My first year as an angel
After founding three companies, one through IPO, the last two in education, I’m taking a hiatus and focusing on angel investing in education for the next couple of years as my kids go through high school. I’ve invested passively in about 20 companies previously and after the first 10 all went to zero, the next 10 gave me a 7x return. I’m really excited about a few of my companies that are getting big like Lambda School, Swing Education, Outschool, and Epic! and tons of smaller companies who are growing up fast like Padlet, Lingokids, Kunduz App, Juni Learning and Dana Cita.
Mainly, I love coaching founders, especially through the turmoil that even a great company causes for them. I’m making about 10 investments per year. I’ve really enjoyed co-investing with the team at Reach Capital, although I’m a bit more dubious of k-12 sales companies than they are.
A couple of areas I really want to invest:
1 — a social network for English language learning, primarily outside of the US. My thesis here is that language is naturally learned socially, but almost all apps have taught language in a single player mode. Not only is that less fun, but you lose all of the growth possibilities of social.
2 — strong AI folks working in any primary curriculum area. My thesis is that this will start very small and focused. In fact, we have already seen companies like Writelab focus on grading writing and be very effective. Since teacher’s and professor’s time is the scarce resource in education, that was a good focus.
3 — kids coding. I spend a lot of time with the folks from Lambda School, which is an incredible online computer science school for people looking to find their first job as a dev. The kids space has apps and some tutoring, that was why I invested in Juni Learning. But I think there is a lot of room here for companies to come up with exciting ways for kids to work together, play together and code together. Roblox is the closest I’ve seen, but I think there will be many more.
4 — Day care and pre-school. This space has been pretty neglected by startups until recently when Wonderschool, Weecare, Brightwheel and several others started to focus on building networks of daycare providers. I wonder though if the fundamental problem to be fixed here is the unit economics of what it means for a teacher to run a day care. Right now, they are terrible. I’m interested in companies trying to change that, and in the process raise the standards for teaching and learning.
5 — The disaggregation of higher ed. For centuries, universities have been able to offer a bundle of goods leading to a degree. Unfortunately, that degree has become far too expensive. The top 10 or 20 schools will be able to keep the traditional model, but for most other institutions, students will start building their own programs that get them what they want, with minimum debt, and maximizing what they want — a job, a passion, etc.
6 — Moving financing risk away from students. Income Share Agreements are a vehicle that schools like Lambda use to defer payment until a student has a job. The beauty of this method is that it aligns Lambda with their students, they get paid when they do. I’m very interested in this general category of removing risk from students and placing it on employers.
7 — Probably the biggest change I’m seeing is the move from asynchronous ‘dead’ content, to scheduled live teaching, to teaching-on-demand. From your phone, when you need to learn some English, click a button and you and a coach start working. Until we get to true AI in 20 or 30 years, human-delivered instruction will be best, and getting it any time you want is a huge benefit to the user.
8 — For profit schools which significantly break the school paradigm. While I wish the charter school movement could experiment wildly, the fact is that they are highly regulated and have to fit into the system. I think that schools outside of the U.S. and private schools in the U.S. need to lead the way in new models.
9 — education startups in India and China. I’ve been impressed with their culture of caring and spending deeply on education, and think that increasingly the innovation in education will come from asia because of this.
If you have built a company in one of these areas or want to, send me email john@danners.org.
