Bringing together two sides of the funding debate--to take the VC money or go it alone--EdSurge’s Betsy Corcoran facilitated a lively discussion Thursday night between co-founder of Wikispaces and bootstrapper extraordinaire James Byers, and Jenifer Carolan, managing partner of NewSchools Venture Seed Fund. The audience, filled with both established and newbie edtech entrepreneurs, listened to the industry experts share their thoughts, beliefs, and advice on how to travel the funding road alone or with VC partners to hold your hand.
Wikispaces' Byers told how he and his cofounder, Adam Frey, raised about $125K from primarily family and friends, then spent the next five or so years painstakingly building the company, which now boasts 35 million unique visitors a month. (They make their points in more detail here in "How To Succeed In Edtech.") Raising money from class venture capitalists, Byers warned, will “forever change the DNA of a company.” Get deeply rooted with customers, Byers advised, and let them--not an external board of VCs--guide whatever pivots a company must make.
Carolan countered by explaining that taking outside funding can help companies to get to the next set of metrics and grow faster, enabling them to raise money from nonprofits or develop more sustainable pathways of funding early on. Top VCs can also bring valuable networks of potential partners and customers. Still, she cautioned that entrepreneurs should vet their investors as carefully as investors vet them.
On the state and evolution of the edtech industry, the two agreed there are more players in the game now, translating into stiffer competition for outside funding. For instance, over the past year, NewSchools has funded a mere 4.5% of the proposals the team reviews--making the fund's acceptance rate more competitive than Stanford University.
Byers says more competition shouldn't be a problem--at least not for companies intensely focused on their customers:
Particularly for engineers…every day that you're not communicating directly with a customer--by phone, by email, face-to-face--is a day that your company is dying...I promise you nothing can replace the value of actually talking to them.
The two speakers left the audience with advice, applicable to any company, regardless of the road they choose. “Follow your passion and really know your customer, that’s a good outcome,” Carolan stressed. Byers advised entrepreneurs to “spend nothing” and “make sure everyday you’re grounded by the words of the teachers, students, administrators, librarians and technology specialists you serve. They are the only ones who can save you.”
By the end of the night it was clear that to VC or not to VC was a nuanced decision, rooted in the values, goals, and sustainability of each individual start-up. Even so, every company starts--and stops--with understanding and serving its customers.