Author: Brady Harter, Business Banker; and Hana Yang, Business Banker, First Republic Bank
Jennifer Lee and Michael Staton came to Learn Capital from different backgrounds — she spent her career in finance and he started out as a teacher. But both have a similar passion for exploring how technology can improve education and make learning more accessible for students of all ages.Their firm, San Mateo–based Learn Capital, funds startups that do exactly that.
We had a recent chat with Jennifer, a principal with the firm, and Michael, a firm partner, about how the state of education is changing, the opportunities and challenges facing education technology (ed tech) founders, and the pair’s best advice for startups in this rapidly evolving space.
“We’re at a place where technology can help differentiate not just how education is delivered, it can also decrease the amount of time it takes to learn something.” — Jennifer Lee
First, can you each discuss a bit of your background?
Jennifer: I come from a finance background; I started my career as a strategist at Lehman Brothers for the U.S. Treasury, Treasury futures and swaps markets. Since then I’ve been moving into less liquid markets, working in private debt and equity, and now venture capital. Prior to joining Learn Capital, I was consulting with a company that did impact advising. It’s important to me to find a firm and sector that makes a positive impact through its investments.
Michael: I actually started as a classroom teacher in a public school in Houston. I saw a lot of challenges that I had entrepreneurial ideas for, and I eventually started to develop web applications to help solve some of those challenges. In 2006, a friend called me from a (then) little-known company called Facebook and said that I should come out to Silicon Valley. I ended up founding and running a company for four years and later started at Learn Capital as an entrepreneur-in-residence.
Michael Staton, Partner, and Jennifer Lee, Principal, Learn Capital
Your website notes that “we’re in the middle of one of the greatest revolutions in the history of education.” Can you explain what that means?
Jennifer: Historically education has been a singularly offered good; it’s very local, with one person speaking to many, and that’s how people are expected to learn. In reality, people learn in such a variety of different ways — and there are so many different things that people want to learn about. So now we’re at a place where technology can help differentiate not just how education is delivered, it can also decrease the amount of time it takes to learn something. For example, we’re now able to take someone who has never learned to code, put them in a three-month course and significantly increase their employability.
Michael: I agree. When talking about the ed tech revolution, I often use an analogy about food. For 300 to 400 years, the only options we had for food were local staples. Now our selection is overly abundant and you have an overwhelming amount of choices. Similarly, after centuries of education being delivered primarily by a local school, there’s now a huge amount of diversity in how, what, when and where you can learn.
Where do see the most activity within the ed tech space?
Michael: There’s a lot of demand coming from capable learners who want to have the skill sets relevant to growth industries such as computer science, and tech companies that help consumers re-skill into those fields have progressed significantly over the past few years.
Jennifer: People also have been moving from job to job more frequently, and as they do, they want to ensure that their skills keep pace with the industry. I also think companies recognize that helping their employees grow and improve can be a powerful retention tool. Overall, including in K-12, we’ve seen a growing interest in tools that help older and younger learners personalize their education.
Learn Capital has made investments in AltSchool, Coursera and ClassDojo, just to name a few. What qualities do you look for in startups?
Michael: We are typically looking for early leaders in a category that is just getting off the ground. Because our name is well-known in ed tech, founders often come to us with their ideas.
Jennifer: Yes, for instance, the idea of a cloud-powered school and the technologies behind that is something we’ve been very excited about for a while. Bridge International Academies is a great example; they offer primary education in Kenya for six dollars a month. They use technology to gather data, improve their performance and scale their product.Now they’re one of the fastest growing school chains in the world, and they’re outperforming local public school options.
What common challenges do ed tech founders face — and how does Learn Capital help?
Michael: The typical challenge is that you either have great tech entrepreneurs who don’t appreciate the complexity of the education space, or you have the reverse — educational experts who don’t understand the technology requirements of the startup world. It can be hard to find a company whose founders have effectively paired that level of tech savvy with an understanding of the industry.
In addition, people sometimes struggle with the fact that the decision-maker or buyer is not the end user for many of these products. Often, the most exciting business models are a little different, and that can be tough from a sales perspective.
In terms of how we help, I think the most important role we play is in setting expectations. In that way, being a VC and being a teacher are similar — we want to set high expectations and provide a pathway for achieving them.
Finally, what advice do you have for aspiring ed tech founders, especially those raising capital?
Jennifer: Just like it’s important to understand the market you’re selling into, I think it’s critical to understand the sources of your capital and make sure that you are finding capital that’s aligned with your goals. Founders also need to understand how much capital they need to hit their next milestone and not overspend to ensure they have enough funds to get there.
The information in this article is presented as-is.
©2017 First Republic Bank