How to navigate fundraising
Simon Nelson shares his experience of building and scaling Europe’s largest MOOC platform, FutureLearn. He led the company from its inception with £15 million in funding from its owner and shareholder, The Open University. He then launched the MVP with a second £15 million based on strong growth projections, and took it to its £100 million valuation in 2019.
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In the world of edtech, few have as much and as wide a range of hands-on experience as Simon Nelson, the CEO of QA Higher Education. He was previously the digital director of Nord Anglia Education, the largest premium international schools group, and the founding CEO of FutureLearn, Europe’s largest MOOC platform. Simon grew FutureLearn to more than 15 million learners worldwide through collaborations with leading universities. In 2019, under his leadership, it reached a £100 million valuation.
This is the second instalment of a two-part series on FutureLearn. Check out the first part, which covers FutureLearn’s origin, monetisation strategy and existential crisis, alongside Simon’s advice for selling to educational institutions. In this instalment, we delve into Simon’s experience with fundraising at FutureLearn and the key lessons for edtech founders navigating fundraising for the first time.
By the end of this article, you will gain insights into:
- FutureLearn’s fundraising journey
How FutureLearn received its initial £15 million in funding and the fundraising process that led it to a £100 million valuation. - How to build relationships with investors
Navigating the fine line between ambitious growth and credible metrics as a founder building long-term investor relationships. - The importance of caution with early data
How to mitigate the dangers of extrapolating early data points into ambitious growth forecasts as an early-stage startup.
FUTURELEARN’S FUNDRAISING JOURNEY
From its inception, FutureLearn was in the unique position of being backed by the The Open University, a pioneer of distance learning. Having watched the arrival of MOOCs, led by American platforms such as Coursera and edX, the British government challenged The Open University — as one of the UK’s leading innovation stories in education — to catch up and build a British MOOC platform for UK universities to sign up with. It was in response to this call to action that FutureLearn was born. It secured £15 million in initial funding from its sole owner and shareholder at the time, The Open University, followed by another £15 million a few years later, based on its promising growth forecasts.
As a shareholder, The Open University was “reasonably benign and very trusting” recalls Simon, and gave his team the flexibility to exercise its judgement in terms of the direction in which it took the company. There were other benefits to FutureLearn’s partnership with a renowned academic institution. For example, having the vice-chancellor of The Open University in their corner, a peer of the vice-chancellors of FutureLearn’s target clients, opened doors early in their journey. However, it came with its own set of challenges and opportunities. Changes in Open University leadership led to shifts in level of involvement, which Simon admits were “quite hard to predict sometimes and quite hard to navigate”.
As FutureLearn aimed to scale and compete with the likes of Coursera and edX, it became evident that significant additional investment was needed. The Open University’s reluctance to allocate further public funds prompted a year-long process, led by an investment advisory firm (IBIS), to secure a new investor. As FutureLearn was a high-profile company, the journey was an arduous one. An initial flyer was sent to a list of 120 companies and a more in-depth version to 30 of those companies, of which 12 received a management presentation, resulting in a final two or three companies. Ultimately, it was Australia’s top employment marketplace, SEEK, that invested £50 million and joined The Open University as 50/50 shareholders in FutureLearn, resulting in a £100 million valuation. It was a tough, long process, but Simon shares how his no-nonsense approach and commitment to transparency at all times helped him persevere.
“Through that process, what kept me sane was that I always felt, I’m never going to bullshit. I’ll tell you what I know. I’ll tell you what I don’t know. I’ll be upfront about where the challenges in the company are and I’ll be bullish about our successes. It meant no one could throw a difficult question at me that would really pull the rug from under me, because I’d just say, ‘I don’t know, we’ll find out.’ No bullshit at any stage. I was never trying to think of what I had said last time and I was always playing a straight bat.”
HOW TO BUILD RELATIONSHIPS WITH INVESTORS
As an early-stage founder, it is unlikely that your fundraising journey will look exactly like this. However, Simon shares three core takeaways for approaching fundraising and building strong relationships with your investors.
1. Transparency, transparency, transparency
Investors are not just investing in your company but also in you. Being upfront from the outset is essential, both to simplify the process and set the tone for an honest, long-term relationship. Whether you’re discussing where you foresee potential challenges or highlighting areas for growth, a straightforward approach fosters mutual respect and avoids discrepancies surfacing in the future.
2. Rigorous documentation
Miscommunication can derail not only a deal but also the long-term relationship with your investors. “Be really rigid and structured in decision-making and communication,” Simon advises, reflecting on an experience where a lack of documentation led to diverging understandings of an agreement with an investor, culminating in a heated argument later when the expected results were not delivered. Documenting agreements and key decisions will prevent ambiguity and disagreements down the line. This is particularly true for complex conversations that may require revisiting at a later stage.
3. Own your numbers
Naturally, every founder wants to project growth and success. However, the temptation to inflate numbers to please investors can be dangerous. Being over-ambitious can backfire as investors may push for even higher targets, and you will often be held accountable for them. Simon urges founders to make sure they’re setting achievable goals they can stand by.
When done right, fundraising is more than just a financial transaction — it’s the beginning of an enduring partnership. Through transparency, careful documentation and realistic planning, you build not only a strong business but also a sustainable relationship with your investors.
THE IMPORTANCE OF CAUTION WITH EARLY DATA
While forging a strong relationship with your investors is crucial, setting realistic and credible expectations through data is another key pillar. For early-stage startups, particularly those pre-product-market fit, with limited data, this is incredibly challenging. Your initial numbers not only inform your company’s strategy but also set the stage for what your investors expect from you. However, being aware of how easily one can misinterpret early data points is essential to avoid setting your team and your investors up for disappointment.
At FutureLearn, Simon and his team saw a 2–4% conversion rate for their first paid certificates, where learners paid after a free course to receive certification. Based on that conversion rate, they built projections and grew the number of courses offered. They sold these projections to their investors as a promising growth forecast. However, as the number of courses grew, these early metrics did not hold.
The dynamics of scale with 100 courses were vastly different to that of the first 40. Not only were the inaugural courses higher quality, they were also selected as the most likely to be successful, thus biasing the conversion rate data from them.
“These first courses had loads of effort and PR behind them. The academics really cared for them and nurtured the communities that were building up in them. They were much higher quality experiences than the second, third, or fourth run of that course, or the second, third, or fourth course that was coming out of a university. But also, you picked those first courses for a reason. They’re your real bankers.”
Founders should be cautious of taking small sample sizes and considering them indicative of future performance. Of course, no early-stage startup is likely to have the data needed to make solid projections of future growth, and there will be some degree of assumptions necessary. The key takeaway is to be realistic about the expectations when taking early data as an indicator of future growth, and leave room for multiple scenarios that could flow from that initial small dataset. From there, be rigorous about checking in and testing those assumptions over time.
Simon warns that even experienced investors might apply playbooks based on past successes, assuming that what worked for one startup will work for another. Finding the right balance between optimism and pragmatism in interpreting data can protect you from unfounded assumptions.
SUMMARY
In the second instalment of this two-part series from PMF Academy, Simon Nelson delves into the complexities and learnings from FutureLearn’s fundraising journey. From navigating strategic shifts due to changes in The Open University’s leadership to enduring a rigorous year-long process that culminated in a £50 million investment from SEEK, Simon emphasises the importance of transparency, meticulous documentation and realistic data interpretation as essential components of successfully navigating investor relationships. To discover more about FutureLearn’s inception, revenue plateau and subsequent pivot in monetisation strategy, and Simon’s advice for selling edtech products to schools and universities, read part one.
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