An edtech company executive on the pros and cons of taking on venture capital.
GUEST COLUMN | by Alex Bloom
As the CEO of a decade old edtech company, I am often asked about the pros and cons of taking venture capital. With today’s influx of funds flowing into the education technology market, this topic is of particular interest to many entrepreneurs. According to CB Insights, education technology companies raked in more than half a billion dollars in venture capital in Q1 2014, and this figure continues to grow.
Our founder was an educator and was focused on – no, obsessed with – solving a problem for he and his fellow educators.
For the sake of full disclosure, my company has chosen to forgo outside investments. However, that doesn’t mean that venture capital isn’t a viable option for many other edtech companies. In prior jobs, I have run companies with extensive Sand Hill Road venture capital and have seen both models work.
We all know that the primary reason for taking venture capital is typically the capital itself and the opportunity it brings. But what additional value can you gain in exchange for giving up as much as half of your company?
My advice would be to take a step back and recall why you started your company in the first place. What were the problems that needed to be solved? What other companies are competing with you to solve those same problems? What educational experience do you bring with you? Were you an educator that experienced these problems and set out to solve them on your own?
If you don’t have the experience or connections in the education market, can investors bring that expertise and industry partnerships with them? If you don’t have many competitors (perceived or otherwise), do you need the outside funding to remain competitive? What about your employees? How would outside funding change their position or motivation?
And, most importantly, what about your customers? After all, it will be your customers that decide whether or not you make it. Are you adding value and helping them to solve a difficult problem? If the venture capital company that is courting you does not have direct experience in education and/or your target audience, are they going to be able to guide you to deliver the most valuable product or service to market? Not all venture capitalists will have your customers’ best interest at heart. So you must remember what your priorities were when you started the company.
At the ed tech company I run today, not taking outside capital was the right move. Our founder was an educator and was focused on – no, obsessed with – solving a problem for he and his fellow educators. He had experienced the problems and set out solving them, leveraging personal experience. At the time, the market was still nascent and the potential partners were limited. It was a small enough community where he could personally make the necessary connections. And by growing organically over time, he could always keep his customers’ best interest at heart without being pulled by outside influences.
At the end of the day, as long as you keep your customer at the top of your priority list, you will succeed – with or without venture capital.
Alex Bloom is the president of WebAssign and member of its board of directors. Alex has extensive experience in taking digital media to the consumer. He has led the development of content platforms, managed product and process development, and forged strategic partnerships with media companies and content owners. He spent much of his career in the mobile industry and has managed businesses related to direct-to-consumer eCommerce, eReaders, and content distribution.