If edtech investment scar tissue could talk
Do’s and Don’ts from 20 years in the trenches
It has been too long since I have been in the game, actively making new investments in education technology; I do partake in follow-ons from existing investments but basically nothing new in the last two years. Stay tuned for a hopeful, new investment vehicle late this year where I get back in the game. Until then, with distance from the playing field, I’ve been thinking about why I might have had success in the past — and where failure has indelibly layered scar upon scar, which does heal with time and recalibrated vigor. Here’s hoping you more easily avoid the landmines I have traversed.
20 Years of ‘overnight success’ investing in edtech.
Given the above 18 realizations, I have some credibility when it comes to education technology investing. I must give credit to previous partners at New Markets and mostly my NEA co-founding father through a unique apprenticeship at Bonsal Capital. Maybe investing is really just a win or learn scenario where I have persisted in pursuit of a lifelong goal to have a positive, sustained impact on education; there will undoubtedly be more learning experiences and hopefully more wins.
Some of my fondest memories of early parenting are those read aloud moments where your child memorizes the lines and completes or cites whole phrases in a volley between engaged participants. This conjures up a Tom Parr board book entitled Do’s and Don’ts that seems an apt frame for advice regarding education technology investing.
The Do’s and Don’ts of edtech investing.
- Do invest in a Founder who has had previous education industry success. >> Don’t invest in a team with a pure consulting background.
- Do invest in an intractable problem whose solution has escaped many or most will dare not go. >> Don’t invest in a nice-to-have product, even with a valid product market fit.
- Do invest in nice, hard-working founders who listen. >> Don’t invest in (or alongside) a founder (or investor) with a reputation for toxicity.
- Do use the product in question and speak with customers and end users. >> Don’t invest in a product that your gut says is ahead of its time — because it is.
- Do invest in a founding team with a diverse set of skills (ideally backgrounds). >> Don’t invest in a team without two of the following three types: ‘builder’, pedagogue, or business person with distribution chops. Stave off the bro culture, too.
- Do add value to a company in tangible ways. >> Don’t expect a busy founder to respond quickly or with all the gory details of each mini-milestone of a company’s trajectory. In other words, lead, follow, or get out of the way.
- Do invest in education evolution, because that is where scaled transformation avails itself. >> Don’t invest in the next shiny education disruption unless you are comfortable with a messy ending.
My experience from six edtech investment ‘learnings’ is pegged to the above healing image and corrleated Dos and Don’ts. Investment scar tissue is really just part of the risk-reward pathway of an early stage investor. Can’t take the heat, get out of the kitchen, right? I should feel good that only 20% of my total edtech investment track record has yielded losses. I don’t, actually. It makes me shudder to relive the pain of shutting down a company or selling a company in an asset sale; but that’s the price of innovation in a tech-enabled world. The key in education is to minimize the end user collateral damage and reduce the losses all around, early in the life cycle of a company and in a context in which employees, customers, and end users are coupled with the Golden Rule.
A final takeaway is that K-12 edtech investing can and has yielded patterned success. Many investors shun K-12 edtech investing, but they are fools attracted to pyrite, the easy, shiny, often relationship- or syndicate-driven decision versus the hard wrought diamond in the rough. Mission-driven investing is not easy, but there is nothing like the blended returns therein.
I write from the soul of Bonsal Capital as Managing Partner and have been at it for a couple of decades. My career alignment as teacher-coach, education and workforce investor, and startup ecosystem leader have availed sharpened senses and hardened scar tissue.
