8 edtech investors talk reskilling, digital universities, ISAs and other post-pandemic trends

We know that the coronavirus has brought unprecedented attention to the edtech market, but now what? What happens when schools are no longer clambering toward an overnight solution? When the surges slow? When our world reopens and there doesn’t need to be a full-suite of at-home solutions for kids and parents?

As the next wave of edtech companies are being built to address these novel use cases, investors are looking for solutions that aren’t simply pandemic-era important. To some, that means skipping the latest videoconferencing platform play and maybe cutting a check to a digital-only university. To others, it means looking for the platform that will educate a diverse range of users, especially the unemployed.

A spree of recent consolidation within the market shows that there is a need for a better plumbing system in the fragmented world of edtech.

We turned to eight investors in the space to understand which subcategories are shaping up to be the future, following up on our first survey last fall when the world was very different, and another in early April when less was understood about the pandemic. Our goal here was to find nonobvious ways innovation is living within the noisier-than-ever sector. The result? Intel on nascent trends, deal-makers and what adaption looks like amid a time of uncertainty.

Today you’ll get a deep dive on the nerdy stuff from the following investors:

  • Reach Capital’s Jennifer Carolan, Shauntel Garvey and Chian Gong
  • Ian Chiu, Owl Ventures
  • Jan Lynn-Matern, Emerge Education
  • David Eichler, TCV
  • Rebecca Kaden, Union Square Ventures
  • Jomayra Herrera, Cowboy Ventures

Investors differed on which subcategories benefitted the most, but it’s clear that the pandemic didn’t lift up the entirety of the edtech space. One investor noted that the pandemic made them even less interested in ISAs, while other venture capitalists noted how valuable the financing instrument is now, more than ever before.

We got into some of the big themes that have risen in the past few months: online learning, reskilling, ISAs, virtual universities and where each investor draws their line around these categories.

A common theme throughout the commentary now is that the opportunity presented by coronavirus is not being met with complacency, but instead a push to grow better. Investors talked about innovation needs to account for childcare, cost, digital infrastructure, and the addressable population, pandemic or not.

I think that’s enough teasing. Now, onto the answers.

Reach Capital’s Jennifer Carolan, Shauntel Garvey and Chian Gong

What nascent trends are you most excited about within edtech?

Chian Gong: I’m excited by the opportunity in early childhood education — today, 90% of new parents are millennials and they are digital-natives who are looking for modern, online tools to help them parent. The industry already had significant tailwinds given the growing percentage of families in which ALL available parents are working (which translates to both more earnings and a greater need for childcare — if you look it up, daycare and preschool has been a growing Google search query). With COVID, the need for innovation is even greater — childcare is critical to reopening the economy and parents sheltered in place with their children are even more tuned in to their needs. The companies we’ve invested in within early childhood have seen a huge increase in demand. I’m eager to see more companies emerge addressing needs like parent education, quality early childhood education and tools for modern parenting.

Jennifer Carolan: Live, online learning in some ways is an evolution of MOOCs (Massive Open Online Courses) that launched about a decade ago. These first-gen MOOCs opened up learning by distributing high-quality content and knowledge to tens of millions of learners around the world. MOOCs made information accessible but also showed that motivation is harder to scale. These well-funded companies learned what educational research had validated decades ago: that motivation drives learning. Motivation is rooted in emotion and people emote, not algorithms or content. Live online holds great promise for bringing engagement to online learning. It’s early days and we are just starting to push the boundaries of online engagement but it’s happening. Our investment in Outschool is a great example of the magic that can happen when you combine passionate teachers, interest-driven curriculum and diverse small groups of kids, online.

The pandemic has accelerated global adoption of education technology. Our category-leading investments have grown their user bases by 5-10x since March and much of it has been outside of the U.S. edtech as a VC-backed industry has been thriving in Asia for more than 15 years but we are now seeing rapid adoption in Europe, Australia, MENA and LATAM.

How does the uncertain future of schools impact how you invest?

