with little public investment), long sales cycles, budget, pedagogy, and regulation. TAM. Relatively low consumer spend on education relative to other markets. Opportunities – increasing access to broadband, increase in device penetration. In FOW, increased recognition that reskilling and upskilling is a business imperative, company culture matters for competitiveness, increased focus on DEI.

Jomayra Herrera, principal, Cowboy Ventures

What will edtech look like when students finally go back to school in person? Now that remote has become familiar, what are other concepts that you could see becoming popular?
I think activities that are fundamentally better in person will go back to [being] in person (e.g., sports, music and other enrichment activities). I think that new technology educators may have adopted during the pandemic that they have found to be helpful to their instruction will remain but all the “nice to haves” will likely fall to the wayside. We have a thesis at Cowboy that supplemental education (e.g., Juni Learning, Reconstruction or Outschool) will likely stay online, because parents will not have to worry about driving their kids to learning centers and these companies have the opportunity to make the learning fun.
What are the biggest hurdles ahead for early-stage edtech startups looking to scale? What opportunities are fading as the space matures?
For companies focused on K-12 students, it’s still really challenging to sell into schools and school districts because of the long sales cycle. This will likely become even harder, as local and state budgets tighten. In regard to what is fading, I think that tools that don’t solve a real need for educators, students and/or parents or don’t have demonstrated efficacy when it comes to student outcomes will start to fade. Consumers, especially after the pandemic, seem to be more aware of what technology has to offer and have lower tolerance for tools not having a demonstrable impact.For companies that are targeting adult learners, the biggest hurdle continues to be customer acquisition and building a brand that learners can actually trust. As the space starts to mature, consumers are getting more aware of the questions they should be asking (e.g., graduation and placement outcomes) and are less [fooled] by clever marketing.

What do you expect education to look like in five-plus years from now, when the pandemic is more of a memory?
I hope that in this pandemic we’ve realized how critical our educators are to our children’s success and we pay them more :) Incentivizing our best talent to get into and stay in teaching is a critical lever we can pull to improve education.
For K-12, I expect that there will be more comfort with technology in the classroom and that tech can be partnered with in-person instruction in a way that supercharges the educator with the data needed to personalize their instruction.
For higher ed, I expect that there will be an acceleration in online learning for adults as they continue to look to reskill or upskill. There will be more opportunities to do self-paced online learning that is effective and affordable.

John Danner, managing partner, Dunce Capital

What will edtech look like when students finally go back to school in person? Now that remote has become familiar, what are other concepts that you could see becoming popular?

In K-12, education will probably continue to look much like it did, because the majority of parents are clear that child care is the principal value for their kids being at school. That said, a minority of parents are certainly rethinking education after witnessing what their children were actually learning every day for a year. My opinion is that we will continue to see a disaggregation of this care function from academics. Here’s a piece I wrote about that, which has accelerated significantly this year.

What are the biggest hurdles ahead for early-stage edtech startups looking to scale? What opportunities are fading as the space matures?

For vocational schools with a “free until you get a job” model like Lambda or SV Academy, it’s all about job placement. Lambda has had a lot of success with their new fellowship model, which has allowed them to scale significantly. For a lot of early childhood and K-12 companies working online, it’s about new parent behaviors and whether you can develop a habit like Outschool has done. For senior learning like what GetSetUp does, finding the reimbursement models through healthcare is probably the key.

What do you expect education to look like in five-plus years from now, when the pandemic is more of a memory?

I think we are in a transition to more and more academics happening in the cloud. Right now, that’s all about live experiences and human in the loop. In five years, I think we will begin seeing a significant impact of AI replacing many human functions.

‘Edtech is no longer optional’: Investors deep dive into the future of the market

One reason some venture capitalists and founders don’t enter edtech is because the space has a sluggish stereotype, thanks to red tape, slow sales cycles, and, in America, a fragmented customer base.

But data suggests that edtech’s reputation is not entirely earned. Byju’s is India’s second-most-valuable company. Since 2013, there have been 300 acquisitions in the space. And if you only understand success in terms of unicorns, two edtech businesses, Quizlet and ApplyBoard, were recently added to the $1 billion valuation club.

