There’s no doubt that the coronavirus has had a monumental impact on the way we view technology’s relationship with education. For now, students are learning from home. But what happens when they return to school?
Picking up where we left off in last week’s survey, we asked top investors in the space for their predictions on what is ahead once life resumes to its new normal. One investor mentioned how in March, they spent a third of their time in edtech. Now, they’re spending almost all their time vetting startups there. Another said that the sector has always been underfunded. Time will tell if venture capitalists become more bullish on the sector, and more importantly, if adoption from schools with strict budgets becomes more lenient.
A harsh statistic sums the dynamic of adoption and investment pretty well: according to Tetyana Astashkina and Jean Hammond of Learn Launch, less than 5% of the $1.6 trillion spent on education in the U.S. is attributed to edtech. Let’s see if other investors think that percentage will shift forward after the pandemic ceases.
Ready or not, edtech has been shoved into the spotlight as millions of students shifted to remote learning due to pandemic-related school shutdowns.
But backing these companies are investors who have long believed that edtech was always set up for great returns and a big impact. We reached out to several to find out about which trends they’ve been willing to put their money behind. (And frankly, what we’ve been missing.)
We got into how tech can help — or hurt — underserved students struggling to find Wi-Fi or a laptop and how braintech still is ripe for innovation. Investors also shared the parts of edtech that Zoom video conferencing doesn’t address and why gamifying learning is so important.
Next week, we’ll publish the other findings we received from these investors, focusing on edtech in a post-COVID-19 world.
Responses below have been edited for length and clarity.
Jenny Lee, GGV
What trends are you most excited about in edtech from an investing perspective?
GGV Capital is focused on how technology is allowing startups to innovate and create new business models to (1) lower the reliance on physical locations and (2) to allow for teachers to teach online with multi-format (1:1, 1:n) virtual classrooms [and] (3) deliver highly interactive and personalized content via use of virtual characters, machine learning, natural language and voice recognition/processing. Edtech can be broken down into the process of (a) learning (reading, speaking, comprehension), (b) practicing, and (c) testing, and targets different age groups from 0-3 years old, 3-6 years, K-12 years and into exam prep and adult training. Over the last four to five years, we have invested in over 10 companies in the areas of language learning, test prep, holistic learnings (like logical thinking, programming etc) and K-12 homework assistant.
How much time are you spending on edtech right now? Is the market under-heated, over-heated or just right?
It’s a key investment sector for me, so I spend about 20-30% of my time with edtech startups. Over the last few years, it has been a steady sector, not over-heated, but the COVID-19 situation has thrown a bright spotlight on it as a sector benefiting from more stay-at-home children and parents anxious to keep them busy, learning and engaged. I expect the sector to heat up quite a bit as we have seen our portfolio companies attract a lot of new users, new revenue and new interested investors over the last several months as much of the world manages lock-down mode. We expect this trend to continue for our US-based and Asia-based edtech startups as well.
Just three months after capping what was the best year for Indian startups, having raised a record $14.5 billion in 2019, they are beginning to struggle to raise new capital as prominent investors urge them to “prepare for the worst”, cut spending and warn that it could be challenging to secure additional money for the next few months.
In an open letter to startup founders in India, ten global and local private equity and venture capitalist firms including Accel, Lightspeed, Sequoia Capital, and Matrix Partners cautioned that the current changes to the macro environment could make it difficult for a startup to close their next fundraising deal.
The firms, which included Kalaari Capital, SAIF Partners, and Nexus Venture Partners — some of the prominent names in India to back early-stage startups — asked founders to be prepared to not see their startups’ jump in the coming rounds and have a 12-18 month runway with what they raise.
“Assumptions from bull market financings or even from a few weeks ago do not apply. Many investors will move away from thinking about ‘growth at all costs’ to ‘reasonable growth with a path to profitability.’ Adjust your business plan and messaging accordingly,” they added.
Signs are beginning to emerge that investors are losing appetite to invest in the current scenario.
