Um… What About Learning Outcomes?

May 8th, 2015

As any good edtech investor does, we speak with a steady flow of entrepreneurs attempting to solve some of the most intractable problems in education today, the bulk of which focus on improving student outcomes either directly or indirectly.  Our presupposition at a basic level is that efficacy/improved outcomes help to drive adoption, which drives growth, which drives returns. The point here is that efficacy creates the foundation on which the others build and without that, the rest will face challenges. Of course this is true in theory, but in practice, reality can materialize differently. Of the 100+ companies we speak with every year the vast majority do have a nod toward efficacy in their presentations that show anecdotal data or quotes from a handful of customers that indicate lift in student outcomes.  However, very few have statistically significant data that can raise one’s confidence levels of improved outcomes from hunch to near certainty.

There are a couple of reasons CEO’s give for this: (1) It’s really expensive to run these studies.  Few startups have the financial backing, bandwidth or, in some cases, a large enough sample set to do this.  However, it is typically on the longer-term roadmap to conduct these studies. (2) There is a genuine belief that their product works and that anecdotal feedback is sufficiently evidential of this and customers are satisfied by this. (3) It is acknowledged that the company’s product is early in its build out and there is concern that indeed it may not withstand the scrutiny of a robust study.  No one has ever told us that outcomes don’t matter.

The interesting part here is that even without statistically significant results, many of these companies are still scaling and being adopted by educational institutions.  I want to be careful to point out that I am NOT saying these decision makers are buying bad products.  My sense is many of these products likely do drive better learning outcomes and nearly all of the entrepreneurs we speak with are working hard to continue to drive these upward.  However, I do believe the emphasis on this by customers will change.

Perhaps a parallel in how this market may evolve can be drawn from another sector that we are active in – the Internet of Things.  Last year we made an investment in Ayla Networks whose customers are large OEMs and manufacturers of devices like thermostats, smoke alarms, water boilers, etc. that are struggling with the first order challenge of just getting devices connected in a secure way that scales.  The second order problem that the companies are beginning to ask and demand of vendors like Ayla is what do we do with all this data that is now being streamed to us from these connected devices and how does that inform the way we interact with our customer that buy those products.

I think edtech is going through a similar evolution of sorts.  The first order problem here is how do I connect students with infrastructure and devices and make sense of the noise of possible solutions in the market to find those that teachers/faculty and students will adopt and engage with. As the market matures that first order problem will be mere table stakes but to win longer term, companies will have to address the second order problem of “does it actually drive improved learning outcomes and is there statistically significant data that can prove that, particularly with my cohort of students?” K-12 and post-secondary institutions will apply more and more rigor to this question when selecting a vendor.  We saw this most recently with Texas’s TEA commissioning a third party study to gauge the efficacy of Think Through Math‘s (an SJF portfolio company) learning outcomes.  As we hoped and expected, the results came back exceedingly well.  Likewise, another portfolio company, Civitas Learning, has seen explosive growth given the level of rigor they place in showing evidence of things like lift in term-on-term persistence.

I am most excited about the ones that will fare well in this inevitable market landing point.  Companies that do this fall into three buckets (1) Those that already have an eye toward this and show an ability to withstand this type of scrutiny (e.g., Think Through Learning and Civitas) (2) Companies where their offering is the actual platform or tool used to empower institutions to figure out which tools they’re using actually work and to help edtech companies determine the efficacy of their products and potentially provides insights on what they can do to their product to drive this upward (3) Those not focused specifically on educational outcomes but in other areas of improving the educational ecosystem that may have less scrutiny applied to outcomes.

For those companies that do not have an eye toward being able to show evidence of real learning outcomes, beware.  I think the day is near where that will no longer be acceptable.  Schools and users of products will demand more.  And perhaps you should, too.

Arrun Kapoor

Yieldbot Sizzles

December 22nd, 2014

Nice year-end review of Yieldbot:

A couple of my favorite excerpts:

Our first 3 years of revenue compares almost identically to RocketFuel, who ended up being the #1 fastest growing technology company in the D&T Fast 500 its first year of eligibility. It’s possible we are the fastest growing company in advertising technology right now…

Maybe our best story of the year is a large site with 22M unique visitors a month that had been a huge Google partner but is now getting RPM from Yieldbot as high as 11X Google and for the first time ever has a partner delivering more total monthly revenue than Google. Cha-ching!


New York Great Place for Ad Tech

June 6th, 2014

It was a memorable week for SJF’s advertising technology investments. First, SJF portfolio company MediaMath announced a $175 million financing. A couple of days later, Yieldbot announced an $18 million financing led by SJF Ventures.

The week was a reminder that New York has a very vibrant ad tech market. The term “business cluster,” which was popularized by Michael Porter, comes to mind when thinking about ad tech and New York. In Manhattan one can find the presence of large advertisers like IPG, Omnicom, Havas, American Express and Verizon; a great number of potential media partners like Viacom, AOL, NBC Universal, Hearst, IAC and The New York Times; and a wealth of ad tech talent in companies like MediaMath and Yieldbot.

For an emerging ad tech company in New York, this business cluster generates a number of benefits. It allows for greater information flow to help identify market opportunities. It also allows entrepreneurs and their contacts to more easily establish beachhead media partners and advertiser customers. Finally, by being closer to media partners and customers, ad tech companies in New York can more easily achieve ongoing in-person feedback on how to make their products better.

There is certainly a lot of fantastic ad tech innovation happening outside of New York, but the city is a great place for this industry.