The tension between edtech’s stereotype and its potential for return, plus the surge in remote learning due to coronavirus-related shutdowns, poses an interesting challenge for the market.

In the beginning of the pandemic, TechCrunch talked to a group of edtech investors to get their knee-jerk reaction to the remote learning boom. Unsurprisingly, many commented that the heat-up of the sector will materially impact K-12 and higher education and unlock new opportunities. Others warned early-stage edtech startups about how newfound competition could hurt content, quality and effectiveness of their end product. Overall, the general message was that the boom is here, everyone is excited and waiting to see what happens next.

Fast forward a few months, mistakes and extended school closures later, edtech now has a better inkling on what the next billion-dollar business needs to get right. Today, we talked to a number of top venture capitalists to get an eagle-eye view of what rapid change, adaptation, and for lack of better phrasing, popularity does for the market.

Today you’ll hear from the following investors:

Ian Chiu, Owl Ventures

What’s the next “phase” of edtech we are entering?

We are now in a time where there is a fundamental acknowledgment that education technology will have a profound effect on the billions of worldwide learners of all ages. With the historical market challenges — of infrastructure, capital and talent — being rapidly removed, there is a major opportunity for the next generation of large-scale education companies that should better represent the enormous size of the six-trillion-dollar education market. Given the attractiveness of the sector, we are now seeing more talent entering the education space; a rapidly growing market for compelling international opportunities; and more companies at the intersection of education and other major sectors. Lastly, we believe that COVID-19 and the dramatic adoption of digital education during this time marks a profound turning point and acceleration in the market for education technology.

When do you know an edtech company can and should be venture-backed?

At Owl Ventures, we are looking to invest in visionary entrepreneurs to build transformative education companies that have the potential to achieve significant scale. More specifically, we are seeking to back companies that have achieved clear product-market fit, possess attractive business characteristics that catalyze growth while creating strategic moats and have a defined and scalable monetization strategy.

How has your appetite for edtech investment changed since March 1?

Owl Ventures has always been 100% focused on edtech since our founding in 2014 and has invested in 35+ companies in the sector. In the current environment, the market now fully recognizes the enormity of the opportunity in edtech and appreciates the value that edtech companies provide as an integral part of the broader education ecosystem. We believe that the secular growth of the edtech market is still very much in its early innings around the world and that edtech will continue to be an incredibly attractive investment sector in the years and decades ahead.

Edtech historically has had fewer IPO exits than other industries. Do you imagine that will change? Why or why not?

We believe this will change dramatically in the coming years as many edtech companies have been rapidly scaling, with an increasing number now approaching and eclipsing $100 million in revenue. As a result, the pipeline for potential IPO candidates coming from the edtech sector continues to grow larger. As one example of investor interest in a pre-IPO edtech company, Fidelity Management & Research recently invested in a Series E round of MasterClass. More broadly, based on data from HolonIQ as of 29 June 2020, there are 19 edtech Unicorns around the world who have collectively raised over $9 billion of total funding in the last decade. Byju’s, recently valued at $10.5 billion, is the largest privately held edtech company in the world. Meanwhile, the stock performance of public edtech companies like Chegg in the U.S. and TAL Education in China have meaningfully outpaced the broader indices and are now valued at $8 billion and $44 billion, respectively, drawing the attention and interest of many scaled public market investors.

How near is edtech’s consolidation phase? Will we see more companies joining forces?

Consolidation has already been happening for some time in the more mature segment of the edtech market. Companies like Frontline Education, PowerSchool and Ascend Learning have all been incredibly acquisitive over the years. Anthology is another timely example of consolidation, with three companies joining forces in the higher-ed market. In addition to more mature businesses combining, we are also seeing younger startups getting acquired by larger edtech companies like Chegg.

Jennifer Carolan and Shauntel Garvey, Reach Capital

When do you know an edtech company can and should be venture-backed?

Jennifer Carolan: Same reasons apply in edtech as in other sectors — is it scalable, technology-enabled with a large market potential.

How has your appetite for edtech investment changed since March 1?

