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With kids home from school around the world, online learning and edtech have suddenly captured the spotlight. Many investors, scrambling to chase hot deals, are already preemptively offering term sheets to companies that are enjoying unprecedented levels of growth, Reach Capital's Shauntel Garvey said in an interview.
Unlike the trend chasers, Garvey's firm has been specializing in edtech deals for years. She started investing in the sector first at the nonprofit NewSchools Venture Fund in 2012. The seed fund spun out into Reach Capital in 2015, when Garvey co-founded the firm alongside colleagues Wayee Chu, Jennifer Carolan and Esteban Sosnik with a debut $53 million fund.
It's since gone on to raise a second $82 million fund to double down on its belief in investing in education companies, and Garvey is on the boards of companies like coding school Holberton and skills gap platform Riipen. Now that edtech is in high demand, she's the one fielding calls from generalist investors looking to understand what's happening.
Protocol spoke with Garvey about what's changed (and what hasn't) since school went virtual, her bet that there's a big opportunity in reskilling a new unemployed workforce, and why she doesn't think the online graduation business will stick.
This interview has been lightly edited and condensed for clarity.
Obviously kids are home and there's a big focus on education both from within households and on the VC side. So how has the world changed for you in the last six weeks as a specialist in edtech investing?
What's interesting is this is not just a U.S. problem. This is a global problem. A lot of companies who maybe were very U.S.-focused are now seeing that a good majority of their growth is coming internationally, which also just opens up the [total addressable market].
We are seeing just tons of unprecedented growth. A lot of our companies have made some of their products free right now, given what's going on. One of them is Epic — they are basically Netflix for kids' ebooks. They added over 2 million new students to their platform so they can basically access a digital library of over 40,000 titles. It's unprecedented growth.
We have another one called Outschool, a live online platform where teachers can do synchronous classes. Typically they really focused on the homeschool market. Now that everyone's home, they've seen over 30,000 students, thousands of classes added. That started a supply problem for them, so they did a whole campaign to add 5,000 teachers to start teaching on their platform.
What's nice is that we're kind of seeing this acceleration of the adoption curve. So where there's been hesitancy or resistance to adopt edtech, this kind of forced it to happen all at once. One of the things we're wondering now is how much does this stick.
What about interest from other venture capitalists?
Oh my gosh — I'm getting calls every other day. There's definitely a renewed interest from generalist investors, and I think they're starting to see just this massive opportunity moving forward. A lot of our companies have received preemptive term sheets already, just based on the growth. People see the growth, but the question is still: Will that growth be sustained over time?
There's definitely a renewed interest, and it's coming from all different levels. You have all those companies that are helping the K-12 market, and you have solutions that will persist in terms of helping schools with online and remote learning.
You have the higher-ed marketer, and I think that's going to be totally unbundled and disrupted. What will college look like, and what will people want that experience to really be? What are some options that will help people who maybe want to do alternatives, like the boot camp space?
And then there's reskilling and up-skilling. All these Americans are unemployed now, so what are they going to do, reskill and find a pathway to new careers? We're seeing interest in all these different levels from generalist VCs that we haven't really seen in the past.
Are there any areas within edtech that have actually cooled or are less attractive right now?
Anything that's happening directly within a school is still a question mark. You're still selling directly to a school for an in-class use case, and that's cooled off because obviously there's just no sales happening. Kids aren't even in school, so they can't even use those tools. So the concern is that when we go back, what are those budgets going to look like? As we see the budgets from states and cities now get decreased, one of the first things that gets cut is education budgets, so that has large implications for what they can spend on some of these tools.
What hasn't changed in the edtech scene in the last couple of weeks? Is there anything that's continued to be normal in this environment?
It's normal and a continued emphasis, but one thing I'll call out is how this has actually highlighted inequities within edtech. Not everyone has Wi-Fi at home. Not everyone has devices at home. So when schools are implementing solutions, it's highlighting those inequities. We still have a ways to go in terms of device penetration and broadband access.
I think the other piece that continues to be at the forefront is data privacy. Who owns the data? Now you have students in these video chats and you really are amassing a massive amount of data. And so those personal data and privacy concerns are also being elevated.
There's also a need for additional support of teachers. We're asking teachers to be heroes right now, and this is highlighting that we still have a ways to go in supporting them into making the transition to edtech. What professional development training do we need to do to make sure people can make this transition successfully?
Now that you basically have half the world's children learning from home, what do you expect will be a lasting shift or behavioral change?
I think parents are getting more in-tune and involved with what their kids are doing at school. They're getting a front-row view of what's happening, and I think that will persist.
I also think this time has really highlighted the need of school being a place where we teach academics, but we also support a student emotionally. I think it's time that we really thought about how we make sure our students are OK, that our students are getting the social and emotional skills they need. I think coming out of this that a lot of students will have trauma, so I think we need a renewed focus on not just the academics but the whole student.
What kind of startups are you looking for coming out of this?
For us, what it's highlighting is the importance of community and that we should focus on strong support systems both personally and professionally. I do think a sense of community is often found within our schools and within our workplace. It's kind of where we look to others for guidance and mentorship, encouragement, inspiration and all that. So I would actually love to see what I'm calling community-driven learning solutions: solutions that reinforce existing communities, but also create avenues to build up new learning communities that may not be necessarily tied to one physical location.
Are there any areas that right now are spiking that you're actually more bearish on? Or categories of startups that you're cautioning is just a blip rather than a longtime path to growth?
This is probably a broad category, but this idea of "the online virtual experience for X," even within a school environment. Right now, for example, there's a lot of tools like, here's an online experience for your graduation. Here's an online experience for visiting campus. I just don't think there's ever a replacement for actually visiting a campus or celebrating your graduation in person. I do think people will cherish and value those special moments.
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What do you make of the generalist investors getting super interested in edtech? In the past, people have said it's a challenge to invest in, so what's it been like to have this sudden renewed interest from mainstream VCs?
I think it's exciting, and what I'm finding is that people are willing to dig more in the space to learn. Instead of just saying, I'm going to invest in this new hot edtech company, I think investors are looking to understand the space more, and I'm getting a lot of those kinds of calls. I do think this will stick just because there are so many tailwinds happening right now. People had kind of put edtech in this bucket, and now they're realizing that it does go across so many different verticals. So much is embedded in the fabric of their lives that I think it will stick this time.
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Biz Carson ( @bizcarson) is a San Francisco-based reporter at Protocol, covering Silicon Valley with a focus on startups and venture capital. Previously, she reported for Forbes and was co-editor of Forbes Next Billion-Dollar Startups list. Before that, she worked for Business Insider, Gigaom, and Wired and started her career as a newspaper designer for Gannett.