Firehose #179: 👩🏫 Getting schooled. 👩🏫
A return to edtech investing. Plus: vaccine logistics, the history of audiotech, a glitch in the matrix, and Pearl Jam wants you to vote!
|Oct 19, 2020||1|
One Big Thought
My interest in education stems from a personal connection. My mother was a teacher for many years. My wife is also a professional educator. After college, I saw myself entering the physics profession as a teacher and researcher. During my first year of graduate school at MIT, I had the pleasure of teaching several sections of “Introduction to Solid State Chemistry” — overseen by the legendary Professor Don Sadoway. He’s the kind of guy who wears a tuxedo and gives a champagne toast to celebrate his last class of the year:
As an investor, education was one of the first sectors I “deep dived” into during my time at Highland Capital Partners in Boston. I worked alongside one of the firm’s founders, Paul Maeder, to underwrite our investment in 2U in 2010.
Our core thesis at the time was that for-profit, online higher education providers like Apollo, Strayer, and Cappella were misaligned with their students. Having just gone through the mortgage crisis in the U.S., we saw similarities in how these schools signed students up, extracted meaningful tuition dollars (often taxpayer subsidized), and then failed to graduate the majority of them. University of Phoenix’s online program was a particularly egregious example, with a graduation rate of 5%! Students who left these programs went back into the workforce worse off, saddled with heavy debt and no greater job prospects than before.
The founders of 2U took a different approach. They envisioned 2U as a service provider to non-profit universities. In a model later dubbed Online Program Management (OPM), 2U offered universities marketing, technology, program management services, and up-front capital in exchange for a cut of tuition. Universities, however, would still do all the teaching and admissions. As such, 2U would only make money when it recruited students who were a strong fit for its university partners and when it retained them through graduation, which requires a high service level. The OPM model attracted some of the best non-profit universities in the country, including USC, Georgetown, and UC Berkeley. At the time of its IPO in 2014, 2U (then NASDAQ:TWOU) had over 14,000 enrolled students across its various programs. It was the first of the recent generation of edtech companies to go public.
While my interest in education continued, it took me almost a decade to make another investment in edtech. I struggled to find another great business in higher education, and, while K-12 saw a ton of innovative products going viral in schools, the path to monetization proved challenging. The market was waiting for a catalyst to release the potential energy of entrepreneurship in this important sector of the economy.
COVID-19 changed everything with respect to education in the U.S. It was the accelerant the industry has been waiting for. I’ve written extensively on its impact on higher ed since the crisis began. Here are 3 different pieces from this newsletter in May 2020:
Reimagining online learning: I discussed the need for digital transformation in universities and how edtech is essentially risk mitigation for these schools.
School’s out: I discussed the economic impact on higher education of COVID-19 and the coming budget crisis.
Fix college first: I shared an article by Flockjay’s* CEO Shaan Hathiramani, in which he calls on university presidents to use COVID-19 as an opportunity to invoke job-ready criteria, reduce inactive tenured faculty, grant regulatory reprieves to endowments to free up restricted dollars, and enact several other key reforms.
My Lightspeed partner Mercedes Bent, who has a deep background in edtech, wrote a two-part series on the impact of COVID-19 on early childhood education, as well as on corporate education and career mobility. Both are worth reading in depth.
Most importantly, I’m thrilled to be investing in edtech again after nearly a decade of sitting on the sidelines. In the last 18 months at Lightspeed, we’ve led three rounds in U.S.-based in companies touching education: Flockjay* (seed), Forage* (Series A), and Outschool* (Series B). These companies join a global edtech portfolio which includes Byju’s* (India), Handshake* (US), Whitehat* (UK), Clever* (US), and several more. The announcement blog posts for these companies explain why they are special and how they address opportunities in career mobility, early career hiring, and interest-based K-12 education, respectively:
It feels good to be investing in education again at such a pivotal time for the industry. We hope to continue to support entrepreneurs finding new channels to market with exciting products like these. Feel free to reach out if you want to connect.