Jennifer Carolan: We have always been an education-focused fund, but it sure is nice to see so much additional capital coming into the space and leading later-stage rounds. Truth is, we have been busier than ever before. Our pipeline has increased 50% year-over-year and we are actively investing in new companies and follow-ons.

How are you managing edtech’s spur of growth with privacy concerns?

Shauntel Garvey: We are encouraging our companies to continue to keep safety and privacy considerations at the forefront of product development. Educators and administrators will need to make quick decisions on which tools to adopt for remote learning and may be unaware of all the safety and privacy implications. Edtech companies that not only design their products with privacy and safety considerations in mind, but also make their privacy policies plain and clear will be at an advantage. We also recommend that companies work with third parties like Common Sense Media and the Future of Privacy Forum who schools often rely on to vet privacy practices.

Jan Lynn-Matern, Emerge Education

What’s the next “phase” of edtech we are entering?

Phase one was about workflow efficiency, producing big infrastructure companies like Blackboard and Ellucian. Phase two was about bringing content online, producing platforms like Udemy, Udacity, Coursera and Codecademy.

We are now entering phase three, which is about bringing teaching and learning online: pedagogy as a product.

One way to think about it is that the next wave of successful edtech companies will be schools, not tools. Being a school can be lucrative: The world’s largest education businesses are universities, together generating somewhere around $2 trillion in tuition revenues.

Tackling inefficiencies in the provision of higher skills is the next frontier.

When do you know an edtech company can and should be venture-backed?

It’s successfully tackling one of the massive growing market opportunities in education:

  1. Disrupting or supporting the growth of higher education provision, gaining a share of their tuition revenues.
  2. Consumer re-skilling — companies that enable career arbitrage at scale and can take value off the table from that.
  3. Corporate upskilling — solving access to talent at scale, through hands-on training and access to global talent.
  4. It’s highly scalable, implying that it can grow efficiently relative to customer lifetime value.
  5. High-value courses/degrees that provide genuine career outcomes (selling short courses can be just as expensive as selling full degrees).
  6. If you are offering a lifeline/new revenue stream to universities you can scale extremely fast.
  7. If you can just be a reliable source of talent at scale for big employers, you can scale infinitely.

How has your appetite for edtech investment changed since March 1?

More bullish.

How near is edtech’s consolidation phase? Will we see more companies joining forces?

Over the last five years, volatility in universities’ financial performance has reached unknown heights. We will see consolidations amongst universities. Same should happen in the infrastructure, learning software and courseware space through players like publishers, Chegg, etc.

David Eichler at TCV

What’s the next “phase” of edtech we are entering?

Edtech is no longer optional … it’s a requirement for success. Specifically, it’s no longer optional to leverage technology given the current pandemic and forced remote environment. For instance, Varsity Tutors, a TCV company, has quickly transitioned [from] part in-person, part online tutoring, to 100% online, plus they have launched a handful of group-learning sessions and “virtual summer camps” aimed at school-age children to keep them engaged while at home.

When do you know an edtech company can and should be venture-backed?

The first thing we do when evaluating any potential investment is talk to customers. It’s critical for a company to have strong market demand. Once there is evident demand, we then look for a plan to efficiently and effectively scale product and/or sales and marketing.

How has your appetite for edtech investment changed since March 1?

We have been active edtech investors for two decades, and our appetite for edtech investing continues to grow as we see the combination of acceleration of market demand, as well as the continued formation of great companies and products.

Edtech historically has had fewer IPO exits than other industries. Do you imagine that will change? Why or why not?

Going public is financial strategy choice, and while there have been many great edtech companies, it is true that many have chosen to remain private. Granted, many were once public and went private (Blackboard, Renaissance Learning, Instructure among others). Part of that is because a handful of the historical market leaders have been very focused on inorganic growth and consolidation. It is hard (and sometimes inefficient) to do that in the public markets.

That said, there are a handful of strong organic growth edtech companies getting close to the scale required to go public, and there could be quite a few edtech IPOs in the next 3-5 years.

How near is edtech’s consolidation phase? Will we see more companies joining forces?

Given the fact that there are so many ways people learn, and so many idiosyncratic needs — edtech has always been a category that’s been ripe for consolidation. We believe that will continue as companies gain market share and seek to add additional capabilities.