Three New Investments

September 12th, 2013

SJF recently has made three new investments in Web-enhanced businesses:

Easy Metrics:  A SaaS-based labor management system.  Financing led by Alan Kelley

Think Through Learning:  A SaaS-based education technology company.  Financing led by Arrun Kapoor

Versify:  A SaaS-based business intelligence company serving the utility industry.  Financing led by Cody Nystrom

Exciting to be teaming up with a number of new companies in the past few months.

Facebook: Now a Utility

August 26th, 2013

A couple of family reunions this summer confirmed a sneaking suspicion that Facebook is somewhat “out” among teenagers.  The blame seems to be partly attributable to adults.  As a niece of mine said, “Facebook used to be cool until parents came along.”

So, where are teens heading?  Many are heading to Instagram, which seems to be an area that can still be claimed almost exclusively by younger people.  As one person noted when comparing Facebook and Instagram, “If you were 16 years old, would you rather go to a party with only your friends (Instagram) or a party with your friends, parents, grandparents, and a whole bunch of other people (Facebook)?”  Furthermore, Instagram takes some of the pressure off of writing clever comments.  Pictures speak for users.

But it may not be so binary.  Facebook may not be heading for a demise among teens.  I think that this Fortune Article had a nice take on the current status of Facebook, noting that Facebook has become a utility for teens.  It may no longer be cool, but it is still a part of their lives.


Thanks, Dave Morgan

August 7th, 2013

I love this quote from Dave Morgan, who founded Tacoda.  When commenting on the merger between Omnicom and Publicis, he said:

“I think it’s a total misdirection to think that you can leverage the scale and advantages of big data if you’re bigger. Quite the opposite,” Morgan said. “These aren’t technology companies, and you don’t get better tech development out of consolidation. You’re not going to create the next MediaMath, or Videology, or Facebook, or Google out of this.” – See more at:
“I think it’s a total misdirection to think that you can leverage the scale and advantages of big data if you’re bigger. Quite the opposite,” Morgan said. “These aren’t technology companies, and you don’t get better tech development out of consolidation. You’re not going to create the next MediaMath, or Videology, or Facebook, or Google out of this.” – See more at:

“I think it’s a total misdirection to think that you can leverage the scale and advantages of big data if you’re bigger. Quite the opposite,” Morgan said. “These aren’t technology companies, and you don’t get better tech development out of consolidation. You’re not going to create the next MediaMath, or Videology, or Facebook, or Google out of this.”


Not bad company for MediaMath to have.

Tesla’s Unique Valuation

July 17th, 2013

I have been thinking about Goldman Sachs’ downgrade of Tesla today.  I haven’t seen the full report, but I have noticed that Goldman Sachs did a reality check on 2017 earnings and looked at market share achieved by some of the best luxury cars historically.

On one hand, I applaud Goldman’s reality check.  On the other hand, I think Goldman is likely missing the bigger picture.  Tesla reminds me of Apple in about 2004.  By that time, Apple had crossed levels of design and brand cache that were very different from what people were used to seeing n its category.  That helped to propel a growth cycle that was much stronger than most everyone expected.  My bet is that Tesla outperforms the market over the next five years.

Similarly, in the venture business we must have investment disciplines, because they tend to work across a portfolio of investments that each have risks.  At the same time, it is also our task to be on the look out for companies that are truly extraordinary and not miss opportunities by letting formulaic approaches tied to historical frameworks eclipse our appreciation of the bigger picture in unique circumstances.

To be clear, I am not saying that valuation should be disregarded for exciting companies.  I am mainly saying that we venture capitalists should continue to push ourselves to continue to see opportunities from new perspectives and remain open minded, which is in a way a different kind of investment discipline.


30 Millionth Work Order Processed

September 28th, 2012

Congratulations to ServiceChannel for processing its 30 millionth online work order.

MediaMath Leader on Facebook Exchange

September 13th, 2012

Congratulations to MediaMath for being an early leader on Facebook Exchange.

Tripl and Social-Enhanced Commerce

August 27th, 2012

Many entrepreneurs have been trying to tap the trusted connections found in facebook for various social and transactional activities.  For example, a number of entrepreneurs have explored the idea of selling, trading, renting and recommending used items from friends and friends of friends.

A classic chicken-and-the-egg issue usually arises in that a person is often limited to finding items on a platform where his or her friends have happened to sign up as well.  Accordingly, the momentum often dies quickly.

Tripl stands out from the pack in part because it automatically pulls in facebook pictures from friends’ trips and displays them in a graphically pleasing way.  Interestingly, many pictures residing on facebook, Instagram and other places are already geotagged.  If you use the service, you will quickly find that you can track your friends’ travels without their having to sign up on Tripl.  The chicken-and-the-egg problem is addressed.  As Tripl develops, I imagine it can layer travel business activities into its offering, thus creating a social-enhanced commerce application that scales and operates in a fertile industry.

I think Tripl is going to be a winner, and I think other social-enhanced commerce companies could learn from its ability to jump start the network effects.

LinkedIn A Year Later

June 3rd, 2012

Despite a disappointing IPO by social media leader facebook, LinkedIn has held up fairly well during the past year.  Since its IPO on May 19, 2011, the shares have dropped about 3%.  The S&P 500 has fallen about 4% during this same period.  The day after LinkedIn’s IPO, I wrote that individuals should think twice before dismissing the company’s 24-times-sales valuation as ridiculous.  So, far that observation seems to be holding.

LinkedIn also continues to show the power of a meshed network compared to a hub-and-spoke network.


A View Into Kickstarter

February 28th, 2012

Although this video providing an inside look at Kickstarter has been around a while, I think it merits being put up on this blog as well.  It is quite interesting.