May 16, 2023

Behind the Scenes at STVL – Foundational Education

The (not so) new education entrepreneur: All of us.

Our K-12 education system is undergoing a once-in-a-generation change. The topline trends are all too familiar: Only 25% of U.S. adults think K-12 education is going in the right direction[1] and teachers quitting accounted for 64% of significant staff loss in 2022.[2]

With this dynamic, people are unbundling and re-bundling education on their own, driven partly by state funding that goes direct to families. Education Savings Accounts (ESAs), which allow families to spend funds on education offerings of their own choice, are live in 11 states across the country. At year-end of 2022, 600,000 students used a voucher, tax-credit scholarship, or other funding mechanism of some kind.[3]

Even without enhanced purchasing power, communities across the country are finding ways to launch and sustain unconventional learning options. The VELA Education Fund’s recent report showcases the proliferation of diverse options across the country.

We think the supply of new education options will come from the new education entrepreneur in all of us. With that in mind, we’re focused on backing technology that solves key barriers for this not-so-new entrepreneurial ecosystem.

How do you invest when everyone has the potential to be an education entrepreneur?

For years, edtech venture funds focused on backing companies that sold software to public districts. That’s the natural result of (1) public district purchasing power and (2) the (false) comfort found in modeling future cashflows from districts as single payers.

STVL’s variant perception is that the future will be dominated by individual families’ enhanced purchasing power and autonomy in education decisions. As a result, our investments are focused on companies that build products and platforms that enable education entrepreneurs—teachers, guides, tutors, and others—to launch their own education offerings in communities across the country. Internally, we’re referring to these as supply enablement investments.

Just as companies, like Shopify, ushered in a new era for the online merchant in all of us, we think a new generation of edtech companies can address common barriers faced by education entrepreneurs at scale.

What prevents the education entrepreneur in all of us from launching a new school offering in a given community? Items outside the educator’s zone of genius: Registration/regulatory approval, enrollment and tuition collection, real estate, and insurance, just to name a few. [4]

We’ll invest in platforms that solve many of the administrative and business burdens of education entrepreneurs everywhere, just like other investors did for e-commerce a decade ago. Our investments in Hallcraft School Studio, Merit, and Prenda are already scaling solutions to both the demand and supply side challenges of foundational education.

We’re also in discussions with mature real estate and insurance businesses about the possibility of novel offerings to serve the education ecosystem, including:

  • Affordable and flexible space for pods, microschools, and other education offerings; and
  • Umbrella liability policies for out of system offerings.

We want to hear from the education entrepreneur in all of you as we continue to refine this investment thesis and build solutions that usher in a bright future for K-12 education.