How are you managing edtech’s spur of growth with privacy concerns?

We have always been highly focused on great learner experiences and outcomes, and a component of ensuring those is teacher/learner privacy. We actively forward invest in security to ensure the privacy of customer information.

Jomayra Herrera, Cowboy Ventures 

What’s the next “phase” of edtech we are entering?

Edtech is such a broad market (pre-K, K-12, supplemental versus core, higher ed, continuous learning, etc.) and there are new phases within each of those categories. I’d answer this question in two ways: (1) Overall, I believe changing practices come before software, especially in education. As educators have been forced to embrace and use online learning solutions and develop new practices, this may be an opportunity to accelerate tech adoption in classrooms and transform traditional teaching practices. (2) In adult learning, in particular, I believe we are now entering a phase where we can expand “bootcamps” beyond software engineering and data analytics and where the requirement for credentials may hopefully be changing on the employer side.

When do you know an edtech company can and should be venture-backed?

Most of the highly valued companies in the sector tend to be platforms that are operating in huge markets and have more traditional software-like margins (e.g., 2U, Instructure, Coursera, Udemy, Pluralsight and Guild Education). If the company is more services than software, low-margin and doesn’t have a credible path to becoming more of a platform, it will likely have a hard time raising venture capital.

How has your appetite for edtech investment changed since March 1?

It hasn’t materially changed. We’ve always known there is a lot of opportunity in the sector and I think this time period has just accelerated the urgency in creating and adopting new solutions.

Edtech historically has had fewer IPO exits than other industries. Do you imagine that will change? Why or why not?

In the near term, it’s very possible we will have a spike in IPO candidates. There are quite a few edtech unicorns who have massive tailwinds like VIPKid, Udemy, Coursera, Duolingo, Guild Education and Quizlet . That said, large tech companies and staffing agencies have been very acquisitive in the edtech market and I believe that will still be a credible exit path for many companies.

How near is edtech’s consolidation phase? Will we see more companies joining forces?

I think we’ve already seen a lot of consolidation in the edtech market, both in K-12 and higher ed. If you review all of the bootcamps that have arisen over the last decade, many have been acquired by other players (e.g.. Trilogy Education, Hackbright, Flatiron, General Assembly, Bloc, Thinkful, Fullstack Academy, etc.). Similarly, in K-12 there is a history of smaller edtech companies being sold to Student Information System (SIS) providers that act more as platforms. I expect we will continue to see consolidation in the market, but likely at the same historical pace.

How are you managing edtech’s spur of growth with privacy concerns?

Privacy is hugely important, especially if it’s related to learners under 18 years old, so asking questions around managing privacy concerns is always part of our diligence process.

12 major league edtech VCs discuss top trends, opportunities

Ready or not, edtech has been shoved into the spotlight as millions of students shifted to remote learning due to pandemic-related school shutdowns.

But backing these companies are investors who have long believed that edtech was always set up for great returns and a big impact. We reached out to several to find out about which trends they’ve been willing to put their money behind. (And frankly, what we’ve been missing.)

We got into how tech can help — or hurt — underserved students struggling to find Wi-Fi or a laptop and how braintech still is ripe for innovation. Investors also shared the parts of edtech that Zoom video conferencing doesn’t address and why gamifying learning is so important.

Here’s who we talked to:

Next week, we’ll publish the other findings we received from these investors, focusing on edtech in a post-COVID-19 world.

Responses below have been edited for length and clarity.

Jenny Lee, GGV

What trends are you most excited about in edtech from an investing perspective?

GGV Capital is focused on how technology is allowing startups to innovate and create new business models to (1) lower the reliance on physical locations and (2) to allow for teachers to teach online with multi-format (1:1, 1:n) virtual classrooms [and] (3) deliver highly interactive and personalized content via use of virtual characters, machine learning, natural language and voice recognition/processing. Edtech can be broken down into the process of (a) learning (reading, speaking, comprehension), (b) practicing, and (c) testing, and targets different age groups from 0-3 years old, 3-6 years, K-12 years and into exam prep and adult training. Over the last four to five years, we have invested in over 10 companies in the areas of language learning, test prep, holistic learnings (like logical thinking, programming etc) and K-12 homework assistant.

