Annual Impact Report
2021

In 2020 the pandemic changed education around the globe. People of any age trying to learn anything struggled with grief; terror; loneliness; anger; hunger; anger; homelessness; racist policies and budgets and the constant spectacle of violence by racists, uniformed and otherwise; lack of a quiet, private place; lack of computing devices; lack of connection to the internet; lack of accommodations for special needs; and lack of childcare and eldercare and help in caring for the sick. The pandemic dramatically exacerbated inequality.
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Even the wealthiest and safest people in the US and most other nations now struggle with an invisible wound, a painful and distracting blankness that falls across every effort to concentrate and to learn. For learners, the trauma of the pandemic sharpened existential questions about whether a particular formal credential was worth pursuing. Learners have become much less tolerant of obligatory busywork: they want an education honed down to essentials.
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What does that education honed down to essentials look like? We have a crystallizing thesis about what learners, and particularly economically vulnerable learners, are looking for and having trouble finding. We call it minimum viable upskilling, and in its purest form it has the following traits: 1. It takes less than time than a traditional degree, and ideally weeks or a few months. 2. It comes with a guarantee of a good job, or at least an interview for a good job, for those who complete the program. 3. It is free or costs very little. 4. It fully recognizes a student’s prior learning. 4. It recognizes the values, preferences, and aspirations of students as well as their skills and aptitudes.
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This may sound like an absurdly demanding set of requirements, but we are starting to see the emergence of strong minimum viable upskilling programs, including some within our portfolio.


One example involves Pathstream, which helps students prepare for jobs including data analyst, digital marketer, sales administrator, and project manager. For each of those roles, Pathstream runs a 4-6 month program where the student earns college credits and certificates from a major tech company like Facebook, Salesforce, Asana, or Unity. Mastering the relevant tech platform is a major edge in landing a good early-career job. Many students will soon be able to have their employers pay the full cost of a Pathstream course. And Pathstream has an expanding network of partnerships with employers, including staffing company Kelly Services.
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Similarly, Correlation One has found sponsors that will allow the company to offer its Data Science For All program free to ten thousand future data analyts and data scientists over the next three years. For their October 2020 cohort, Correlation One chose 500 people from a pool of 8500 applicants. The admitted students were 60% black, 30% Latinx, and 15% LGBTQ+. The program includes mentoring and connections to multiple employers.
Like many of our portfolio companies, Pathstream and Correlation One had a good year. For many education technology companies, 2020 was a year of unprecedented growth. Online learning moved from the periphery of formal education to the center, from a supplemental or inferior option to a central one. Some companies struggled, but many companies experienced a decade worth of growth in a year. Valuation multiples for many education companies have increased dramatically, competition among investors has intensified, and a bubble is emerging.
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Some of the most successful education companies, though, widen rather than narrow the gap between rich and poor. And many financially successful companies have anemic completion and engagement numbers.

An investors who want to make the world juster and more equitable, we try to choose our companies and our entrepreneurs thoughtfully. We look for companies whose core strategy centers on serving a vulnerable population. We want the commitment to social impact to be hard- wired into the business model. We did our first close on our first fund back in August of 2012, although the fund technically belongs to the 2014 vintage year. We have watched companies from our portfolio grow into the tens and even hundreds of millions of dollars of revenue. And it gives us great pleasure to be able to say that we have seen very little mission drift in our portfolio.
We have had nineteen partial and total exits from our portfolio, and we are happy to say that even our companies that have gone public or been acquired have largely maintained fidelity to their missions. Some acquirers under-utilize or even destroy the assets they acquire, but we have not seen a former portfolio company go over to the dark side. And there are many instances where one of our companies became a critical component of the strategy of a much larger acquirer. The skills assessment capabilities of our company Smarterer became a crucial differentiator for their acquirer PluralSight. Our Fund II company Trilogy Education Services contributes an increasing percentage of the revenues of our Fund I company 2U and helps 2U address a more economically vulnerable student population. McGraw Hill Education doesn’t use all of the capabilities of the Engrade platform, but Engrade’s software is now the content management platform used to deliver all of McGraw Hill’s digital assets, which play an important role in the lives of millions of people every month.
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Our firm continues to have a slightly different perspective on education than other investors do. And we believe that our perspective is more badly needed than ever.

Schools, colleges, and upskilling programs are frequently teaching the wrong skills. The skills we all need include the ability to listen and empathize, to ask interesting questions and define problems, to collaborate, to solve problems creatively, to write and speak clearly, to evaluate the quality of information, to think critically, to analyze probabilities, to analyze and change our own habits of thought, to translate ideas and paradigms from one domain to another, to think about the behavior of systems, and to mentor and be mentored, to name just a few. We need less grading, less memorization of facts and formulae, fewer videos of lectures, and fewer multiple-choice tests. We need more active learning, collaboration, exploration, peer feedback, debate, simulations, interviews, metacognitive reflection, prototyping, projects, and portfolios. We need learning at every level to blend the continual play of pre-school, the intense collaboration of a hackathon, and the self-directed deep exploration of a doctoral program.

The entrepreneurs we are looking for thus have a double task: to solve an urgent problem for the current system, and to transform the system into one that serves the whole student. We are looking for Trojan horse companies that carry a secret cargo of heightened empathy and collaboration and joy.


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