Rich Capital, one of the first venture firms to focus exclusively on edtech, has closed its latest investment vehicle in an unprecedented deal in tech. The San Francisco-based venture capital firm saw the rise of digital infrastructure, distance learning and society’s changing focus as opportunities — and, unsurprisingly, those same tailwinds helped close its largest fund to date.
Fast forward two years, we are now in a different world, socially, politically and technologically. Aside from the fact that no one is talking about Zoom School or Pod Education, edtech startups raised $10.6 billion last year, down 49 percent from the year before. So, has the edtech venture landscape changed?
“I think edtech is probably less in the news, which is a good thing,” said Esteban Sosnik of Rich Capital. Echoing a cliché of other investors these days, he says there’s never been a better time to start a company. Especially in education, less capital means less competition: if you can build something, you’re 10 times more likely to succeed.
A small amount of capital for some is a win for others: Rich just announced his biggest fundraising to date. A $215 million investment vehicle to support startups based in the United States and abroad with a special focus on Latin America. It has closed a $4 million sidecar fund called Rich Founders Fund, which will raise capital from 40 portfolio companies. As mentioned, the new capital was raised on a very different background from the previous fund; But the team says history makes a difference.
“There’s been a lot of fly-by-night investors that have come into the space in the last two or three years, so having a long-standing investor fund before the pandemic seems like a real value proposition and a working favor for us,” said Rich Capital co-founder Waye Chu. Chu said LPs from 20 He resonated with the firm’s investors, an “educated bench” that brings years of public school experience.
Rich Capital’s strategy among funds isn’t changing much (Chu says edtech estimates are starting to come down as of March 2020). But what’s old doesn’t mean they ignore what’s new: excitement around artificial intelligence.
Rich Capital has made about five investments in AI companies since starting the firm, but given the growth in the space and the recent technological advances with ChatGPT, the firm is looking forward to new startups. Chu tells TechCrunch that they are currently involved with four AI startups. “We’re seeing a lot of technology looking for a solution,” Chou said, “and founders who start with the right pain point and solution and decide which technology is capable of solving it — we’re seeing a lot of exciting new technology, but it still seems like it’s putting something into the pain point that’s not enough.”
Reach’s Sosnik, meanwhile, wants to remind founders that AI isn’t new. The investor urged founders to focus on partnerships with researchers, unique data engines and measurable impact.
As he recently wrote, “As we’ve seen from the crypto, metaverse, and VR rollercoaster, adoption hinges on whether or not the product delivers better experiences and outcomes. Simply put: How is AI improving life?” Ironically, the same question he sees as essential to AI is the one that edtech success always poses: Can it work for the right people, at the right time, in the right way, in the most equitable way?