We frequently hear (and write) about teachers who are driven to start their own edtech companies after struggling to implement top-down technology initiatives in their classrooms. It is less common, however, for educators to graduate into the realm of venture capital investing.
"I think of my career as a progression of abstracting myself out of what I'm doing," explains Michael Staton, a partner at San Mateo, Calif.-based Learn Capital.
Staton, who began his career a decade ago as a U.S. History teacher in Houston, was underwhelmed with the tech tools available to teachers during that time. After a period of tinkering around with technology, he relocated to San Francisco to work for an edtech startup that would shortly thereafter go belly up.
Surrounded by friends in the tech sector, including a roommate at the time who worked at Facebook, Staton would soon with a couple partners start a student engagement platform for higher learning now called Uversity. The company, which helps more than 140 colleges and universities connect with approximately four million students, was the first for-profit organization to secure a venture investment from the Bill and Melinda Gates Foundation. After serving as CEO of Uversity through 2011, Staton would go on to become a Community Advisor and Volunteer Venture Partner at the nonprofit NewSchools Venture Fund. He joined Learn Capital as a partner in 2012.
"Venture provides a platform for abstract thinking and analysis," he said, "and allows me to have influence in what strategies companies across the board are taking."
Learn Capital (along with the NewSchools Venture Fund) is among the most prolific investors in early-stage educational technology companies today. The firm, which has approximately $80 million under management in two separate funds, has about 40 portfolio companies including learning management system Edmodo, massive open online curriculum provider Coursera, and educational video producer and distributor LearnZillion. The five-year-old firm makes 8-to-10 new investments per year, while supporting existing portfolio companies.
Staton says he is not at all concerned that there are no financial exits to date for Learn Capital portfolio companies.
"There is no onus to liquidate our assets," he said, adding that "we believe we are today the highest performing education venture capital fund in terms of financial returns."
Seeking strategic returns on investment
While the five limited partners that to date invest in Learn Capital's funds are assumedly expecting a financial return, Staton said they also have a "vested interest" in supporting innovation within education. The identity of limited partners within venture capital firms are not typically made public. However, a 2012 press release by Pearson indicates that the educational publishing behemoth was, at least at that time, the firm's largest limited partner.
Speaking generally about Learn Capital's investors, Staton said they prioritize "insight first, impact second, and financial returns third." He added that "the capability of creating returns for investors in a predictable way in the education space is something that is an end in itself and will create a multiplier effect in innovation in the space in general."
On investing in Common Core-oriented companies
Like many educators, students, parents and politicians, Staton is not pleased with how Common Core Standards are currently being implemented. However, once we get beyond "the messiness in the middle", he believes the "megatrend" of aligning content to transparent learning outcomes will remain.
"We're looking for data systems to make that easy and cheap, and reduce the barriers of distributing quality content and digital learning experiences to students," he said.
Learn Capital investments in this realm include LearnZillion (producer of Math and English Language Arts video lessons aligned to the Common Core), MasteryConnect (an online tool that helps more than one million teachers provide instant assessments and learning interventions), No Red Ink (an online tool that builds grammar and creative writing skills), and Desmos (a mobile app graphic calculator).
Taking a cautious approach to learning-based objects
Although Staton is personally interested in how the Internet of Things will impact learning, particularly at the early childhood level where young kids "brains aren't ready for the abstraction layer of symbolic systems of communication", he says Learn Capital is taking a necessarily cautious approach to the sector.
The challenge for companies creating educational wearables and other learning-based objects comes from the perception (fair or not) that the data collected throughout the process could be mishandled.
"Until the public has wider discussion on that," he explained, "Learn Capital won't want to be out in front in that trend."
In the meantime, he anticipates that consumer awareness and acceptance of learning-based objects will grow primarily through tablet-based accessories that are built for early childhood play.
This is all part of the "extra layer of responsibility" Staton takes on as a teacher turned entrepreneur turned venture capital investor.
"In general there is a public responsibility for what you do and what your companies do," he said. "The reason we wake up everyday is because we think technology integration can create results for learners, their families, and general well being of humanity.