New Markets Venture Partners is making a return trip to familiar grounds. The Fulton, Md.-based venture firm is close to launching a second fund dedicated to education technology startups.
Dubbed “New Markets Education Partners II,” the new fund will support 10 to 15 edtech investments, Mark Grovic, co-founder and General Partner of New Markets, shared with EdSurge in an interview. He didn’t disclose the size of the fund but estimated that “we’ll probably write $1 to $5 million checks, with big reserves” for follow-on rounds. Expect his team to lead some Series A and B deals.
Founded in 2003, New Markets current lists 14 companies in its education portfolio that deliver a broad range of services, from K-12 math curricula (ThinkThroughMath) and classroom management tools (Kickboard) to data analytics support for higher-ed institutions (Civitas Learning). Most of these companies were funded through the firm’s first education-focused fund, launched in 2010. (New Markets also invests in business services, health and IT sectors.)
“Our focus is to understand the pain points that keep people from successfully navigating the education system,” shared Grovic. “What we’ve learned is that there are plenty of achievement and skills gaps that lend themselves to exciting business models in both K-12 and higher-ed.”
Two of its edtech investments have found buyers: Moodlerooms (acquired by Blackboard in 2012) and Starfish Retention System (sold to Hobsons in 2015).
Education entrepreneurs may see New Markets’ new fund as an early sign that 2016 will bring another windfall for the education industry. (US edtech companies raised $1.85 billion in 2015.) Grovic, who described his team’s investment strategy as a little “old fashioned,” had this tip to offer: “We’re interested in building rational companies with rational cap tables, [that] raise a sane amount of money, and get to cash-flow positive after a couple of rounds.” In other words: companies should have a working business model, generate revenue and show verifiable traction among school customers.
Grovic recently blogged about his wariness of edtech companies that raise big rounds at inflated valuations: “New Markets is not convinced that an environment of high valuations will continue given the onset of pressure from public institutional investors to rationalize valuations,” he wrote. But at the same time, “we will continue to sell into the bubble, [and] ready to invest aggressively when it bursts.”
Although New Markets’ second education fund has yet to close, a couple of deals are already in the works. Grovic only gave this teaser: these involve companies that focus on credentialing and building “alternative pathways” to connect employers with students.
New Markets is also bringing on a couple of veterans from the academia and edtech industry to advise on investment decisions. Josh Reibel, former CEO of Wireless Generation and Amplify Learning, will be brought on as a Senior Advisor, along with Dr. Brit Kirwan, who previously served as president of the University of Maryland and Ohio State University, and as Chancellor of the University System of Maryland. Other advisors for the new fund include Ben Wallerstein (co-founder of Whiteboard Advisors), Jim Shelton (President of 2U) and Rusty Grieff (Managing Director of 1776).