For this post I’ll skip the “official” advice, which would involve talking about the right metrics to present, the quality and consistency of your deck, best practices for demonstrating product-market fit, etc. Esteban has already written about a few of these topics, including metrics and TAM. In this post I’ll share some guerrilla strategies from someone who has been fundraising in edtech for the past 5 years.
As an early-stage entrepreneur, time is your most scarce resource, so I am happy to provide a summary of the main resources I’ve found helpful to navigate the early stages of edtech company formation. Needless to say, don’t worry about going deep through all the resources you come across. Instead, focus on your key priorities and find the resources that are best suited for addressing those needs.
Here’s a quick framework to get you started thinking systematically about resources.
Your TAM, or “Total Addressable Market,” is a dollar figure representing the total amount of money spent on the problem your product or service addresses. The term is often a proxy for how big the revenue opportunity is for your company. The bigger the TAM, the bigger the opportunity. VCs, of course, tend to like big TAMs.
At the same time, it’s common for early-stage entrepreneurs to hear VCs encourage them to stay laser-focused on solving a narrow problem. As a resource-limited startup, you need to scope and focus on successfully solving one pain-point for your customers in order to overdeliver in customer satisfaction. The thinking goes: start by doing one thing really well with your limited time and capital, and then expand.
In many cases, the classroom is ready for virtual reality (VR) and other frontier technologies. Students and teachers deserve the best tools for learning, and these technologies offer promising ways to engage students and improve outcomes in K-12 and beyond.
The caveat is that schools don’t typically have the same need as other industries to chase the “flavor of the month.” Schools aren’t going to adopt something simply because it’s “innovative.” Rather, I have found that schools and districts will massively deploy a new technology only if it fulfills the following four criteria:
The general conception is that you can only raise money from a VC when you have amazing metrics. However, metrics are relative to where you are in your company trajectory.
In my experience, the best founders and the savviest investors will look at contract churn as a key indicator to determine the health of a business. New sales matter, but churn among your existing paid customers matters even more!
My first piece of advice is to define exactly how you want to measure churn and align everyone in the company around the same metric.
When starting a new company, entrepreneurs like you typically aren’t picky about their very first customers. Beggars can’t be choosers, after all. In education your first customer could be a teacher, a school, or (more rarely) a district. In my work at Reach, I’ve found that it’s usually an assortment — you might have a few dozen scattered teachers, a school or two, and maybe even a small district.
If you want to sell your product to schools, you need to think multi-platform from day one. When we started Nearpod in 2012, our focus was purely on iPads. We were certain that Apple was going to own the K-12 space.
Fast forward to today: Google Chromebooks, Amazon Kindle Fire, Windows, Linux, and various other devices have entered the classroom. While some schools have a 1:1 program with a specific device (e.g. iPads), most schools have diverse hardware ecosystems: a computer lab, bring-your-own-device (“BYOD”) classes, Chromebook carts, etc.
As forecasted, 2016 saw a softening of venture activity, especially at the seed stage, and a return to historical means after a frenetic 2015. In this letter we share what we’re seeing in the edtech investment environment and offer our thoughts on what that might mean for you.
Edtech investment generally follows the same trends as the overall tech investment landscape, and 2016 was no different. Overall, tech investment declined for 6 straight quarters, with seed rounds seeing the sharpest drop. Similarly, education saw a ~30% decline in investing activity last year. 2016 was off from the year prior by about 60 fewer deals and $370M dollars. Keep in mind that education remains a very small slice of overall venture capital activity: in 2016 education investments represented about 1.5% of total VC investment.
On March 1st, Nearpod publicly announced that they raised $21M in a Series B round of funding led by Insight Venture Partners, a world-class tech investor with deep knowledge and a strong portfolio in the k-12 education space. Below you will find a copy of the announcement, and for more information you can see some of the press in TechCrunch and EdSurge.