Jennifer Carolan: There is no doubt that schools will look different post-virus. This pandemic has made parents/guardians acutely aware of just how challenging and technical the role of the teacher is. It has also highlighted the custodial function of our schools — 92% of our nation’s 50 million+ schoolchildren attend our public schools. The school closures have been especially challenging for single-parents and families with two working parents, which now make up a majority of our K-12 families. Regarding our investing, district and school budgets have been shifting from print to digital for years, but the pandemic has accelerated this shift dramatically. Our K-12 portfolio companies are stepping up to support schools and families, adapting their products for home and hybrid use.

Are you bullish or bearish on digital universities?

Shauntel Garvey: I am bullish that in order to survive, traditional on-campus, residential colleges and universities will need to find ways to integrate more digital experiences into their existing programs. This is the perfect opportunity for these institutions to experiment with hybrid models to understand which aspects of the learning experience are best suited for online delivery and which aspects are best suited for in-person interactions. These hybrid offerings will be more compelling to the modern learner who is seeking more affordable, accessible and flexible higher education options.

Are you bullish or bearish on reskilling technology?

Shauntel Garvey: Bullish — there is a tremendous need for people to reskill and transition into new careers as entire industries will be transformed or disappear in light of the pandemic. I see a huge opportunity in the middle skills space where there are a number of industries such as health care with growing talent shortages. Technology is also enabling more accessible and engaging learning formats such as mobile-first content delivery and live online instruction. NextStep, for example, trains people to become Certified Nursing Assistants via their mobile phones in as few as 10 weeks.

Are current market solutions inclusive? To what extent?

Chian Gong: The edtech market has come a long way in terms of inclusivity — many of the most widely adopted edtech products today have helped increase access to quality education and provide greater visibility into learning. For example, ClassDojo is free and used in 95% of U.S. schools to help build classroom communities. Many of these tools provide translations and are designed with accessibility in mind. At the same time, while great strides have been made in bringing schools online, (broadband penetration is now at 99% in schools) — COVID-19 has revealed the gap in home access to high speed internet and devices. Many students were left behind with school closures and the reality is that well-resourced families are able to continue learning, while many others are left in the dark. We need better digital infrastructure to realize the full promise of education technology.

What are you looking for in your next investment? What is the deal-maker?

Chian Gong: Relationship-driven learning. With the renewed interest in edtech due to COVID, people often ask if the surge in usage will last — the answer is it depends. There are many tools that have popped up as substitutes for classroom learning and their stickiness post-COVID is unclear. At Reach, we are investing in the future of education, we believe that technology has the opportunity to enable great learning and that learning is deeply human. As such, we’re excited by entrepreneurs who are finding ways of creating meaningful learning experiences — whether its mentors who guide you through a career transition (Springboard, PeopleGrove), keeping families connected to the classroom (ClassDojo, FreshGrade, Kaymbu), or engaging live with an educator and other students (Outschool, Tinkergarten). We are seeking opportunities that enable scalable, relationship-driven learning.

Ian Chiu, Owl Ventures

Which sectors within edtech have most benefited from the digital revolution and remote rush?

The vast majority of companies across K-12, higher ed and lifelong learning that are providing solutions to support the successful delivery of remote learning and training have benefited from the increasing adoption of digital solutions. The ones that have benefited the most are those that (1) have compelling offerings with proven satisfaction and outcomes and (2) have been able to mobilize to meet the surge in demand, particularly as their own organizations shifted to a remote work environment. WhiteHat Jr., which provides live online coding classes for kids is an example of this in India — they have experienced 100% month-over-month growth over the past several months. Another great example is MasterClass, which provides an online platform for lifelong learners — they have experienced a surge of new users in recent months with weeks where they have done 10x what they did last year in revenue.

What nascent trends are you most excited about within edtech?

The continued globalization of edtech offerings is a trend that we are very excited about. The demand for high quality education is global and technology has now enabled companies to more easily reach the 1.5 billion learners and students around the world. Quizlet (www.quizlet.com), as an example, already serves over 50 million monthly active users across 130+ countries. This trend is also happening with international companies like Labster in Denmark which serves many universities and schools around the world including most recently all of the California Community Colleges and Byju’s in India planning to enter the US, UK, Australia and New Zealand as well as acquiring a US based learning startup last year. We believe that EdTech will continue to see dramatic international expansion in the coming years.

What within edtech are you bearish on?

