Learn Capital: Why We Invested

Feb 15 2023 · 5 minute read

At Snowball, we’ve never previously written a “Why We Invested” blog for new investments. We think our investments speak for themselves. In our portfolio, we have impact investing leaders such as Bridges, Resonance and Ananda alongside emerging managers such as Eka Ventures.

Our most recent investment is into Learn Capital. Now raising its fifth fund, Learn has been a pioneer as the first VC firm focused exclusively on EdTech. It has since established itself as a leader in the sector, having invested in more breakout EdTech companies than any other manager. It has backed transformational companies such as Coursera, Andela and NewGlobe.

EdTech is a high-growth area with the potential to help address inequalities of opportunity within and between countries, with marginalised groups often denied access to schools with adequate resources. The sector exploded during the pandemic – and whilst that rate of growth won’t continue – it has set in motion many changes that will persist. For example, most schools in Western economies now have near 1:1 digital device penetration, and HolonIQ projects EdTech will continue to grow at over 15% annually over the coming years.

We believe LC is well-positioned to execute against this opportunity. Investing at the growth stage means companies are significantly de-risked from a commercial perspective and the fund can benefit from the recent fall in company valuations. Learn is a leader in the field with a clear edge from its first-mover advantage, with deep sector knowledge, extensive networks and proprietary dealflow, as evidenced by its superior track record compared to its peers.

So why write our first blog now? Firstly, investing in education is not only complex operationally but also from an impact perspective. Some believe the sector should remain the preserve of the state, and digitization can threaten good quality, unionized jobs. Further, Learn is not necessarily your traditional impact manager. With a Silicon Valley background and mindset, the founders are culturally different from many of those working in impact investing. The team believes in the power of the markets and that competition can drive better outcomes in education, not a universally held view. The co-founders describe their North Star as the education system in Sweden and Arizona, where money follows the student and are enthusiastic advocates for school vouchers, a controversial topic in the US.

So how did we get comfortable with Learn?

The team is committed to backing transformational EdTech companies which help individuals unlock their talents and advance “human flourishing”. This broad thesis extends to lifelong learning and workforce development (for example, Andela below). It can be difficult to unpack such a big vision, so we delved deep into Learn’s portfolio. And we believe their investments stand up to scrutiny. In education, accessibility and affordability are critical, and for each company, Learn tracks multiple metrics, including at least one, to understand if it is reaching underserved groups.

For example, Learn was an early backer of Andela, Africa’s leading digital skills fellowship, which has opened up career paths for more than 175,000 budding software engineers. On average, Andela software engineers take home 87% more than what they were earning before. Female developers account for 21% of its workforce; in contrast, women make up 6% of software developers worldwide. They have invested in Ascent, which uses AI and machine learning to make student loans. The company’s algorithms have enabled it to broaden access to student finance to groups which have historically been excluded: for example, DACA students (often known as “dreamers”), those without credit history or without a co-signor.

Learn’s strong convictions have enabled it to ride out controversy to back truly innovative and disruptive companies. Portfolio company NewGlobe works with national and state governments across Africa and Asia to create technology-enabled education systems. This has sparked debate over the outsourcing of education in emerging markets to for-profit operators. However, a recent study led by Michael Kremer, a Nobel prize-winning economist, tracked more than 10,000 primary school students in Kenya and found that students in NewGlobe’s programme gained almost an additional year of learning, learning in two years what their peers learned in nearly three. This was covered in a recent article in the Economist.

As investors, risk-adjusted financial returns are part of our lexicon. And we believe the fund can deliver top-quartile returns. But we must also consider risk-adjusted impact returns – and we believe that Learn has a robust process to mitigate impact risks and therefore identify disruptive companies that have a higher likelihood of delivering better outcomes for underserved groups.

We hope to use our privileged position as an LP to engage with Learn around its impact practice, and we can also learn from them as we continue to evolve our thinking as we aim to set standards as a top-tier impact manager.

If you have any thoughts on the article or would like to learn more about Snowball, please do be in touch at hello@snowball.im

Jake Levy, Investment Manager at Snowball
Jake Levy, Investment Manager at Snowball