How NewSchools Picks Its Investments


How NewSchools Picks Its Investments

By Jennifer Carolan     Aug 19, 2014

How NewSchools Picks Its Investments

Our Seed Fund supports high potential entrepreneurs developing technology solutions for the biggest challenges in K-12 education. We look for areas where the power of technology can improve our education system and its ability to maximize the learning potential of every child.

We borrow our approach from venture capital in that we develop investment theses informed by listening to educators, researching technology trends, studying student achievement data, and listening closely to the practitioners in our schools and organizations. Of course, the big difference between us and a venture capital firm is that we are optimizing for impact, not money.

In contrast to a fixed theory of change, we are continuously updating, modifying and revising our theses as we gain more visibility. Most of our investing is thesis-driven though we remain open to breakthrough ideas where the entrepreneur is educating us on the opportunity.

Below are a number of our investment theses (in no particular order) and how some of our investments line-up against them.

The STEM Skills Crisis

The greatest unmet demand in our economy is for STEM-related jobs. Two million high-demand, high-skilled jobs go unfilled in the US because employers can’t find enough qualified workers. It’s also an equity issue: females, Blacks and Latino’s are critically under-represented in some of the fastest growing and highest valued consumer technology companies like Facebook, Google and Twitter.

Approach: Our thesis is founded on two data points: a) About 50% of HS math and science classes are taught by a teacher with inadequate background; b) More than 60% of students who chose a STEM career did so because a teacher sparked their interest.

Given the importance of teachers to inspire and prepare our children for STEM fields, we seek education technology startups targeted at helping teachers. Specifically, we look for content companies to bolster teachers’ STEM knowledge and support their efforts to deliver high-quality instruction even when they lack the requisite certification, background or skills (as often is the case with computer science).

Relevance Matters More Than Ever

School is becoming less relevant to children all over the world who now carry in their pockets access to the world’s knowledge, not to mention addictive video games.

But even before smartphones, school’s suffered from a relevance crisis, described by Y Combinator founder Paul Graham:

…we never had anything real to work on. Humans like to work; in most of the world, your work is your identity. And all the work we did [at school] was pointless, or seemed so at the time. At best it was practice for real work we might do far in the future, so far that we didn’t even know at the time what we were practicing for. More often it was just an arbitrary series of hoops to jump through, words without content designed mainly for testability. (The three main causes of the Civil War were…. Test: List the three main causes of the Civil War.)

Over a million students per year dropout, failing to see the relevance of school to their future. Another 250,000 opt to attend school full-time online, without a live teacher. Virtual schools are the fastest-growing category of school choice with enrollment jumping 21% last year while enriching online providers like Schools have struggled to define their relevance for decades but the problem has become more acute with smartphones and everywhere access. Children can find answers, code, connect to an online community, build, sell things, blog, review and learn online — all without schools. We are becoming increasingly connected and it’s not just our laptops or smartphones. The Internet of Things (IoT) is coming. In just six years, Gartner estimates that 26 billion devices will be connected to the internet (e.g. your plant pots, watch, scale, and things we cannot yet conceive of).

Approach: Our thesis is that technology can help bring the real world into the classroom, making it more relevant. Children are naturally hungry for authentic problems to solve, real content to delve into and opportunities to create and contribute to our world. Not only can we help children better understand why the content and skills they are learning matter, but to also apply their learning to build something of value for themselves and community.

Better Communication Leads to Better Educational Outcomes

At a basic level, education is communication between parent, teacher and child, or in ed-school jargon, the Golden Triangle. It is critical to optimize for better communication because it has a significant impact on a child’s school performance.

Approach: Technology can reduce communication friction and enable more effective, frequent and purposeful communication between parent, teacher and child. Schools are just beginning to utilize basic communication tools that consumers have been using for years like text messaging, news feeds, translators, push email and social networks. We seek out startups leveraging consumerlike communication technologies to help parents, teachers and children better understand and support each other. This area, in particular, is undergoing major change. Currently, our focus is to dramatically improve parent engagement rates through tools that invite parents into the learning process and encourage a positive partnership between parent, teacher and child.

Specialized Tools Can Better Reach Children Outside of the Mainstream

While traditional venture capital has backed consumer-oriented English language learning tools like Rosetta Stone, Livemocha and more recently, mobile apps like Duolingo, we take a very different approach. We target tools for educators in schools serving these students.

Our school system is undergoing a long, slow shift from a mass-production model of instruction to a more differentiated model. This is a good thing and will be better for both the educators and children within the system. While we’re excited that new blended models are pioneering the way for whole school change, their numbers are tiny at less than 1% of US schools. We need to accelerate this shift because achievement data makes it clear that children from less privileged backgrounds and those with particular learning needs have the most to lose from a one-size-fits-all approach to schooling.

As this systematic shift lumbers on, teachers are driving change in their own classrooms. For more than a decade, differentiated instruction has been the #1 topic of interest for professional development. Teachers have long believed they needed more arrows in their quiver to teach the range of learners in their classrooms. And now, with the ubiquity of technology devices and the content ecosystems that come alongside them, teachers are actively adopting tools and content to teach diverse learners — despite the many constraints imposed by a system designed for mass-production.

Approach: The demand for educator-focused specialized learning tools and content is strong. Because technology offers unique and easy ways to differentiate curriculum and instruction, our baseline approach across all investment areas is to find products that build these features from within – it should be the norm of all education technology products. (Stanford professor Jo Boaler calls differentiated learning tasks, “low-floor, high ceiling” – we look for products similarly designed.) Newsela, mentioned previously as a tool to promote relevance, is one of the best examples with a built-in lexile leveler to reach beginning and advanced readers alike.

We have narrowed our criteria to areas with: a) high need b) an over-representation of poor and minority children and c) opportunities to build a scalable and sustainable business. Given limited follow-on funding options, we invest in areas with Federal and State categorical funding available so the company can become cash-flow positive quickly. This space is primed for impact investors and Foundation mission-related investments (MRI’s). Our investments are focused in two areas in particular: ELL and SPED.

English Language Learners (ELL)

The fastest growing sub-population of students in the US is English Language Learners, currently at about 11%. Thirty percent of schools have more than a quarter of students from an immigrant background. PISA data shows that students in the US with an immigrant background³ more often attend schools with a) more children from a socio-economically disadvantaged background, b) have lower quality of educational resources available and c) have fewer staff per students, among other disadvantages (see table ii.4.9).

Special Education (SPED)

About 12% of US students have identified special learning needs. Special education teachers have some of the toughest jobs and the poorest tools available. It is an area virtually devoid of innovation and yet these teachers have some of the greatest needs for personalized learning tools. After all, differentiated instruction began in special education classrooms. Faced with the reality of a classroom of diverse learners, special education teachers adapted their instruction and developed new pedagogical strategies.

In both ELL and SPED, we look for tools and curriculum to help educators support the learning needs of their students while efficiently meeting compliance demands for categorical funding. We would like to do a lot more investing in this category and are researching needs for rural children and early-diagnostic tools for classroom teachers to screen for learning disabilities so those children can get help sooner. We are at the tip of the iceberg in understanding how technology can positively impact the lives of children with special learning needs — and we are keen to invest in entrepreneurs who are leading this innovation and will equip our educators with the best tools possible.

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