We shy away from edtech companies with products or solutions that do not have demonstrable efficacy or outcomes. We strongly believe that the most successful companies are those that are able to quantitatively measure their education outcomes. To that end, we work continuously with our companies to measure the impact, efficacy, access and student outcome gains that are taking place across the portfolio.

How does the uncertain future of schools impact how you invest?

We are actively looking at opportunities that will help schools carry out their mission in myriad learning environments. Given the dynamic and unpredictable environment, educational institutions from here on out will need to be prepared and ready to deploy technology at scale to maintain continuity of learning for their students. At the same time, we are seeing an increase in compelling direct-to-consumer offerings as families consider alternatives to traditional schooling. Direct-to-consumer edtech businesses are incredibly scaled in international markets like China and India, and we believe there will be meaningful opportunities for edtech companies to increasingly reach consumers here in the U.S. as well given the uncertainty around the upcoming school year.

Are you bullish or bearish on ISAs?

ISAs have helped to reduce the friction for students to gain access to education. As a financing instrument, ISAs help to align the institution with the student’s goals and outcomes. In order for that all to be ultimately successful, everything in the value chain needs to work — institutions need to provide an outstanding education, students need to be committed and engaged and companies need to hire and pay students coming out of these programs. If all of those hold true, then ISAs will have served a valuable role for all stakeholders involved.

What about digital universities?

Digital universities and courses expand the addressable market of learners that can be served by not only increasing access to those who cannot pursue residential learning but also by expanding the capacity for traditional universities and empowering them to deliver a hybrid experience. Moreover, given the challenges we face with COVID-19, many universities are planning a full or partial remote teaching and learning model for the upcoming academic year. Additionally, we are seeing tremendous uptake of digital education in graduate and certificate education where professionals are able to improve skills and expand their understanding without leaving the workforce. In short, the value of digital offerings as part of the higher education ecosystem is tremendous for both institutions and learners and will only continue to get better as technologies evolve.

Are you bullish or bearish on reskilling technology?

We are very bullish on reskilling technology. The need for these offerings has never been higher, both because of the rapidly changing market — the OECD projects that a billion jobs will be transformed by technology in the upcoming decade — and because COVID-19 has effectively eliminated the option for live in-person training at the moment. We are seeing a fundamental shift not only in the way employers and employees view reskilling but also in the way that it is delivered. Technology is at the core of this shift and enables more flexible and accessible learning while also creating valuable benchmarking and outcomes data. Companies like Degreed, offering an upskilling platform, have seen a dramatic rise in demand over the past few years. Degreed now counts many of the largest enterprises around the world, like Citi, Itau, Boeing and Verizon, as customers and millions of employees as users.

Are current market solutions inclusive? To what extent?

Globally, many edtech solutions are focused on delivering the very best education at a fraction of the cost as compared to traditional alternatives, which helps communities that may otherwise not have access to these resources. World-class offerings from companies like Labster and Byju’s are great examples of this. On the other hand, there is still a very real digital divide both in the United States and countries around the world that needs to be addressed before these offerings can truly fulfill their goals of increasing access to all.

Another example of inclusivity in edtech is SV Academy, which provides a free online sales training program for underrepresented groups. Sixty percent of SV Academy graduates are women, 40% are Latinx or African American and 70% are first-generation college graduates. SV Academy has also partnered with Arizona State University and Florida International University — partnerships that were intentionally created with schools that serve underrepresented students. Arizona State is a large public university with over 90,000 students and Florida International University graduates more Latinx students than any other higher education institution in the continental U.S.

A lot of people want to see a hybrid future between IRL and digital. Are there any companies doing this better than others?

Companies whose product portfolio have been designed in a way that can be used by teachers in the classroom will drive a hybrid future. Accelerate Learning’s STEMscopes is a perfect example of this. Their pre-K-12 STEM curriculum is used by over 4.5 million students across all 50 states and provides comprehensive digital resources, supplemental print materials and hands-on exploration kits to drive engagement and academic growth. We have also seen this internationally with companies like Lele Ketang where their comprehensive digital curriculum is being used by teachers in live learning centers all across China.

Jan Lynn-Matern, Emerge Education

Which sectors within edtech have most benefited from the digital revolution and remote rush?

Edtech companies have both won and lost out as a result of the pandemic. Amongst those that most benefited are early years media companies like Yoto, K-12 study tools like YaClass, causal learning apps like Duolingo and MasterClass, companies providing alternative ways of accessing university-level content like Coursera and companies helping universities go online like Aula.

