Episode 22: Deborah Quazzo- Investing in Exceptional EdTech Entrepreneurs
About Deborah Quazzo:
My next guest on The One Percent Project is the Managing Partner of GSV Ventures and the Co-founder of ASU Summit, the incredible Deborah Quazzo. Coursera, Course Hero, Guild Education are among a few Edtech unicorn outliers that GSV has invested in over the years and Bill Gates, Barack Obama, George Bush are among the few superstars whom she has hosted over the 11 years of the summit.
Listen on:
Spotify | Youtube | Apple Podcasts | Google Podcasts | JioSaavn
In this conversation, she talks about:
Her career: How she got into Venture Capital, after having worked for the likes of JP Morgan and Merrill Lynch and why EdTech
The 5P framework to analyse and validate businesses and ideas. How businesses with Purpose the fifth P, will have a higher outcome.
Why is the Asian EdTech market attractive, especially India and Indonesia?
How companies are utilising EdTech platforms for upscaling their employees?
The impact of Covid on primary, secondary and tertiary education?
How the GSV team grooms its portfolio of companies?
The key difference between the US and the Asian ecosystem.
Her learnings from organising the ASU EdTech Summit and hosting guests such as Bill Gates, Barack Obama, George Bush, Byju and many other superstars.
Three ways to support the podcast:
#1 Share the episode with family and friends on social media with #OnePercentProj using the share button on the site.
#2 Take a few seconds to give us a rating on Apple Podcasts. This helps new folks find us organically. Rate
#3 Leave a review if you feel inclined. We read every single message and love feedback. Review
Transcript:
*The transcripts are not 100% accurate.
Pritish: Welcome, Deborah to the one percent project.
Deborah: Thank you. I'm very honored to be here. Thanks for inviting me.
Pritish: You have had an excellent career in finance and banking before you stepped into building Think Equity. And then venture capital. Why did you make that transition?
Deborah: I started out of college and Business School working at large financial institutions JP Morgan and Merrill Lynch. And I was at Merrill Lynch for 13 years. I was ultimately the head of growth research banking at Merrill Lynch. And I recruited over a partner of mine, Michael Moe, who's based in Silicon Valley, I was based in Chicago to be the head of growth research. And I think it's through some conversations I realized at that point that perhaps I was better fitted to try something entrepreneurial. So, Michael and I decided to leave in 2001. And to actually build our own business, which was Think Equity Partners. My father was an entrepreneur, my grandparents were entrepreneurs. And I had a lot of it. I'd certainly grown up with a lot of it and entrepreneurial spirit. So, the idea of jumping out from a more traditional setting like a big investment bank, like Merrill Lynch was very enticing.
Deborah: So, it really went from there to start Think Equity investment bank. We sold that in 2007, happily before the financial crash in 2008. And after staying through our lockup period left to start, what we run today, which is GSP, which stands for global Silicon Valley. So, it was all an instinct that I needed the correct thing. Michael gave me the courage to vet my entrepreneurial instincts. And that turned out to be a pretty good decision to have been made.
Pritish: Valid. And why education?
Deborah: Yeah, Michael Moe was a broad strategist. So, he had begun to write in mid 1990s, about the sector as being a huge opportunity for entrepreneurs and for technology app with the application of technology. And the fundamentals for that was a massive chunk of GDP, global GDP, still is incredibly dysfunctional still is, to some degree, very fragmented. And this was in the mid-1990s, at the time, very little application of technology, which was really the only way to scale solutions in a way that would address the sort of gaping holes of educational and skills deficits amongst populations. And sort of sketch that out as being a prototypical description of a category that should attract great entrepreneurs.
Deborah: And I think he was a little bit early in forecasting that in the mid-1990s, but we became very involved as bankers and advisors, and research analysts and conveners. And ultimately in building our funds, and 2010 is when things began to really hit. And we began to see all those kind of component parts put together, great management teams, many coming out of great experiences and other technology areas, many coming out of experiences, like Teach for America, where they'd seen very smart young people, where they'd seen inequity on the ground, and wanting to create a company that would help drive change. And if you look at the class of highly scaled, a tech company, the first class I call the first cohort, whether it's Coursera, or Duolingo, or class dojo, or edX in the nonprofit side, or others, interestingly, they all were kind of formed around that period. But, but for me, I got very hooked on the idea of working in a sector that I could actually run parallel lives with, I could actually do it 100% of my professional life, and I could actually do it 100% or nearly 100%, in my personal life. Education is a great sector because we all had one. So, we all have opinions on them and how they could be better and then then I had three kids and developed further opinions about that.
