5 Questions to ask your investor

Venture capital is in flux. There is a blurring of boundaries between early stage investors and mezzanine/growth investors. Many reasons account for this change including: larger round sizes, increase in opportunity funds, more strategic investors, and growth investors seeking lower valuations. At Reach, we invest alongside investors from a range of stages: pre-seed to private equity to growth venture capital.

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Nearpod acquires Flocabulary!

I could not be happier to share the news that Nearpod and Flocabulary are joining forces, bringing together two of the most beloved brands in education. Today represents a major milestone for both companies, and a true testament to our passionate teams, customers, and partners who supported us over the years.

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Eight Buckets of EdTech

When talking about edtech in general, we find that companies tend to fall into one of four categories based on what I call “ The Learning Continuum:” (1) early childhood education (ECE), (2) kindergarten-12th hrade (K-12), (3) higher education (HE), and (4) lifelong learning (LLL). Each of the four categories tends to require a different type of product as users’ educational needs and expectations vary significantly based on their age and where they are in life.

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Edtech Exits on the Rise

A common misconception about edtech is that there are few and only small exits in the market. In reality, the private (M&A) and public markets for edtech stocks are really heating up. Overall, we’ve seen buyers excited by the fact that edtech is growing globally – the market is estimated to reach $252BN by 2020.

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What are the possibilities for AI in Education?

Artificial intelligence has many exciting applications in education: from sophisticated assessments to personalized tutoring systems. As we discussed in a previous BlendED post, over 40 AI acquisitions happened in 2016. These numbers are climbing: recent research predicts that the AI education market will increase 47.5% by 2021. Despite its influence, AI in the field of education remains a sensitive topic – specifically, what does AI mean for the future of teaching jobs? AI should not be used to replace teachers, but instead, should be used to superpower them to support the needs of students.

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How can overseas edtech companies successfully enter the US market?

Edtech adoption is growing rapidly in the K-12 market, particularly by schools with high connectivity and device penetration. For reference, in the last 4 years, 33M students were connected and less than 2% of the schools lacked high speed connectivity. I won’t delve into general market entry and competitive strategies such as judo that have been around for decades. Instead, I’ll cover fundamental learnings from two recent examples of overseas edtech companies that have gotten a foot in the US market – Lab4U and PeerGrade.

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How should I balance impact with economic sustainability in edtech?

Most entrepreneurs (and VCs!) in the edtech space are in it not only as a business opportunity, but also because we care about educational opportunity. As a result, many of us feel the need to balance impact and return. I believe true impact is derived primarily from these two factors: 1. A product that adds real value to your users (QUALITY), and 2. A product that has a far-reaching user base (SCALE)

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What are some unconventional fundraising tips for edtech startups?

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.

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What are the key resources for early-stage edtech entrepreneurs?

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.

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How do I know if my total addressable market is big enough?

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.

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Is the classroom ready for virtual reality?

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:

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How much churn can we tolerate?

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.

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Should my edtech company sell to teachers, schools, or districts?

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.

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When should I prioritize being multi-platform?

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.

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What’s the edtech fundraising environment in 2017?

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.

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What business models are possible in edtech?

I get this question a lot, particularly from entrepreneurs who have not worked in edtech before. There is a general perception that education is full of regulations and red tape that make it impossible to innovate. But I have found that there is a lot of interest from teachers and admins in new digital solutions that “superpower” their work, and edtech companies are finding creative ways to monetize use of their products.

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