Early Stage Edtech Investment Thesis (Sept 2016)

Earnest Sweat | 2016Prospective Venture Capitalist

[email protected]

ExploringtheEdtech Industry

InvestmentThesis&Opportunities

EDTECHThe Big Idea

The internet’s ability to provide access to information to larger audiences coupled with rise in user generated data creates an opportunity for customized educational products that align with

the needs of the digital native students & the workforce.

The way individuals learn has changed because technology is redefining how we learn, obtain skills, & get credentialed. Classrooms are not a barrier as tech enables new ways to communicate & collaborate.

Education is still a key to mobility and has a positive impact on earnings & unemployment rates. Advanced degrees garner an average of $1,730 weekly earnings & sport a low unemployment of 1.5%.

Increase in computing power will eliminate jobs that can be automated & there will be a need for a workforce with new skills. History shows tech does eliminate jobs, but it also creates new & better jobs to replace them.

Source:Forbes;BureauofLaborStatistics;Medium.

EDTECHThis Thesis is Predicated on 6 Assertions

• The increase in student loan debt has created a large barrier for current & future workforce participants to pursue traditional educational resources.

• Individuals are more accustomed to learning concepts and skills online thanks to the access to credible resources on the internet.

• Increase of contract work professionals that managed their own hours and need to constantly adjust their skill sets to meet the needs of remote employers.

• Large educational institutions are slow moving and their educational options generally do not reflect the ever changing needs and trends of the job market.

• Spread of mobile and social media has given rise to large amounts of user-generated data on educational achievements and previous roles.

• This aggregate data can be highly revealing to how some can continually evolve their skill set that appeals to employers.

Therefore, there is a tremendous investment

opportunity in early-stage startups addressing

education, career building, and workforce training.

EDTECHEducation Remains an Opportunity in Ever-changing Job Market

The relationship between educational attainment & unemployment rates with the emergence of new roles thanks to computing power, suggests the education sector is at a technological tipping point.

EDTECHThesis Definition

This thesis defines edtech as intersections of user-generated customized tools, data analytics platforms, & specific marketplaces that provide users access to information to obtain a skill or knowledge.

Technologies that abide by this definition may be learning tools, data analytic platforms, marketplaces, and tech-enabled professional development solutions that address the fast paced needs of the 21st century learner. For instance, Guild Education has built a lifelong learning platform that offers classes, programs and degrees for working adults, with a path for them to move forward in their education and career.

Access to educational resources is 1of 3 fundamental drivers of this thesis. There is an emergence of barriers like rising college costs & proliferation of stale courses.

The $1.3 trillion in student debt limits aspiring students & current employees from obtaining more traditional credentials.

However, learners are able to participate in MOOCs, online courses, and career accelerators to acquire complex skills from university alternatives.

EDTECHOnline Resources Provide Alternatives to Expensive Universities

Source:StudentLoanHero;BureauofLaborStatistics.

EDTECHEdtech Solutions should Align with New Job Market Needs

Source:BusinessInsider;FastCompany.

User-generated data & changes in job market are creating new needs. There are a record 5.8M jobs available in the U.S., but hiring has not followed suit. This trend points toward a gap in what employers want & what employees “appear” to offer. Additionally, 82% of millennials are optimistic about the future of freelancing.

This opens the opportunity for data analytics platforms that recommend optimal courses, tools that provide transparency in employee capabilities, & marketplaces that match talent to roles.

EDTECHValue Proposition

The value proposition of this thesis can be defined by actionable analytics, wherein data offers guidance on optimal educational content, skill acquisition, employee or freelancer placement.

As an example, Quero Education has built a marketplace for

students to identify & connect with their ideal (based on

interests & financial circumstances) for-profit college.

While Supergleu serves current college students through its

mobile app that prompts student comments on news

relevant to potential employers.

Lastly, Gild has created a predictive analytics tool for

company recruiters to hire the optimal candidates. The

platform uses user-generated data from popular sites.

1. Universities have been slow to adapt their course offerings to

reflect the constantly changing needs of the global job market.

EDTECHInvestment Conclusion

2. Despite more data generate from the population, companies have

been unable to leverage the information to find the optimal

employees or address the skills gap.

I believe that the success of edtech startups will be a function of their analytic capabilities, as opposed to the originality of their content or access to online learning providers. The excess of digital educational content causes the general market to be crowded with competition.

