Edtech seed fund co-launched by New Hampshire university
Southern New Hampshire University (SNHU) has partnered with Rethink Education to launch a $15m seed fund called Rethink Education Seed to invest in edtech start-ups. SNHU President Paul LeBlanc said he wanted the fund to give the college a strategic advantage. Both SNHU and Rethink will take equity in the companies in which they invest. The partnership is Rethink's first foray into seed-level investments, after having participated in A and B funding rounds. Michelle Dervan, Principal at Rethink Education, said there was an investment gap for enterprises "beyond the accelerator … stage, but not quite ready to raise a series A round".
Most universities take a conservative approach with their endowment funds. Not so for Southern New Hampshire University, which has partnered with Rethink Education, a venture firm based in White Plains, NY, to launch a $15 million seed fund to support early-stage edtech startups.

Dubbed “Rethink Education Seed,” the fund will support about two dozen startups over the next five years. (SNHU contributed $10 million; Rethink chipped in the rest.) Most will receive an initial $250,000, with an additional $500,000 available through follow-on funding. Both SNHU and Rethink will take equity in the companies.

The conversation leading to the partnership, according to SNHU President Paul LeBlanc, was raised during a university board meeting in October. The conversation turned to the endowment, which, as is the case in many schools, is usually managed by an third-party investment manager. But “rather than handing it over to an investor who tells us how we’re doing once or twice a year,” LeBlanc recalls asking, “would it be possible to, say, invest in something that can give our school a strategic advantage?”

Under LeBlanc, who joined SNHU in 2003, the university has established a reputation for experimenting with new educational services and tools. Last year it launched an internal R&D incubator, the Sandbox ColLABorative, to prototype, pilot and test the feasibility of education products for use on campus. Already there are more startups knocking on the door than the Sandbox can support, LeBlanc notes. Still, he believes the seed fund will offer an opportunity “to get an early insight into entrepreneurs and helping them guide their technologies.”

The investment thesis behind the Rethink Education Seed is broad, encompassing tools and services aimed at increasing access and affordability for K-12, higher-ed and workforce development opportunities. Reducing student attrition during these major transitions in their pathways is also a focus. “The education-to-workplace pipeline” is where the biggest needs are, says LeBlanc.

This partnership marks Rethink’s first entry into making seed-level investments. The group has invested in 30 edtech companies since its launch in 2012, mostly through Series A and B rounds. “We’re seeing a gap in the investment landscape for companies that are beyond the accelerator and angel funding stage, but not quite ready to raise a Series A round,” Michelle Dervan, Principal at Rethink Education, tells EdSurge.

The new seed fund is already accepting pitch decks. When it comes to due diligence, Rethink’s team will focus on business and operations, starting with identifying mission-driven entrepreneurs. (Evidence of product-market fit, an understanding of distribution channels and the “ability to generate recurring revenue and repeatable sales” is highly encouraged, suggests Dervan.) SNHU’s role will be to “kick the tires” of each product to see whether it is pedagogically sound and can be feasibly implemented, says LeBlanc.

Portfolio companies are expected to have access to SNHU’s Sandbox and other resources to further test and refine their wares. There’s also the possibility of raising additional venture capital from Rethink through its other funds.

SNHU’s collaboration with Rethink marks the latest in a string of partnerships between universities and venture capital firms. Last year, Arizona State University, GSV and Tim Draper launched an edtech accelerator for startups building higher-ed products. The University of Virginia’s Curry School of Education hosts the Jefferson Education Accelerator, which funds and helps more-established companies conduct efficacy research.

The trend that doesn’t surprise LeBlanc: “As institutions continue to struggle with innovation, one of the ways to move the dial more emphatically is to have a skunkworks space like accelerators and incubators.”

There’s also, naturally, the slim prospect of financial returns beyond what most university endowments’ portfolio managers can generate. “Not every investment will be equally successful,” he notes. “But what if one of these home-run bets pays off?”

Disclosure: GSV is an investor in EdSurge