What’s driving entrepreneurship in Education?
Keynote, Victor Hu, Managing Director & Global Head of Education, Goldman Sachs
There is more entrepreneurial activity in all areas of education, and annual dollars investmented in education companies are about 5 times higher than what they were up until about 8 years ago. Victor talked about six trends and forces that are driving entrepreneurial innovation in education:
- The demand for technical skills, companies pay more employees who have the technical skills they need. This is driving demand for people to get those skills quickly and economically.
- The Digital Revolution has made the consumer directly reachable; there are no distance or time barriers. This is especially true outside of the US, where content and learning companies are reaching parents and learners on their mobile devices.
- China has more Millenials looking for jobs than the US and Europe combined.
- Lots of people are looking for adult education different from what Universities traditionally offer. Innovations are reducing the time and cost to get the skills and knowledge to meet some specific purpose through cutting edge content, analytic insight, and platforms that integrate the data, analytics, and content.
- As K12 moves to digital, whoever owns the platform controls the flow. The innovations are facilitating communications between teachers, students, and parents.
- There are bold bets to rethink education when we are not restrained by location and time, and we are under pressure to do more with less.
How do knowledgeable investors evaluate education opportunities?
- Robin Warner, Managing Director DeSilva + Phillips
- Jonathan Harber, Founder, StartEd Companies
- Judah Karkowsky, Global Head of M&A, Cengage
- Amy Margolis, Principal, The Riverside Company
Investors look for the exit, is it likely that the company will sell for enough in 5 years for investors to earn 10x what they put in? Is the company going to achieve escape velocity in a really big market.
Questions that investors ask themselves:
- Can these people pull it off?
- Is there a big enough opportunity? You’re not going to get investors in a venture with a potential for $20 million in revenue.
- Does the product meet a market need, and do potential customers have a way to pay for it?
- Have they shown good progress in the time since they’ve started?
A typical professional investor will have about 2000 deals cross their desk each year, look at 10%, and invest in 2-3.
The Inside Track on Raising Capital
- Rita Ferrandino, Founding Principal, Arc Capital Development
- Don Cogan-Draw, Co-Founder, Newsela
- Elena Cox, CEO, vibefect
- Daniel Pianko, Managing Director, University Ventures
- Marie Schwartz, CEO, TeenLive Media
When you make up your mind to accept professional investment, you’ve also made up your mind to sell the company; investors make their money at the exit.
You need to research a potential investor; you can’t just make a standard pitch every time. You need to show why there is a fit with that investor. Figure out what is going to appeal to the investor by looking at what they’ve invested in already.
Raising money is a job; you won’t be able to devote as much time to the rest of your company as you have in the past while you are raising money.
If you raise $10M you need to be able to show that the company is going to be worth at least $50M. In education, only 1-3 companies a year sell for that amount.
Your pitch deck is to get enough interest for them to be willing to spend the next 2-3 months figuring out if they are going to invest in you. The deck, and your presentation using the deck, isn’t going to raise the money.
If you have bad news, don't make potential investors dig to find it. They will find it, and then they won't be investors.