Yet the user retention strategies to create continued career learning and analytic value propositions remain integral, and a function of an expressive founder’s execution. These factors should be evaluated thoroughly during due-diligence for early-stage edtechstartups.

These two conditions (on the right) present a tremendous opportunity in education technology.

Key Market Conditions

Quero Education,ALEX,Supergleu,GuildEducation&Gild

StartupsofInterest

Significant Achievements & Opportunities: The startup is growing 5x year over year. The team totals more than 100 employees & the net profit margins are 30%.

Some colleges suffer from oversupply due to mismatch of info that exists for the students. Almost 3M student spots are open each year. Just 14% of Brazilian adults have college degrees & there’s a lot of room for growth.

EDTECHQuero Education

Investment Conclusion: This information is sufficient to prompt informal due-diligence.

Overview: Marketplace helps students compare their higher education options and apply. Students can find their ideal college program and save tuition in partner colleges. http://quero.education/

Total Financing: Have raised $800K in total over 2 rounds. The latest was a $120K Seed, August 2016, led by Y Combinator.

Traction: Have 600 partner private colleges. Since August 2015, the startup has matched 70K students with college programs, which totals to 1.6% of college admissions in Brazil. The startup has generated $7M in revenue during this period.

Founder: Bernardo de Pádua (CEO, Co-Founder, [email protected]). Software Developer, Instituto Tecnologio de Aeronáutica Computer Engineering.

Source:Crunchbase;TechCrunch; CompanyWebsite.

Significant Achievements & Opportunities: During pilot, students requested comparisons to courses from schools & 1 student purchased a course from a class comparison.

In a world where technology has enabled us to maximize space in a car or apartments, ALEX’s marketplace has potential to address the inefficient college enrollment process. The solution will give individuals the opportunity to enroll in physical courses, on their terms.

EDTECHALEX


Overview: Anyone’s Learning Experience (ALEX) is a marketplace for continuing professional education courses from across universities. Higher Education, one course at a time.

Total Financing: Currently not fundraising but will begin in the 1st

Quarter 2017.

Traction: Completed first pilot in September with Benjamin Franklin Technical Institute in Boston. Team near closing second pilot with an NYC college. Pipeline of potential customers includes 3 other universities.

Founder: Sergio Marrero (CEO, Co-Founder, [email protected]). Serial Entrepreneur, Teach For America Corporate, Education Pioneers, Deloitte Consulting, & Harvard MBA.

Can make personal intro to CEOSource:Crunchbase;CompanyWebsite.

Significant Achievements & Opportunities: Supergleu’spilot with Teach For America displayed 6x improvement in student response rates to recruiters. In May 2016 it was revealed that the startup would be participating in 500 Startup's 17th batch.

Millennials & Gen Z are diverse & attached to their phones. The product addresses their desire to communicate in bite size content & leverage storytelling from mobile video to inspire & hire young employees.

EDTECHSupergleu

Overview: Supergleu is a daily conversation app that prompts college students to connect & comment on industry news they care about. Supergleu helps college students & employers connect through conversation. www.supergleu.com/

Total Financing: Have raised $125K in seed capital (May 2016). Investors include 500 Startups & Camelback Ventures.

Traction: Since inception, Supergleu has conducted a successful pilot program which generated $40K in revenue & includes 9school partnerships.

Founder: Bryan Lattimore (CEO, Co-Founder, [email protected]). McKinsey & Co., Digital Strategist, & Wharton MBA.

Source:Crunchbase;TechCrunch, CompanyMaterials,CompanyWebsite.


Can make personal intro to CEO

Significant Achievements & Opportunities: Included in the White House’s EQUIP equip program. The startup has also closed a college credit partnership with Chipotle thanks to the federal grants & existing programming.

Less than 20% of students acquire a degree on time. Reasons include poor-planning or work schedules. This platform meets the need of this large segment & provides corporate partners with an employee perk to promote.

EDTECHGuild Education

Overview: Guild's lifelong learning platform offers classes, programs and degrees for working adults moving forward in their education and career. Guild offers these adults support from start to finish. https://www.guildeducation.com/

Total Financing: Have raised $10.5M over 2 rounds. The latest round ($8.5M Series A in August 2016) was led by Redpoint and included Cowboy Ventures & Social Capital.

