Alex Latsis on European Edtech Funding in 2020

Brighteye Ventures, a leading European venture capital firm specializing in edtech, has recently announced a $54 million first closing of its second fund, increasing the firm’s total assets under management to over $112 million. The 2017-established VC intends to allocate these funds to 15-20 companies over the next three years, making investments ranging up to $5 million during the seed and Series A stages.

Characterized as a fund guided by a specific investment philosophy, Brighteye focuses on startups that “improve learning” in the context of automation and emerging technologies, alongside evolving societal trends. According to a recent press release, Brighteye aims to transform the $7 trillion global education industry as both educators and learners increasingly embrace distance learning and a growing number of professionals seek opportunities for skill development.

The firm’s current portfolio includes Ornikar, a French and Spanish online driving school serving more than 1.6 million students; Tandem, a Berlin-based platform for peer-to-peer language exchange with over 10 million users; and Epic!, a reading resource utilized in over 90% of schools across the United States.

To gain further insight into Brighteye’s investment strategy and the broader edtech landscape, I spoke with managing partner Alex Latsis. Our conversation also covered key findings from the firm’s recent European edtech funding report and the anticipated increase in venture capital flowing into educational technology.

TechCrunch: Brighteye Ventures invests in seed and Series A startups throughout Europe and North America that “enhance learning.” Could you provide further detail regarding the fund’s focus, including specific subsectors, technologies of interest, and the qualities you seek in founders and startups at this early stage?

Alex Latsis: We concentrate on companies that leverage technology to facilitate learning, skill development, or research, as well as those addressing fundamental challenges within the education sector. For instance, Zen Educate tackles the issue of teacher shortages in the U.K. through an on-demand platform that reduces costs for schools while offering educators increased earning potential. Litigate provides an AI-powered coaching and workflow tool to improve outcomes for legal associates, and Ironhack, the largest tech bootcamp in Europe and Latin America, equips young professionals with the skills needed for the innovation economy, achieving a 90% job placement rate.

Recognizing the complexity of the education field, we prioritize establishing a strong alignment between the founder’s expertise and the market need. Crucially, we also assess the internal compatibility and dynamics of the founding team, as no startup can succeed based on a single founder’s efforts alone.

Your “The European EdTech Funding Report 2020” highlights Europe’s growing prominence, with a significant increase in venture capital investments in local edtech startups. You specifically note a 9.2x increase in edtech VC investment between 2014 and 2019. What factors are driving this trend, and how does Europe compare to other major tech hubs like Silicon Valley/U.S. or China in terms of edtech investment?

In 2019, both Europe and the U.S. allocated approximately 2% of venture capital to edtech. The growth in edtech investment in these markets has been primarily fueled by a greater willingness to pay for training that is inaccessible, ineffective, or prohibitively expensive through traditional institutions, and to a lesser extent, by increased digital adoption in schools and universities enabling the scalability of SaaS products.

Considering the rapid expansion of online education spurred by the pandemic, we anticipate that edtech funding will rise to 3%-5% of total venture funding in the coming years on both sides of the Atlantic. This translates to billions in additional investment, the emergence of numerous promising companies, and expanded learning opportunities, particularly for individuals seeking to upskill or reskill. In countries like India and China, where student populations are expanding rapidly, we expect over 5% of VC funding to be directed towards edtech due to the increasing demand for core educational resources.

The report also indicates that generalist European VCs are showing increased interest in edtech. While this is beneficial for edtech founders, it could potentially increase competition for deals. What advantages does being a sector-specific VC offer that will allow you to continue sourcing and securing the most promising deals as more capital enters the space?

For entrepreneurs, the key factors are conviction, speed, and network. Our specialization means our entire team is dedicated to identifying, evaluating, and building relationships within the learning industry. We can quickly understand and recognize truly differentiated approaches, develop strong conviction, and make timely investment offers. Once we invest, our portfolio companies benefit from a network encompassing potential clients, investors, and leading edtech companies in Europe (and some in the U.S.), such as Ornikar, Epic!, Ironhack, and Tandem, which can share best practices. As we continue to expand our team, generalist funds would need to significantly increase their focus on edtech to match the depth and breadth of our expertise.

The report notes that the U.K. accounted for 72% of total edtech VC investments in Europe in 2019. What factors contribute to this dominance, and do you believe the country will maintain its position as the leading European edtech hub following Brexit?

The U.K. possesses several strengths that support its edtech sector, including world-renowned universities, high levels of digital adoption in schools, and a robust tech sector with strong talent demand. However, we anticipate that the U.K.’s share of edtech funding relative to the rest of Europe will decrease over time, partly due to the challenges Brexit presents for attracting and retaining talent, but primarily because the geographic distribution of early-stage edtech startups receiving funding is expanding, leading to a more dispersed allocation of capital.

The future of work is a key area of interest for any edtech fund, as individuals seek new career paths and opportunities to reskill or upskill and engage in lifelong learning. How have developments like automation, and more recently, the pandemic, influenced your perspective on education?

Education fundamentally aims to equip individuals with the skills they need to reach their full potential. As the pace of innovation accelerates, the demand for education has also increased, both because the need for continuous training is more frequent (hence the term lifelong learning) and because the economic benefits of acquiring skills relevant to the innovation economy have grown substantially.

At its best, edtech leverages technology to deliver education at scale more effectively, efficiently, and affordably. This can be achieved through automation, but also through facilitating connections between learners, such as Tandem, which enables language practice with individuals worldwide, or by creating inherently engaging learning experiences, like Aula, which provides a best-in-class blended learning environment for universities.

The pandemic significantly increased exposure to edtech. With 90% of students worldwide affected, traditional institutions were compelled to adopt technological solutions for learning delivery. Simultaneously, economic disruption and lockdowns drove an unprecedented number of individuals online to acquire new skills. This dramatically reduced user acquisition costs for edtech companies and made both institutions and learners more familiar with, and demanding of, online education.

Looking ahead, we expect production standards to align more closely with those in the broader tech market. We also believe that the challenges and frustrations experienced with existing platforms during the widespread shift to distance learning will inspire a new generation of entrepreneurs, leading to a surge of promising prospects in the coming months and years.

Regarding the coronavirus pandemic, what guidance can you offer to early-stage founders seeking seed funding remotely, and how can they mitigate the challenges of building relationships without face-to-face interactions?

While in-person interaction with potential investors is preferable, a compelling idea, promising traction, and the ability to effectively educate funds on your company’s potential can still secure funding. It is a VC’s role to invest, and we will always find ways to assess opportunities, even in challenging circumstances.

Finally, what steps is Brighteye Ventures taking to ensure you support diverse founders, encompassing gender, ethnicity, and socio-economic background, and to promote diversity within the companies you fund?

We actively consider diversity and prioritize it in our investment decisions and as we expand our team. Individuals are best positioned to develop solutions for the problems they understand. We are intentionally seeking to fund technology-enabled solutions across the learning landscape, which has naturally fostered diversity in the age, ethnicity, socio-economic background, gender, geographic location, and professional experience of the founders we back.