Investments in educational technology startups in the United States hit a record $ 2.2 billion in 2020. Globally, this figure was over $ 16 billion, a 32-fold increase over 2010.
Few investors have observed and driven the growth of the edtech industry as closely and consistently as Reach Capital, one of the few venture companies that has concentrated its investments in startups in the educational technology sector over the past 10 years. And with the advent of edtech tools increasing – largely due to the pandemic – Reach sees many more opportunities for another decade.
The San Francisco-based company announced today that it has raised $ 165 million for its third fund. Funders include Sesame Workshop, Kaiser Permanente, National Geographic and AIMS Imprint from Goldman Sachs Asset Management. According to Shauntel Garvey, co-founder and partner of Reach Capital, this money will be used to support around 20 investment agreements in the Seed, Series A and Series B phases.
Reach has now raised $ 311 million across its three funds and invested in 90 edtech startups.
As the use of edtech products increased during the move to remote learning, the size and scope of investment agreements for digital education providers also increased. And closely followed by education funds from new and old firms, including ETS and Salesforce.
From EdSurge: “A Record Year Amid a Pandemic: US Edtech Raises $ 2.2 Billion in 2020.”
“The fact that we were able to raise a third fund indicates that the industry is maturing,” says Garvey. “With the pandemic, people are coming to realize the importance of having the right edtech tools to ensure that students have great educational experiences.”
Distance learning has also exposed and exacerbated socio-economic disparities, leading to uneven access to educational resources (especially for families who still cannot get online). Garvey says this was a top priority for her team in evaluating opportunity, and she points to reach portfolio companies like Paper, which works with school districts to provide free tuition to students, as examples of solutions that help eliminate Contribute to inequalities.
At $ 165 million, Reach’s newest fund seems small, at least when compared to the recent fundraising benchmarks set by its peers. Owl Ventures, another edtech-focused venture capital firm, raised $ 585 million for two new funds last year. Learn Capital is currently raising $ 250 million for its next fund.
Successful investors sometimes raise larger follow-up funds to write bigger checks to more established startups. However, Reach is sticking to its specialty, says Garvey: “We are still trying hard to provide early support to companies and we believe we can identify these winners early on.”
Investing in early-stage start-ups, which are often still optimizing their business models and adapting to the product market, is risky. But if the company is successful, there can be a big payday. Last November, Discovery Education paid $ 140 million to acquire one of Reach’s portfolio companies, Mystery Science, which raised just $ 4.5 million in venture capital.
This was the youngest of Reach’s seven exits to date, and Garvey believes more to come. “It used to be mostly private equity firms that made the most acquisitions. Now we’re seeing more strategic acquisitions like the Discovery deal. I think the big tech players – Apple, Google, Microsoft – will be more active in the future. “In addition to these opportunities, the emergence of SPACs offers another exit option.
The company has been improving its betting senses for nearly a decade. Reach’s roots go back to 2012 when it was a seed fund for the NewSchools Venture Fund, an Oakland-based nonprofit educational philanthropy. After investing nearly $ 12 million in 39 education startups, the team that led the work spun off into their own firm, Reach Capital.
Some of the earliest investments in K-12 companies are now having widespread presence. These include ClassDojo, a communications app that has 51 million users in 180 countries, and Nearpod, a digital teaching platform used in 99 of the top 100 school districts in the United States.
Reach has also branched into other areas of the education market. Services offered by the portfolio companies now range from a coding bootcamp and college mentoring service to medical flash cards, a daycare directory and a podcast app. It Goes Beyond the US Earlier this week, Reach participated in a launch for FourthRev, a London-based company that works with technology companies and universities to offer digital skills programs.
Garvey attributes much of the Reach’s success to its diversity. In the venture world, where women make up only 12 percent of decision-makers, Reach is one of the few companies that is led by a predominantly female team. Beyond gender, she finds that her colleagues – former teachers, entrepreneurs, and technologists – also bring a wide range of backgrounds and experiences to their work.