Lessons on Investing

The story of Knewton is fertile ground for learning lessons for Jeremiah as he considers where and how to invest in adaptive learning. Not only did they take in a lot of funding, over $160 million, they pivoted very late and appeared to have a questionable strategy for much of their existence. This quote is illuminating:

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“Kibby, who joined the company as CEO in July and previously held executive roles at McGraw-Hill Education and Pearson, said that Knewton’s previous strategy of leasing its technology to other companies 'was misguided' and ‘flawed from the beginning'” (McKenzie, 2017).

 

In the old approach, they looked to use their technology with content from other companies. However, the pivot focused on using their technology with their own content. To expedite content for their platform (at minimum cost), they pursued using open educational resources (OERs), primarily through OpenStax. This change in strategy is reminiscent of Netflix (lessons can be learned from across industries!). Netflix has a great technology, but initially relied on other companies for content. This content licensing strategy became a risk for Netflix as their partners saw a lucrative opportunity based on content and believed that they could introduce their own supporting technologies (Team, 2017). Unfortunately, TV shows and movies do not have an equivalent to OERs (YouTube content would be quite different). To counter this risk, Netflix had to invest in developing their own content .

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The one other lesson from Knewton was that while there is value in self-promotion and raising funding, there is still the need to deliver results.

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An interesting aspect to consider regarding ALEKS is that while they are a technology company, they were able to succeed and generate a large acquisition price even though they openly share details on how adaptive learning should work. Research details in the open doesn't appear to have had any negative impact. And, as an investor, it is reassuring to know that there is substance to the technology underlying the venture.

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N2Y has less appeal from the point of view of seeking a "unicorn" investment. However, the fact that they financed their own growth before acquisition is impressive. Further, the alignment between N2Y and their user base speaks to customer development skills and passion. Hopefully, there are other adaptive learning opportunities that have similar capabilities. 

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Some outstanding questions for Jeremiah include:

• Is it possible to create a unicorn in EdTech? As noted by Pearson & EdSurge in “Decoding Adaptive”: “Maybe the best news of all is a new realism that’s starting to infuse the adaptive learning community. There have been no break-out hits, from an investor perspective. That’s weeded out many potential investors and entrepreneurs, as the realization dawns that this promising type of technology isn’t likely to spawn the next Silicon Valley 'unicorns' with $1 billion valuations” (Pearson, & EdSurge, 2016). 

• Does an approach like the Riverside Company of purchasing companies like N2Y make more sense than funding companies like Knewton? Or does it make more sense to swoop in like Wiley and purchase assets?