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Early Stage Edtech Investment Thesis (Sept 2016)

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Here is an example of a personal investment thesis that I created to share with venture capital firms. In this example, I provide my personal perspective on the edtech sector. For details on how I build this thesis check out my blog (https://goo.gl/CU4Qid).

Note: Some of the confidential information has been redacted for privacy.

Published in: Technology

Early Stage Edtech Investment Thesis (Sept 2016)

  1. 1. Earnest Sweat | 2016 Prospective Venture Capitalist xxxx@gmail.com 555-555-5555 Exploring the Edtech Industry Investment Thesis & Opportunities
  2. 2. EDTECH The 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; Bureau of Labor Statistics; Medium.
  3. 3. EDTECH This 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.
  4. 4. EDTECH Education 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.
  5. 5. EDTECH Thesis 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.
  6. 6. 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. EDTECH Online Resources Provide Alternatives to Expensive Universities Source: Student Loan Hero; Bureau of Labor Statistics.
  7. 7. EDTECH Edtech Solutions should Align with New Job Market Needs Source: Business Insider; Fast Company. 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.
  8. 8. EDTECH Value 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.
  9. 9. 1. Universities have been slow to adapt their course offerings to reflect the constantly changing needs of the global job market. EDTECH Investment 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 edtech startups. These two conditions (on the right) present a tremendous opportunity in education technology. Key Market Conditions
  10. 10. Quero Education, ALEX, Supergleu, Guild Education & Gild Startups of Interest
  11. 11. 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. EDTECH Quero 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, xxxx@quero.education). Software Developer, Instituto Tecnologio de Aeronáutica Computer Engineering. Source: Crunchbase; TechCrunch; Company Website.
  12. 12. 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. EDTECH ALEX Investment Conclusion: This information is sufficient to prompt informal due-diligence. 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, xxxx@anyoneslearning.com). Serial Entrepreneur, Teach For America Corporate, Education Pioneers, Deloitte Consulting, & Harvard MBA. Can make personal intro to CEOSource: Crunchbase; Company Website.
  13. 13. Significant Achievements & Opportunities: Supergleu’s pilot 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. EDTECH Supergleu 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 9 school partnerships. Founder: Bryan Lattimore (CEO, Co-Founder, xxxx@supergleu.com). McKinsey & Co., Digital Strategist, & Wharton MBA. Source: Crunchbase; TechCrunch, Company Materials, Company Website. Investment Conclusion: This information is sufficient to prompt informal due-diligence. Can make personal intro to CEO
  14. 14. 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. EDTECH Guild 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, xxxxxx@guildeducation.com). Serial Entrepreneur, The Parthenon Group, White House, & Stanford MBA. Source: Crunchbase; TechCrunch, Company Website. Investment Conclusion: This information is sufficient to prompt informal due-diligence.
  15. 15. 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. EDTECH Gild 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, xxxxx@gild.com). Sapient, Cambridge Technology Group, MIT BS Electronic Engineering. Source: Crunchbase; BBC.Com, Company Website. Investment Conclusion: This information is sufficient to prompt informal due-diligence.
  16. 16. Thesis Couture Non-Edtech Startups
  17. 17. 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. EDTECH Thesis Couture 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 75K visitors to their website (including 20K repeat visitors). 2.5K visitors have pre-registered to place orders. Founder: Dolly Singh (CEO, Founder, xxx@thesiscouture.com). Oculus, SpaceX, & UCLA BA. Source: Crunchbase; Company Materials. Company Website. Investment Conclusion: This information is sufficient to prompt informal due-diligence. Can make personal intro to CEO
  18. 18. Affordable College Frontier Investment Opportunity
  19. 19. 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. EDTECH Affordable 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, xxx@affordablecollege.org). Director of Strategic Partnerships in Higher Education, & Princeton BA. Source: Crunchbase; Company Website. Although it is too nascent a technology to be investable at the moment, Affordable College’s future remains promising. Can make personal intro to CEO
  20. 20. EDTECH Conclusion 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. LinkedIn For more context on my academic and professional experience, please check out my profile here. Medium I have written about my Edtech investment thesis & provided advice for founders. Check out #ReadingEarnest here. Twitter I have microblogged & shared articles on events impacting the Edtech sector. To stay informed please follow me here.

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