How much time are you spending on edtech right now? Is the market under-heated, over-heated or just right?

It’s a key investment sector for me, so I spend about 20-30% of my time with edtech startups. Over the last few years, it has been a steady sector, not over-heated, but the COVID-19 situation has thrown a bright spotlight on it as a sector benefiting from more stay-at-home children and parents anxious to keep them busy, learning and engaged. I expect the sector to heat up quite a bit as we have seen our portfolio companies attract a lot of new users, new revenue and new interested investors over the last several months as much of the world manages lock-down mode. We expect this trend to continue for our US-based and Asia-based edtech startups as well.

Checking in of the state of ISAs

Income share agreements (ISAs) rose to public awareness this year — if measured in press articles and discussion on “VC Twitter” — after several years of niche experimentation among a small community of education advocates. An ISA in a financing model where the student participates in an education program without paying tuition, then pays a certain percentage of their income for a set time term in return.

As I mentioned in my analysis of ISAs back in April, there is rapid growth in ISA pilots by traditional universities in the US and by vocational training programs but there’s also a lot of regulatory uncertainty. All stakeholders in the US want the federal government to provide a regulatory framework for the ISA market since the current lack of policy creates market uncertainty and opportunities for unethical actors.

I asked several of the entrepreneurs, investors, and policy experts at the forefront of ISAs to share their perspectives on the current state of the ISA movement:

  • Tonio DeSorrento, Vemo Education
  • Ethan Pollack, Aspen Institute
  • Shaan Hathiramani, Flockjay
  • Austen Allred, Lambda School
  • Alison Griffin, Whiteboard Advisors
  • Sam Lessin, Slow Capital
  • Terri Burns, GV
  • Kristen Sharp, Entangled Solutions
  • Leo Polovets, Susa Ventures
  • Jan Lynn-Matern, Emerge Education

Here’s what they had to say…

GettyImages 960803498

Image via Getty Images / manopjk

Tonio DeSorrento, Founder & CEO of Vemo Education

“What’s been really fascinating, in recent years, is the innovation that is occurring at colleges and universities that are using ISAs to support and improve student success.

Where top VCs are investing in edtech

Education is a $4 trillion market globally in urgent need of overall — so where within education are top venture capitalists optimistic about startups building large businesses by providing new solutions?

According to EdSurge, $1.45 billion of venture capital (a mere 1.1% of the $130 billion in US venture funding) was invested in education startups in the US in 2018; there were only 112 education-focused deals. In line with the trend in venture capital overall, this represented an increase in overall capital but a concentration in fewer deals (mainly large late-stage rounds).

Education is regarded as a tough market for achieving VC scale returns. Selling into school districts and universities is difficult and slow, and freemium models that go direct-to-teachers have struggled to monetize.

New software, content, and financing solutions for learning outside the traditional school system are more compelling business opportunities. This is particularly the case in vocational training where the return on investment of an educational program or tool can be quantitatively measured in job offers and salary increases

I asked four leading edtech VCs and six of the top generalist VCs (who have a track record of education investments) to share where they see opportunity in this sector:

  • Jennifer Carolan, Reach Capital
  • Amit Mukherjee, NEA
  • Michael Staton, Learn Capital
  • Annie Kadavy, Redpoint Ventures
  • Aydin Senkut, Felicis Ventures
  • Matt Greenfield, Rethink Education
  • Hemant Taneja, General Catalyst Partners
  • Marlon Nichols, MaC Venture Capital
  • Jan Lynn-Matern, Emerge Education
  • Charles Birnbaum, Bessemer Venture Partner

Here are their answers…

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Image via Getty Images / doyata

Jennifer Carolan, General Partner at Reach Capital (an education-focused VC firm in Palo Alto with investments including Abl, BetterLesson, Epic!, Handshake, Holberton School, Newsela, Outschool, and Tinkergarten):

“Human-centered learning has been traditionally limited to one’s physical geography but technology is unlocking learning opportunities that never before existed.  We’re particularly interested in the marketplaces that are better matching supply and demand across experiential learning, educator coaching, tutoring, and online small groups.