Brighteye Ventures, the European edtech venture capital firm, recently announced the $54 million first close of its second fund, bringing total assets under management above $112 million. Out of the new fund, the 2017-founded VC will invest in 15-20 companies over the next three years at the seed and Series A stage, writing checks up to $5 million.
Described as a thesis-driven fund investing in startups that “enhance learning” within the context of automation and other new technologies, coupled with changes in the way we live, Brighteye plans to disrupt the $7 trillion global education sector “as educators and students are adapting to distance learning en masse and millions of displaced workers are seeking to upskill,” according to a press release.
The firm’s investments to date include Ornikar, an online driving school in France and Spain serving more than 1.6 million students; Tandem, a Berlin-based peer-to-peer language learning platform with over 10 million members; and Epic!, a reading platform said to be used in more than 90% of U.S. schools.
To dig deeper into Brighteye’s thesis and the edtech sector more broadly, I caught up with managing partner Alex Latsis. We also discussed some of the findings in the firm’s recent European edtech funding report and how more venture capital than ever is set to flow into educational technology.
TechCrunch: Brighteye Ventures backs seed and Series A startups across Europe and North America that “enhance learning.” Can you elaborate a bit more on the fund’s remit, such as subsectors or specific technologies and what you look for in founders and startups at such an early stage?
Alex Latsis: We invest in startups that use technology to directly enable learning, skills acquisition or research as well as companies whose products address structural needs in the education sector. For example, Zen Educate addresses the systemic issue of teacher supply shortages in the U.K. via an on-demand platform that saves schools money whilst allowing educators to earn more. Litigate is an AI-driven coach and workflow tool improving results for legal associates, while Ironhack, the largest tech bootcamp in Europe and Latin America, gives young professionals the skills needed to enter the innovation economy and connects them to employers with a 90% job placement rate.
As education is a complex field we always seek to establish a degree of founder market fit, but more importantly that the founding teams themselves are a good fit internally. No startup succeeds on the merits of a founder alone, even if they may be driving the momentum.
In “The European EdTech Funding Report 2020,” you note that Europe is gaining momentum with a healthy increase in VC investments in local edtech startups. Specifically, you say that edtech VC investment has experienced 9.2x growth between 2014 and 2019 in terms of money invested. What is driving this and how does Europe compare to other major tech regions for edtech, such as Silicon Valley/U.S. or China?
Both Europe and the U.S. saw about 2% of venture capital invested in edtech in 2019. Growth in edtech investment in these markets to date has been driven largely by increased willingness to pay for training that is unavailable, unengaging or too expensive in legacy institutions and to a lesser extent by increased digital penetration in schools and universities that has enabled SaaS products to scale.
Given the rapid evolution of online education in the face of the pandemic, we expect funding for edtech will trend closer to 3%-5% of venture funding in the coming years on both sides of the Atlantic. This will mean billions in incremental investment, hundreds of new promising companies and incredible learning opportunities, particularly for those looking to upskill/reskill. In countries like India and China where school and university student populations are growing more rapidly, we expect 5%+ of VC funding to go into edtech as there is more growth in core demand.
The report also observes that edtech is getting more popular with generalist European VCs. From a competition point of view, this is obviously good for edtech founders but could make it harder for you to compete for deals. What’s the value add of being a sector-specific VC that you think will still enable you to source and win the best deals if there continues to be more capital flooding into the space?
From an entrepreneur’s perspective, it comes down to conviction, speed and network. Sector specialisation means that our entire team is devoted to mapping, evaluating and building networks in the learning industry. We understand what a differentiated approach looks like, can develop conviction quickly and make an offer based on that conviction. Once we invest, portfolio companies benefit from a network that includes not just potential clients and investors but also some of the best performing edtech companies in Europe (and some in the U.S.) like Ornikar, Epic!, Ironhack and Tandem, all of which would be able to provide examples of best practices. As we continue to grow the team internally to better serve the portfolio, generalist funds would have to double down quite considerably on edtech as a vertical to match the breadth and depth of focus we can offer.
The report notes that the U.K. received 72% of total edtech VC investments in 2019 in Europe. Why do you think that is and with Brexit looming do you think the country will continue to be the biggest European edtech hub in terms of capital invested?
The U.K. has a number of strengths underpinning the edtech sector, including world-class universities, high digital penetration in schools and a relatively large tech sector with strong demand for talent. That said, we expect the relative proportion of edtech funding in the U.K. versus the rest of Europe to decrease over time, in part because Brexit will make talent attraction and retention more difficult, but mostly because the geographical spread of edtech startups being funded at the early stage is increasing and so favors a greater dispersion of capital.
Clearly the future of work is an area of interest and focus for any edtech fund as people seek new career paths and ways to reskill or upskill and embark on lifelong learning. How have things like automation, and also more immediately, the pandemic, altered the way you think about education?
Education is ultimately about giving people the skills they need to fulfill their potential. As the pace of innovation has increased in recent years, the demand for education has also increased, both because the need for training is more frequent (hence the term lifelong learning), and because the relative economic benefits of acquiring innovation economy skills have grown dramatically.
At its best, edtech leverages technology to help people realize the promise of education at scale better, faster and cheaper. This can come from automation, but it can also come from facilitating connections between peers, like Tandem, which lets people practice languages with each other from around the world — or designing an experience that is inherently more engaging, like Aula, which provides a best-in-class blended learning experience for universities.
The pandemic has dramatically increased people’s exposure to edtech. With 90% of students affected worldwide, the pandemic forced the vast majority of traditional institutions to employ some technological solution to deliver learning. At the same time, economic disruption plus confinement made an unprecedented number of consumers go online to seek new skills. This dramatically reduced the cost of user acquisition for edtech companies across the board and has made both institutions and consumers both more familiar and more demanding with regards to online education.
Post-COVID, we expect production standards to follow those in the wider tech market more closely. We also believe that a new crop of entrepreneurs will spawn from some of the frictions and frustrations experienced with existing platforms during our mass-distance-learning experiment, so we’re hoping for plenty more prospects to come on the scene in the coming months and years.
On the topic of the coronavirus pandemic, what advice can you offer to early-stage founders looking to raise a seed round remotely and how to mitigate the lack of face-to-face relationship building during the process?
It’s certainly not ideal to not be able to interact in person with an investor potentially putting millions into your startup. But if the idea is compelling, traction is promising and you can provide enough time and bandwidth to educate the funds on why your company is an investable prospect, deals will get done regardless. It is a VC’s job to invest, so COVID or not we need to keep “meeting” people to deploy our funds — there is always a way for us to get comfortable if we want to.
Lastly, what is Brighteye Ventures actively doing (if anything) to ensure you back diverse founders, including relating to gender, but also ethnicity and socio-economic background? Or to shape the way the companies you fund think about diversity?
We consider diversity actively and have it front of mind when making investment decisions and as we look to expand our own team. People build solutions for the problems that they understand. We are purposefully looking to fund tech enabled solutions across the learning landscape. To date, that has helped to ensure a diversity of backgrounds in the age, ethnicity, socio-economic background, gender, geographic and professional backgrounds of the founders we back.