Q4 Investment Strategy
Matt Greenfield, Managing Partner
Education technology became a popular investment category during the depths of the pandemic: in 2020 and 2021, many venture capitalists got the opportunity to experience online education and remote training in their own homes, and many new entrants began making big bets at high valuations. But in 2022, some of these tourists seem to have gone back home.
Venture investment in education companies declined steeply in 2022. According to Pitchbook, in 2022 (through December 9th) venture capitalists invested 57% less capital in education companies than in the prior year. This was the largest decline Pitchbook measured in any of the sectors they cover.
This squares with our own anecdotal evidence. A lot of tourists — the generalist VCs — who leaped into education in 2020 and 2021 leaped back out in 2022. And some specialized education firms slowed the rate at which they invested or even entirely stopped making new investments entirely.
Not us, though. I made my first education investment in 2003. Rethink Education launched in 2012. Today, we are still going strong. The partners of Rethink Education have dedicated our lives to our mission of helping to unlock the full human potential of people in marginalized and underserved groups. And we see more opportunities than ever before to build world-changing businesses that are also large, financially efficient, and defensible.
We have continued seeking new investments with our usual level of curiosity and persistence, but we were not faced with many opportunities that we loved.
We think there were several reasons we weren’t seeing lots of opportunities.
- In 2021 many education companies raised enough money to last them several years.
- Companies that needed money in 2022 often raised small extensions of the previous round from their existing investors.
- Entrepreneurs became more hesitant about starting new companies.
However, Q4 was a different story. We invested in six companies, five of them new to the portfolio.
These recent investments are in companies with exceptionally inspiring missions.
We invested in three K-12 companies, two focused on literacy and one, initially at least, on math. All three have CEOs who have worked in K12 schools.
Ignite! Reading. We were lucky enough to have the opportunity to lead the A round of Ignite! Reading, which delivers high-dosage literacy tutoring and a data-driven, differentiated, evidence-based foundational reading curriculum to early readers. Today only 35% of fourth-graders read on grade level, and 21% of American adults are illiterate. Ignite is delivering strong results: in one district, at the beginning of the first grade, 35% of students were reading on grade level. At the end of the school year, 80% of the students who received instruction from Ignite! were on grade level. Even more strikingly, a district official said, “100% of our students who moved from below grade level to at or above grade level were in Ignite.” The founders of Ignite!, Jessica Reid Sliwerski and Evan Marwell, both most recently ran successful nonprofits. Both have known Rethink team members for about a decade.
PeerTeach. PeerTeach is a pre-seed company focused on equipping students to tutor their peers in middle school math. The company has a strong grounding in research. The founder, Soren Rosier, has a doctorate in learning sciences and technology design from Stanford University and has been co-running a Stanford master’s program that teaches entrepreneurs to develop evidence-based education products. PeerTeach is the only pre-seed education company we know of that has already conducted two randomized controlled trials of the efficacy of its product. Students taught by PeerTeach-supported peers gained 30% more on test scores than students taught by peers not supported by PeerTeach.
The third K12 company we invested in is a stealth startup focused on neurodivergent students.
We also backed a company focused on making student debt more affordable.
Eduvanz. Eduvanz is enabling learners in India to build their careers more effectively by revolutionizing access to vocational education through affordable finance. With its innovative approach, Eduvanz is able to secure meaningful price concessions from colleges and training programs, making education more accessible and affordable for all learners. The company’s sophisticated data analysis enables swift loan decisions for borrowers with no credit history, and its dedicated philanthropic capital pool provides tuition for the socially and financially underprivileged. With its focus on student outcomes and institutional value-add, Eduvanz is becoming a leading voice in the education sector, working to hold colleges accountable and help improve student success. Rethink led a B round extension, which is unusual for us, but we were already honorary insiders because Andre Bennin had previously invested in Eduvanz from another fund. This is our first investment in a company headquartered in India and our first with Sequoia.
We also invested in two companies focused on upskilling front-line workers.
FN Logistics. FN Logistics is a stealth startup focused on upskilling front-line workers and unlocking opportunities for them. We are helping to incubate FN Logistics with our long-time friends Paul Freedman, former senior Guild executive and co-founder and CEO of our portfolio company Entangled Ventures, and Kate Finnefrock, who worked for Guild and Entangled and also, a long time ago, for Amplify Education.
Pathstream. Pathstream trains front-line workers and students to use no-code tech platforms to get attractive jobs at salaries that are on average $17,000, or 35%, higher. Pathstream’s offerings include Tableau for financial analysis, Asana for project management, the Meta advertising platforms for digital marketing, and Salesforce for sales administration. Pathstream also addresses a hard challenge that we are very interested in solving: helping deskless workers figure out which pathway is right for them. Pathstream customers include Walmart and Amazon. We just led a massively oversubscribed A round extension at Pathstream. Pathstream is an existing portfolio company; we initially invested in their initial seed round.
These companies are run by diverse teams. One of these companies, Peerteach, is part of our Rethink Equity carve-out for BIPOC founders, and three of the six have female CEOs. Over half of the total capital invested in this four-month period went to the three companies run by women.
Being able to invest in these six amazing companies is immensely gratifying to all of us on the Rethink Education team. We have never had a stronger belief in the power of innovation to unlock the full human potential of people who have been marginalized or underserved. We are acting out of deep compassion and deep outrage and a sense of urgency sharpened by the pandemic and by the pushback against social justice and equity around the globe.
