As testing and assessment giant ETS creates a new investment unit, its director looks ahead.
INTERVIEW | by Victor Rivero
Ralph E. Taylor Smith is the Managing Director of ETS Strategic Capital, the newly minted Merchant Banking unit of the $1.5Billion ETS Educational Testing/Assessment Services global organization — where he has lead responsibility for all Private Equity and Venture Capital Investments, Mergers/Acquisitions (M&A), Strategic Business Growth Partnerships & Joint-Ventures (JVs), and Tech Innovation Transfer initiatives. Educated at Princeton University and Massachusetts Institute of Technology (MIT), Ralph holds a Ph.D. in Engineering and an MBA in Finance.
‘…the genie is now out of the bottle, and various aspects of remote and distance learning are here to stay.’
Prior to being recruited to ETS, Ralph was Managing Director at GE Ventures, the $500Million private equity and venture capital investment unit of General Electric Corporation (GE). Before GE, Ralph had been General Partner and Managing Director at Battelle Ventures, the $300Million venture capital investment unit of Defense Contractor Battelle Corporation. Before entering private equity and venture capital corporate finance, Ralph worked for several years as an Investment Banker on Wall Street at GoldmanSachs and at JPMorgan focusing on tech Mergers/Acquisitions.
In this EdTech Digest interview, Ralph talks about the purpose of the new unit, why we are at a pivotal moment in education, what sort of edtech companies he is looking to work with, the current state of education, and trends driving the future of learning.
What drove ETS’s decision to create ETS Strategic Capital?
Ralph: ETS Strategic Capital was created as a new unit of education non-profit ETS to grow its business and advance its mission through new strategic equity investments, growth partnerships and mergers and acquisitions. It will serve as the private equity investment and M&A execution arm for ETS, with the mandate to advance ETS’s mission while broadening, expanding, and diversifying the non-profit’s offering in assessment, learning and development for K-12, higher education, and learning.
Why is now the right time for this?
This is a pivotal moment in education – we’re seeing a fundamental change in how services are delivered, how tools and assessments are structured, and how learners, schools, and companies are engaged and connected. We’re excited about the opportunity this presents, and with our funding, expertise and experience in education, ETS Strategic Capital will be able to build a strong portfolio of companies to tap into new market opportunities in education.
‘This is a pivotal moment in education – we’re seeing a fundamental change in how services are delivered, how tools and assessments are structured, and how learners, schools, and companies are engaged and connected.’
What types of companies is ETS Strategic Capital targeting for investments, partnerships and acquisitions?
We are looking at emerging companies that bring technology, new business models and geographic coverage to address gaps at ETS and market opportunities in education. There is an especially strong growth opportunity in higher education, international K-12, corporate learning, training and assessments, and Language Learning & Assessment (LLA), not only in English but also other languages such as Arabic and Mandarin, which will be a key focus of ETS Strategic Capital’s investments.
We are also very interested in companies that integrate application of new innovative technologies into education and distance-learning, for example Artificial Intelligence and Machine Learning, Virtual Reality and Augmented Reality, Natural Language Processing, Identity-Management and Biometrics, and Remote-Proctoring.
How will ETS Strategic Capital’s work advance ETS’s mission and complement and build out its existing business?
ETS Strategic Capital strives to identify opportunities where ETS can and should grow to better serve our customers and meet our mission to drive quality and equity in education, learning and development. With our funding, expertise and experience in education, ETS Strategic Capital is well positioned to partner with emerging education companies that are addressing these gaps to grow and increase their impact, while tapping into new opportunities for ETS. The relationships we develop will be mutually beneficial in that ETS will bring strong capabilities in assessments, research and development, deep intellectual property and relevant patents, as well as global channel-partner distribution, to our portfolio and partner companies.
What is your take on the current state of education? What are your thoughts on the near term (months) and little bit longer term (the coming year) for education, for companies working in education?
Education is now changing rapidly and in various ways. First with Covid19, there is clear trend towards distance-learning, and that is not going to go away, even if a vaccine is created tomorrow and the pandemic recedes; the genie is now out of the bottle, and various aspects of remote and distance learning are here to stay. Technologies such as remote-proctoring will become increasingly important to educational testing and assessment, as will identity-management and biometrics. Given that academic credentials still tend to be driven by assessment, it will be increasingly important to be able to verify and validate exactly who is on the other side of the keyboard, as well as to ensure test integrity.
Second, there is increasing gravitation towards direct-to-consumer education offerings, in particular for the K12 and elementary education sector. A range of learning curricular and social-emotional tools and education offerings are emerging that are increasingly low-cost, effective, scalable and targeted directly at the consumer education market rather than institutional market, and I expect that to continue.
In addition, upskilling and re-skilling at the adult level is likely to grow, and there is increasingly a focus on lifelong learning. With key industries impacted by the pandemic, the population volume seeking to re-train and find new employment is growing dramatically and the opportunities for workforce development, new-industry-skilling, and relevant short courses to ensure re-employability and career-control will be critical.
These challenging times for education will nevertheless create new business opportunities for those who are well-positioned to rapidly adjust to and positively take advantage of such market dislocations.
‘These challenging times for education will … create new business opportunities for those who are well-positioned to rapidly adjust to and positively take advantage of such market dislocations.’
From your perch and your strategic view of all things edtech – what trends are you keeping an eye on? why those? What is technology’s role?
There are three key trends that will drive our strategy and investment decisions: technology, new business models and changing demographics.
Technology plays a more essential role in education than ever before, especially in remote learning and assessment. It both increases accessibility and presents new challenges that must be addressed, such as identity management, verification, and testing and learning efficacy and integrity.
Business models are changing. Learning is now a lifelong endeavor. With the skills gap widening in the workforce, and the need for on-the-job training, education doesn’t stop after school is finished, but instead continues over the course of one’s career.
Finally, geographic coverage will be key. Changing demographics are driving demand for education and language services globally in emerging markets, and we’ll be looking for opportunities in those regions – including Asia Pacific, South Asia, Latin America, the Middle East and Africa (MENA).
Anything else you care to add or emphasize concerning edtech, the future of learning, parting advice to companies?
In terms of parting advice to entrepreneurs leading edtech startup companies, I will outline the key things I specifically seek in evaluating a potential investment opportunity (see brief listing below):
- Unique proprietary technology (barriers to entry); also innovative products or services that solve critical market and business needs
- Large high-growth & scalable market with customers willing to pay
- Market proof-points with clear early-adopter referenceable customers
- Strong experienced management teams that can sell and scale
- Good interpersonal dynamics, with the ability to learn from constructive criticism and coaching
- Clear path to high-value financial exit for the investors
- Mission-focused entrepreneurs, with a desire for both financial and social impact
Victor Rivero is the Editor-in-Chief of EdTech Digest. Write to: [email protected]