Tweet of the Week
Links I Enjoy
With several vaccine candidates for COVID-19 on the horizon, the next issue to address is how to distribute those vaccines to billions of people around the world. With global travel down significantly, fewer commercial planes are flying. These planes traditionally ship around 50% of pharmaceuticals in their cargo holds. Existing freighter aircraft are attempting to make up for the volume, but there are simply not enough of them. The cold chain makes the distribution task even more complicated. Everything has to be specialized in a cold supply chain, and each vaccine sitting in the cold chain must be used quickly after shipping. Several of the vaccine candidates require storage at even lower temperatures than normal.
Even if a vaccine is available in the next few months, if you’re young and healthy, you’re likely going to be at the end of the line, perhaps getting it in late 2021.
As usual, Matthew Ball dropped a comprehensive, thoroughly researched piece on the history of media — this time focused on audio. He draws inspiration by comparing the effects of technology development on audio vs. video, gaming, and other media sectors.
Audio stands out for its early innovation, but general sluggish pace thereafter. Ball speculates on why:
This dynamic stems from audio’s technological simplicity compared to other media types. We can see this in how much earlier recorded audio emerged than recorded video or video game arcades, and live audio (radio) versus live TV or online gaming. Or how much easier it was to make and record music than shoot and press a film, or design a video game.
One could even argue audio is simpler than text. Although the printing press emerged centuries before radio, printed text was difficult and costly to distribute, and could not be delivered live. Live audio, meanwhile, is even easier than recorded audio and radio broadcast technology meant it could reach every single American household simultaneously and at no marginal cost.
While audio’s simplicity provided it with a head start on other categories, it has also held back its growth. As a general rule, media categories that are strongly affected by technological changes are advantaged over those that are not. We see this through the ways technology changes have increased the diversity of content, delivery and monetization.
Ball sees opportunity for new format innovation in both audio-only storytelling and virtual concerts. Tour revenue is still a massive component of the music market, and with COVID there’s a strong accelerant for bands to try new formats. We’ll certainly see more performances like Travis Scott in Fortnite* in the future.
Apple’s latest iPhone 12 Pro is the first consumer device to feature a LIDAR scanner. The baseline pitch is to improve lowlight photography, but having a sensor that natively understands depth is going to lead to a ton of new AR use cases. Snap* is a launch partner for this initiative and will allow developers to build with LIDAR in its latest Lens Studio release.
Elon Musk popularized the idea that we’re likely living in a simulation, but the idea itself is almost 20 years old now. I was personally familiar with some of the base arguments, but hadn’t previously considered the experiments one could run to detect a potential simulation. The collapsing of the quantum mechanical wavefunction upon observation, for example, never made sense to me:
For Owhadi, the most promising way to look for potential paradoxes created by such computing shortcuts is through quantum physics experiments. Quantum systems can exist in a superposition of states, and this superposition is described by a mathematical abstraction called the wave function. In standard quantum mechanics, the act of observation causes this wave function to randomly collapse to one of many possible states. Physicists are divided over whether the process of collapse is something real or just reflects a change in our knowledge about the system. “If it is just a pure simulation, there is no collapse,” Owhadi says. “Everything is decided when you look at it. The rest is just simulation, like when you’re playing these video games.”
Pearl Jam has always made a hobby of advocacy. Back in the 90’s, they fought against the Ticketmaster monopoly (and lost). In 2000, they promoted Green Party candidate Ralph Nader (that didn’t go so well either). Let’s hope they’re lucky this time around with their “get out the vote” campaign.
I loved this quote from the article. Come on, NYT! You can’t print the F word? Not very rock ‘n roll of you.
Asked how their feelings about this moment could be best summed up in a Pearl Jam song, Mr. Vedder immediately offered the opening lyrics to “Porch” from the album “Ten,” an anthem that cannot be quoted here.
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Disclaimer: * indicates a Lightspeed portfolio company, or other company in which I have economic interest. I also have economic interest in AAPL, ADBE, AMT, AMZN, BABA, BRK, BLK, CCI, CRM, GOOG/GOOGL, FB, HD, LMT, MA, MCD, MSFT, NSRGY, NEE, PYPL, SHOP, SNAP, SPOT, SQ, TMO, VEEV, and V.
Header image credit: https://www.bridgemi.com/talent-education/which-comes-first-tourism-dollars-or-students