Traction: Company offers a variety of online classes, programs & more than 30 degrees from top-ranked universities, including Colorado State University’s Global Campus, Bellevue University & Western Governors University.

Founder: Rachel Carlson (CEO, Co-Founder, [email protected]). Serial Entrepreneur, The Parthenon Group, White House, & Stanford MBA.

Source:Crunchbase;TechCrunch, CompanyWebsite.


Significant Achievements & Opportunities: Has customers in industries ranging from travel to social media, healthcare, and financial services. Gild has been recognized as an innovator in Hiring with Big 50 Award.

The machine learning recruitment product will enable employers to make more informed decisions on hires given the increase in info. The product will identify personality traits from applicants’ self expression on paper & online.

EDTECHGild

Overview: Uses data science, consumer-friendly technologies, & predictive analytics to bring intelligence to entire hiring process. Using data from sites like Quora, LinkedIn, & Facebook to show the candidate’s profile. www.gild.com

Total Financing: Have raised $25.9M over 4 rounds. The latest round ($13.5M Series B in June 2014) was led by Menlo Ventures & included Correlation Ventures & Sapphire Ventures.

Traction: Company features corporate clients including Facebook, Progressive, Fitbit, Travel Advisor, & HBO. In July 2015, the company announced that it has surpassed over 1,200 customers across a wide array of industries.

Founder: Sheeroy Desai (CEO, Co-Founder, [email protected]). Sapient, Cambridge Technology Group, MIT BS Electronic Engineering.

Source:Crunchbase;BBC.Com,CompanyWebsite.


ThesisCouture

Non-Edtech Startups

Significant Achievements & Opportunities: Team is confident they will oversubscribe the first product offering (1.5K units).

The startup has created a patent-pending internal architecture of core components to replace the century-old parts & processes used in painful high heels. The $40B has not been disrupted in 100 years. The team has concentrated on its target customer through discovery efforts.

EDTECHThesisCouture

Overview: The team is designing world’s first performance driven, high fashion footwear brand by using structural engineering principles, advanced material science, and a keen focus on human factors. http://thesiscouture.com/

Total Financing: Have raised $1.5M in seed round (July 2015). The notable investors include Menlo Ventures, BBG Ventures, & Carlyle Group.

Traction: From organic press, the Thesis Couture has been able to garner considerable interest on their site. They have attracted 75Kvisitors to their website (including 20K repeat visitors). 2.5K visitors have pre-registered to place orders.

Founder: Dolly Singh (CEO, Founder, [email protected]). Oculus, SpaceX, & UCLA BA.

Source:Crunchbase;CompanyMaterials.CompanyWebsite.



AffordableCollege

FrontierInvestmentOpportunity

Significant Achievements & Opportunities: In early 2016, the startup graduated from the Boston-based edtech accelerator, LearnLaunch.

The data analytics technology would have huge implications on cost savings for students (since an average of 13 credits fail to transfer to 4-year colleges) and community college enrollment continues to fall.

EDTECHAffordable College

Overview: Affordable College provides community college students a clear path to an affordable bachelor’s degree by bringing together community colleges and universities in a transfer student marketplace. http://www.affordablecollege.org/

Disruptive Potential: More than 10M students enroll at community college each year with the goal of transferring to a 4-year college after two years at CC. The startup’s platform would guide students to enroll in the optimal junior college.

Product Features: The mobile & desktop app has a machine learning component that uses crowd-sourced & partner school data to determine which courses & community colleges have the most transferrable credits based on the user’s goals.

Founder: Sean O’Brien (CEO, Founder, [email protected]). Director of Strategic Partnerships in Higher Education, & Princeton BA.

Source:Crunchbase;CompanyWebsite.

Although it is too nascent a technology to be investable at the moment, Affordable College’s future remains promising.


EDTECHConclusion

The future of Edtech is at an exciting point. I hope our paths intersect in the future to build companies that change the way every student or employee learns in the next 30 years.

LinkedInFor more context on my academic

and professional experience, please check out my profile here.

MediumI have written about my Edtech

investment thesis & provided advice for founders. Check out #ReadingEarnest here.

TwitterI have microblogged & shared

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Early Stage Edtech Investment Thesis (Sept 2016)

Technology

Transcript of Early Stage Edtech Investment Thesis (Sept 2016)