Reach Capital’s Investment Thesis
by Esteban Sosnik
Does Reach have an investment thesis, besides its focus on edtech? What are some of the areas you are most excited about for the next 5–10 years in edtech?
— Thesis Thoughts
Dear Thesis Thoughts,
This is a good question. Reach, like many of the best VC funds in our industry, is very thesis-driven. We believe that this focus makes us a better investor. Here is a recent post we just published going over our investment thesis.
Reach invests in people and solutions that broaden access to quality education. Through our investments, we aim to inspire and empower learners at every stage of life. We do this by backing education technology products that are grounded in strong pedagogy and research, delivered in engaging formats and built with humans at the center.
No longer confined to formal schooling, education is now recognized as a lifelong endeavor and critical to a shifting economy. As such, technology is playing an increasingly important role in expanding access to new learning opportunities and communities. Massive global businesses are being built with learners all over the world who are seeking to initiate new economic opportunities and to enrich their lives. Given changes to the macro environment, we step back to analyze how the market is evolving and identify new and exciting areas for investment.
When the Reach team began investing in edtech, we were primarily focused on companies developing products for K-12 schools. At the time, laptops and iPads were just making their way into classrooms, and schools were increasingly connected to the internet. We invested primarily in teacher-focused products such as ClassDojo, Nearpod and Newsela- companies that have transformed parent communication and instruction. Many of the products we funded are now commonplace in US schools and touch millions of kids and teachers. Over the years, we’ve expanded our investment scope more intentionally into higher education and lifelong learning while always sticking to our core principles of strong pedagogy, research-driven and human-focused education. Leveraging our investment experience, we’ve identified two new areas that align with our mission and represent promising market opportunities for the coming years: Career Pathways and Learning Enablers.
Our career pathways thesis focuses on solutions that develop “employability” skills that are in demand today. These include both hard and soft skills that bridge the gap between what students have traditionally learned in formal education and what employers and the labor market demand. We are moving away from an education system focused on credentials to one focused on higher-level skills and mindsets. As automation continues to penetrate more industries, the demands of jobs are changing at increasingly faster rates and employers are shifting to valuing skills over degrees. And because technology is driving an unprecedented pace of change, continuous learning is imperative to stay relevant in the workforce.
The stakeholders with the greatest motivation to facilitate this shift include employers desperate to hire and retain valuable workers and job seekers in need of new skills. Millennials, for example, have much higher expectations for professional growth, generating a titanic shift in how companies design and invest in training and employee development. At the same time, the digital skills gap is a byproduct of software eating the world, spawning an explosion of workforce development programs. With millions of unfulfilled job positions across industries resulting from a fast-moving economy, reskilling the workforce at scale is a clear opportunity for new business creation.
Higher education institutions, traditionally focused on preparing young adults for the world ahead, play a critical role here too. With the current $1.5T college debt crisis, the slower pace of enrollment and wider age-range in the college demographics, higher education institutions are already feeling the pressure to prove their relevance and value to students. Even K-12 is showing signs of change in this direction with a renewed focus on STEAM and the 4Cs (critical thinking, communication, collaboration, and creativity) and a record high demand for social emotional learning in schools.
Given this context we are focused on companies that are addressing this opportunity across K12, higher-ed and workforce development. Learners’ expectations from K12 through adulthood is training in skills that are demanded by employers. For too long education institutions and industry have worked in silos with little to no communication. We believe the future is bright for those who can work with industry to guarantee job advancement and hence make new education offerings the lifeblood of employment in the 21st century.
We believe that technology can be used to scale the delivery of supports and interventions that improve students’ ability to learn. This type of support has historically been high-touch and expensive to deliver. As a result, these critical supports have been limited, often just scratching the surface of demand. Examples of these supports include guidance counselors, specialists for students with learning differences, tutoring and health aides. Even in the enterprise, corporate L&D, line managers and executive coaches support the learning and advancement of employees. Technology can be used to super-power the humans that do this work. By affordably engaging human resources to provide support, and by targeting proven interventions, we now have the ability to scale these supports.
These approaches can be applied to academic support and other critical areas for student success, such as career readiness, financial aid and mental health. Live video chat and mobile penetration can reduce the costs of connecting students with experts anywhere, anytime. Machine learning can help efficiently deploy a portfolio of supports at scale by detecting and predicting students’ needs and targeting the delivery of proven, effective supports. We’re just starting to see university functions such as enrollment, student success, and career centers being transformed with the help of technology. We believe that the ability to provide access to student support will be critical to the success of learners at scale in the 21st century. The winners will be those companies supporting students where they are (increasingly on-the-go), and paving the way for them to achieve their learning goals.
We are excited for the coming years of investing in edtech and for the iconic companies that will be created in these two areas and beyond. We believe that education is the most important investment for the world economy as it represents the real lever for the future of work: augmenting human potential in the face of automation and talent competition.
If you are an entrepreneur who finds these thoughts compelling and are building a company that aligns with these values and vision, please get in touch with us at email@example.com
Originally published at https://www.blended.blog on July 1, 2019.