The Newest U.S. Education Technology Venture Fund? Look to Japan

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The Newest U.S. Education Technology Venture Fund? Look to Japan

By Tony Wan     Mar 6, 2018

The Newest U.S. Education Technology Venture Fund? Look to Japan

It’s no secret that Asian capital fuels American business. That’s especially true in education technology, where last year EdSurge revealed that Asia-based financiers are increasingly investing in U.S. edtech venture firms as limited partners.

Now, one of those groups has decided to create its own U.S.-based fund. In the coming months, EduLab Capital Partners, a group with roots in Japan, will wrap up the fundraising process for a new edtech fund that could bring up to $40 million to invest in early-stage deals.

EduLab Capital Partners is a new offshoot from EduLab, which is the parent company of JIEM, a Japan-based research and assessment group. (Think the Japanese equivalent of the Educational Testing Service in the U.S.) Over the past few years, EduLab has invested in three U.S.-based education technology venture funds: LearnLaunch, Fresco Capital and GSV Acceleration. With those investments, EduLab was looking to learn from how experienced and networked edtech investors made their bets.

But now, the company feels confident to invest on its own. “We feel it is our turn to contribute to the global edtech ecosystem,” says Norihisa Wada, a general partner at EduLab Capital Partners and chief marketing officer of EduLab, in an interview with EdSurge at SXSW EDU.

EduLab Capital Partners, which will be based in Boston, has tapped Liam Pisano as its managing director. He most recently served the same role at LearnLaunch, an investment and incubator group based in the same area.

This new fund will focus on investments at the seed and Series A stages, according to Wada, with a specific interest at high-growth edtech and artificial intelligence-related startups. It will also boast a small AI team in its Boston office that may work with some of the portfolio companies. And although it expects that many of these startups will be based in the U.S., it is also casting a wider net to find entrepreneurs from as far as Europe and Southeast Asia.

EduLab’s focus on seed and Series A deals may be welcome news to entrepreneurs who are just getting off the ground. Enthusiasm for early-stage U.S. education technology investments have largely simmered from its peak in 2013, when edtech-focused accelerators and seed deals flooded the market. Reality has set in for many investors who had naive expectations around how quickly startups could build sustainable businesses in the education market.

According to our tally, seed rounds accounted for 4 percent of the $1.2 billion total invested in U.S. edtech startups in 2017. In fact, the total volume and value of seed deals have declined in each of the past three consecutive years.

Today, just a handful of edtech venture firms operate dedicated seed funds. Among them are University Ventures, and a joint effort between Rethink Education and Southern New Hampshire University. Both funds are focused on higher-ed startups.

Japan’s interest in education technology is also part of a broader strategy led by the government to modernize its infrastructure as it gears up for the 2020 Olympics, says Wada. And it overlaps with other edtech initiatives in time for the games. For instance, NTT DOCOMO, a mobile telecommunications operator in Japan, has begun rolling out a nationwide 5G network across the country. It has chosen EduLab as a partner, giving it the opportunity to test the delivery of educational content and services on this new high-speed network.

EduLab Capital Partners’ portfolio companies will be able to access this network as well, if they so choose, Wada adds.

Separately, the Japanese national government plans to allocate a separate $25 million budget to promote local education technology programs. It projects that the domestic edtech market will reach $2.4 billion by 2020. It even dispatched an official from the Ministry of Economy, Trade and Industry to share more about these plans at SXSW EDU later this week.

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