Indian startups participated in 79 deals to raise $496 million in March, down from $2.86 billion that they raised across 104 deals in February and $1.24 billion they raised from 93 deals in January this year, research firm Tracxn told TechCrunch. In March last year, Indian startups had raised $2.1 billion across 153 deals, the firm said.
New Delhi ordered a complete nation-wide lockdown for its 1.3 billion people for three weeks earlier this month in a bid to curtail the spread of COVID-19.
The lockdown, as you can imagine, has severely disrupted businesses of many startups, several founders told TechCrunch.
Beauty products and cosmetics retailer Nykaa on Tuesday suspended operations and informed its partners that it would not be able to pay their dues on time.
Investors cautioned startup founders to not take a “wait and watch” approach and assume that there will be a delay in their “receivables,” customers would likely ask for price cuts for services, and contracts would not close at the last minute.
“Through the lockdown most businesses could see revenues going down to almost zero and even post that the recovery curve may be a ‘U’ shaped one vs a ‘V’ shaped one,” they said.
If you’re looking for toothbrushes, skin-care face masks, mattresses, glasses or even socks, there’s a digitally-native, direct-to-consumer (D2C) company or two that can help you out.
And thanks to smart digital marketing, the cult followings that ensue and the economics of e-commerce, D2C has changed how we relate to consumer goods (while attracting a waterfall of investment dollars).
Globally, D2C startups have raised between $8 billion to $10 billion in known venture capital across more than 600 deals since the start of 2019, according to Crunchbase data. The industry was catalyzed by a number of nine-figure deals for companies like Glossier, which sells makeup products, and Ro, which is a telehealth startup.
Indeed, when prepping this post for publication, our list of notable D2C rounds since the start of 2019 grew long enough that we abandoned the idea of including a digest. The sector has been active across a host of verticals, making it hard to sum up in terms other than rounds and dollars invested.
But those are trailing indicators of what is going on between D2C startups and their investors. TechCrunch was curious, especially in the wake of the troubled Casper IPO, how investor sentiment might have shifted and what venture capitalists are looking for in the category.
We got into advice for founders looking to raise, whether influencer marketing is worth it and which channel one investor says is an “all-but-closed door for most D2C companies.” We’ll start with a summary of the three trends that stood out the most from our collected answers and then share the full investor digests.
With the news cycle churning out updates on the latest COVID-19 developments, the uncertainty about how long the pandemic will last and inevitable economic effects, some people are turning to meditation apps to clear their head. And in turn, some popular apps are making the services free or curating them for certain groups.
Los Angeles-based meditation app Headspace is offering free services and guides to help people and specific groups cope with stress by introducing Headspace for Healthcare Professionals, Headspace for Work and Headspace for Educators.
Headspace for Professionals, for example, gives all health care workers in a public health setting in the U.S. free access to Headspace Plus through the rest of the year, according to a blog post from the company. The workers will be able to access the subscription with their National Provider Identifier (a 10-digit identification number) and email address.
Headspace for Workers and Headspace for Educators offer free access to collections of meditations for teachers and other members of the workforce.
The meditation apps Calm and Simple Habit also are introducing free services. Calm, which is backed by investors including TPG Growth and Lightspeed Venture Partners, has put together a curated selection of free resources. Users can pick from sleep meditations, meditations for kids, practices to find ease and more.
Simple Habit is introducing new meditation collections specifically geared toward coronavirus–topics including self-care, mindfulness for kids at home, mindful communication with family and easing fear, according to the company.
“We recognize that many people are now being required to stay home, resulting in loss of income and financial uncertainty,” Simple Habit CEO Yunha Kim wrote in a blog post. “As a response to this macro change, starting today until the end of April 2020, we’ll offer free Simple Habit premium memberships to all people who are financially impacted by this difficult time and can no longer afford to pay. If you’re struggling or in need, we’ll take care of you.”
In part two of a survey that asks top VCs about exciting opportunities in open source and dev tools, we dig into responses from 10 leading open-source-focused investors at firms that span early to growth stage across software-specific firms, corporate venture arms and prominent generalist firms.