What nascent trends are you most excited about within edtech?

We invest in companies that address the $8.5 trillion global skills gap and in companies that either disrupt the status quo by providing people and industries with access to in-demand skills directly or that enable higher education incumbents to serve the adult market.

Specific ideas we are excited about:

  • Companies that staff projects with independent digital remote workers (Contra).
  • Industry-certified training programs for digital economy (FourthRev).
  • Hybrid offline and online challenger universities (EDU).
  • Products that helps universities refocus their student support and curricula on employability.
  • Challenger universities created by industry for industry.
  • Hard and soft skill bootcamp re-bundlers (i.e., combining a range of bootcamps to deliver a degree).
  • Apprenticeship-based scalable corporate training providers (e.g., WhiteHat, OpenClassrooms).
  • Unbundling degrees into specific career-outcomes-based programs (e.g., the MBA targets a broad range of careers — break it up into more focused and cost-effective specializations) (Quantic).
  • Small group, live learning, for high-end professionals (mid-career), supported by superstar mentors (B2B or B2C).
  • Skills and competency mapping players (e.g., Fuel50, FutureFit AI, Glean Labs, Faethm).
  • Out-placement and out-skilling (e.g., Next Chapter by Guild).
  • Micro-credential marketplaces/transfer clearing houses (e.g., FutureLearn — establishing university credit as a common currency/stackable degrees).

What within edtech are you bearish on?

We are not hot on companies selling pure software to schools and universities.

Are you bullish or bearish on ISAs?

Pre-COVID, we were already bearish on ISAs in the sense that we didn’t see this becoming a major asset class without government support (no track record, minority of programs that have a high enough career ROI to be investable). Post-COVID, the environment in which to prove this asset class has become even tougher.

Are you bullish or bearish on digital universities?

It’s hard to think of many universities that will not, in some sense, be digital in the future.

Does that mean full degrees will be delivered online? How deeply digital is embraced will differ from program to program.

At the undergraduate level, the physical experience is more important, so digital here will likely be limited to providing students the ability to seamlessly transfer from physical to digital ways of engaging with content, as needed. Undergraduates will continue to demand a bundle of products including the coming of age experience that being away from home provides.

The story is different at the postgraduate level. In Australia, it is already the case that more postgraduate degrees are delivered fully online than face to face. Adult learners value efficiency over physicality and this trend will continue. The same is true of adult learners pursuing career-focused short courses and corporate education clients. Digital universities will play a big role here.

Are you bullish or bearish on reskilling technology?

The biggest need amongst corporates is actually to help them understand what skills they have and need. This is a billion dollar problem that some of the largest employers are building in-house solutions to but no one has solved adequately. We’re actively looking for solutions here.

Are current market solutions inclusive? To what extent?

A lot of the vocation training solutions we are interested in are specifically designed to make the education system more inclusive, e.g., by removing financial barriers to accessing education (bootcamps) or by allowing adult learners to finish their degrees through education as a work benefit.

A lot of people want to see a hybrid future between IRL and digital. Are there any companies doing this better than others?

EDU: delivering full medical degrees in hybrid fashion.

Skillit: trade school delivered partially online and partially on-site with employers.

David Eichler at TCV

Which sectors within edtech have most benefited from the digital revolution and remote rush?

We are seeing strong tailwinds across the edtech landscape, and we believe the biggest beneficiaries are the products that have prioritized both (1) high-quality experiences and (2) positive outcomes for learners. In terms of specific subsectors, digital native instructional content platforms across K-12, higher education and corporate training are now in very high demand. In addition, we continue to see strong demand for platforms that digitize manual and paper-based products.

How does the uncertain future of schools impact how you invest?

While we have spent many, many hours trying to understand some of the implications arising from the uncertainty in the future of schools, it hasn’t changed how we invest. We are focused on technology products and platforms that provide leverage to teachers and enable better learning experiences for students. The last few months have provided positive indications that these products tend to provide value both in-person and remote, and thus we feel many of the companies we spend time with can adapt and thrive in any future environment.

Are you bullish or bearish on digital universities?

Bullish. There is a place for both ground-based and digital universities, and we believe that over time, high-quality use cases for both will emerge. Digital universities are still nascent today, but they are quickly maturing as demand spikes. We believe they present a scalable learning alternative and have the potential to reach more students than traditional ground-based universities. It will be exciting to see how the market transitions over the coming decade.

Are you bullish or bearish on reskilling technology?

Bullish. As a society, we are going through an economic transformation, and training platforms can help bridge skill gaps and enable individuals to be a part of the future economy. There are many interesting areas to enable reskilling — from technical skills, to managerial skills, to mastery of content. The key for businesses in reskilling is to be able to provide a comprehensive experience from (1) assessment of where an individual is today to (2) a pathway to show them where they want to be and (3) content to help them get there.

Are current market solutions inclusive? To what extent?

Our focus has always been on platforms that enable positive outcomes for all, and equitable access is a critical component to that. In some cases, there is friction given hardware requirements to leverage software solutions. However, as smartphones become ubiquitous and the price of laptops and tablets continue to decrease, we are bullish that equitable access to education services will grow over time.

A lot of people want to see a hybrid future between IRL and digital. Are there any companies doing this better than others?

Yes, companies like Newsela, a TCV company, which provides teachers with vetted, quality content and tools to manage their classroom via software, are flourishing right now. Particularly as the definition of a classroom is becoming more complex and teachers can provide instructional content to their students regardless of being in the same room or remote.

Many corporate training platforms (like Skilljar and Lessonly) are also seeing very strong adoption — especially, purpose-built platforms focused on things like customer training, sales training and customer success training, as they can enable an employee or customer at the point of learning. Many of these tools provided extra leverage when in-person was possible but are now mission critical as employees and customers are remote.

What are you looking for in your next investment? What is the deal-maker?

Within edtech, we have two main themes: (1) instructional content platforms that provide strong engagement and consumer value proposition and (2) administrative platforms that help utilize data to measure and improve outcomes. In addition, we want to work with management teams that have incredible empathy for the end user, and they are excited to change how learning happens. Investments happen when we have the intersection of a great product and a management team that can scale with the business.

Rebecca Kaden, Union Square Ventures

What kinds of edtech companies transform what education means and looks like?

  1. Change the system from the outside in by going direct to learner — we are interested in businesses that sell to the learner directly (versus the school system) both because of the speed of change possible with the model and because we think these are most likely to be positioned to structurally change what learning looks like versus augment it. Some of these are virtual learning systems or platforms like Duolingo or Quizlet (USV investments). Some may be new forms of what learning or school looks like altogether like Prenda or Verto (not USV investments, just examples).
  2. Broaden access by dramatically lowering the cost and increasing the quality through how learning is structured and delivered. We’ve been focused on this graph that shows price changes over 20 years. So much of what we depend on has gotten cheaper (software, etc.) — but health care and education have dramatically increased. Much of venture has been invested on the bottom of the graph. But the opportunity to drive value into the top is huge and we think really critical. It will rely on solutions that have different cost structures, like Duolingo or Outschool.
  3. Companies that are outcome versus credential driven.
  4. Expand geographical boundaries to improve accessibility and quality. This is something COVID has dramatically sped up by necessity but was already in process. Expanding geographical boundaries allows us to think about the best way for someone to learn versus the closest; remove overhead to lower cost; and dramatically expand diversity of experience. Companies like Outschool are showing this firsthand. While the growth is accelerated by COVID we think it is training behavior that will linger long after.

Jomayra Herrera, Cowboy Ventures

Which sectors within edtech have most benefited from the digital revolution and remote rush?

Pre-K-12 supplemental online learning and edutainment — as parents now have to play the dual role of providing for their family and be an educator, they are in search of any resources and tools that can supplement their children’s learning.

Online adult learning. Even before COVID-19, the “traditional” college student was not the typical 18-24-year-old. In fact, 38% of undergraduate students are older than 25, 58% are working and more than 25% are parents. Typical adult learning solutions do not work for the majority of learners and this time period has potentially accelerated the movement to making offerings more accessible. Moreover, whenever there is a downturn, we’ve seen educational enrollment increase so I expect that to be the case over the next year.

What nascent trends are you most excited about within edtech?

Online live learning that lets learners connect with students of different backgrounds: The rise of companies like Outschool enable kids to be in virtual classrooms and collaborate with students all across the country. If you’re limited to going to school or after-school programming within your neighborhood, you run the risk of being surrounded by a mostly homogenous population throughout most of your upbringing. With the rise of online live learning, it really expands the group of people that students engage with and, relatedly, build empathy for.

Adult learning solutions outside of software engineering and data analytics: The last era of “bootcamps” have mostly been focused on preparing students for careers in fields like software engineering and data analytics. I’m excited about the new wave of training and apprenticeship offerings that expand learning to areas likes sales, health care, cybersecurity and manufacturing.

Improved tooling: As the majority of people are now using Zoom to facilitate the move to online learning, I think many are realizing some of the shortcomings of existing tooling for online learning. I’m hoping that as a result of this time period, we start to see better tooling to enable best practices in teaching and leverage the unique benefits of technology to supercharge the teacher.

What within edtech are you bearish on?

The mass adoption of homeschooling. I’ve seen a lot of predictions that more parents are going to homeschool their children after COVID-19 passes and I have a hard time seeing how that will be the case. There might be a slight uptick, but most of the barriers for homeschooling are resource-based (e.g., there isn’t an adult that can stay home full time) so unless that changes I don’t know if we will see the rise that many are predicting.

I’m excited about the potential for online learning to increase accessibility and hopefully improve affordability, especially in the higher ed space, but I don’t believe online will (or should) fully replace in-person learning. There are a lot of benefits to meeting and collaborating in-person that we shouldn’t lose sight of.

How does the uncertain future of schools impact how you invest?

The future of traditional higher ed is more uncertain than ever. Students are questioning whether to enroll if learning is going to be online and most schools don’t have the resources to cover even a year of reduced tuition revenue. This creates an opening for alternative learning providers in the adult learning space, which we are excited to track.

We weren’t really investing in companies selling directly to schools (K-12 and higher ed) before this time period and I think it is only going to get harder for these companies as budgets tighten for all schools.

Are you bullish or bearish on ISAs?

I am bullish on alternative financing solutions that make schools more accessible and values-aligned, of which ISAs are one option. It will be interesting to track how cohorts of students with ISAs who are just graduating perform in a potential downturn and how that might impact the way ISA purchasers (those who actually purchase and hold the ISA) evaluate how attractive they are.

Are you bullish or bearish on digital universities?

Online universities are not a new concept — schools like WGU and Penn Foster have been around for many years with their online offerings and they have more than 100,000 students. That said, their completion rates are pretty low. I’m bullish about digital universities, as they can help increase access to higher ed, especially for working adults, but I believe there needs to be new practices and tools that help to ensure better engagement and completion. Only then will we actually realize the potential of online learning.

Are current market solutions inclusive? To what extent?

Market solutions for upskilling and reskilling continuously get more inclusive every year. As companies find new ways to increase accessibility (e.g., online and part-time offerings) and improve affordability (e.g., ISAs or deferred tuition options), it expands the addressable population they can serve. That said, there is still a lot of improvement that can be made to ensure solutions are truly inclusive. As I think about inclusivity, I find it easiest to think about it from the point of view of my own family — could someone who hasn’t gone to college before and English isn’t their first language access this offering? The answer is often no. The current process of finding the right learning offering for you, applying, staying engaged, getting coaching, preparing for job interviews, creating a resume and finding job placement is still super challenging.

A lot of people want to see a hybrid future between IRL and digital. Are there any companies doing this better than others?

Before COVID, I know there were some companies that had online offerings but were experimenting with having smaller “hubs” where they had a concentration of students that could meet in-person. I think that’s a promising approach, but I imagine it won’t be possible to do again at least through the end of the year.

What are you looking for in your next investment? What is the deal-maker?

At Cowboy, we think about the four Ps: people, potential, product and plan. We’re looking for founders who have a unique insight to a problem, operating in a large and growing market, with a solution that is 10x when compared to current offerings and have a plan to execute on their opportunity. Within this particular sector, there is a ton of opportunity. A few areas I’m personally excited about are new online adult learning and job placement solutions, especially in industries like health care, cybersecurity and manufacturing, and re-imagining the underlying tooling for online learning (e.g., a Zoom specifically for teaching).