Deborah: But I got very impassioned about wanting to get up every morning and work with entrepreneurs who are trying to change the world through the scale deployment of education technology and then that ultimately ended up in our creating the ASU GSV summit, which is a really important global event for education innovators all over the world. And then the summit actually are starting GSV ventures, which is our venture fund, just finishing this raising the second fun so it was a circuitous route, wasn't linear, but It was organic route. It’s what I would say. I think I would tell people that when you have a sense that you're developing a passion, you should follow it.
Pritish: Absolutely. And I don't think any route is linear. So, congratulations on actually having such an excellent portfolio of startups and businesses who have scaled across the world. Right. And you just took a few of those names. When you see these businesses, how do you know these ideas and teams are unstoppable?
Deborah: Yeah, it's a question, we get up and ask ourselves every single day, because obviously, we have made mistakes, and you will promise we will keep making mistakes. But we've been fortunate enough to make some pretty good decisions. We have a framework that we developed. Michael Moe and I've worked together for 23,24 years. And it was a framework that that he designed. And it's pretty simple, but it actually works pretty well. It's called the five P's. So, the first P is people, there's no shortage of great ideas, but it takes a great team; a great team with incredibly high energy level and high vision and high band bandwidth and clock speed. And so, we look for that first. And then product, obviously. We’ve been working in education sector for over 20 years, I think we've got a pretty high sense of pattern recognition. So, if you look at our funds, we haven't had a lot of losses, because I think we've been pretty good at avoiding the mistakes is. We've made mistakes, and we'll continue to make mistakes, but I think our pattern recognition has been quite a lot reliable in the scheme of things.
Deborah: And then product has to be highly differentiated, we have a good sense when someone's creating something new, and that with high potential scale, we're very biased to platform companies and scale businesses. Predictability is another one that doesn't happen in the early stages, obviously, but we begin to look at milestones, and our management teams, hitting milestones. Are they pivoting when things are not working? That's another aspect of predictability actually, perversely, and then potentials which is addressable market, and then we have a fifth P, purpose. And while we're not an impact fund, as specifically defined, we believe that every investment we do, if it doesn't have impact, it will not have financial returns. And we believe that companies that operate with purpose are companies that are going to have higher outcomes both for financially, as well as professionally for all the individuals involved in the business.
Deborah: So, we're very sensitive to that, I think there's certainly in the education sector plenty of ways to top tick the upper echelon of income, that won't lead to high scale, but it might lead to great profitability, but that's not what we invest. So that's the framework of how we look at things. And I think we have a great four-person Investment Committee, and we have very robust conversations, and we, at the end of the day, know that at least 50% of the formula is going to be based on the strength of the team that we're backing. And so, we really also put a heavy shoulder to the teams that we're backing and do everything in our human power to make sure that we're supporting them appropriately. So yeah, I think that's how we think about it.
Deborah: And as I said, fortunately, we've been lucky to be fairly right in picking a good number. Our combined team has been involved about half of the US funds and we've only gone international on our second fund. So, we were pretty domestic, our first 100% and the second fund, we've been spending huge amounts of time in India, we'll make our first investment there shortly, we’re finishing our first investment in Indonesia, we've made a small investment in Jordan, and we've made it with a great team. And we've made an investment in South Africa in Cape Town, and online high school with again another fantastic team and photo math, a company that's fairly well known in Ed-Tech in Zagreb, Croatia, again, another extraordinary team. So, we've gone far more international, which we're thrilled about in the second fund.
Pritish: Brilliant. I have so many questions, but I probably structured them one by one. Firstly, why Asia is so important now. And I would like to know, Jordan, I wasn't expecting that.
Deborah: Yeah, I'll start with Asia. So EdTech fundraising venture and growth, financing, and education technology this year, will blow the doors off any previous record. So, it'll probably end somewhere around 11 to 12 billion. If you look at it, about half will be China. And then right now, when it was 10 billion, it was basically 5 billion in China, 2 billion in India, 2 billion in the US and then 1 billion rest of world.
Deborah: So, India is coming along very rapidly. It has all the rise in middle class, a critical importance of education, it is, sadly, culturally way ahead of the United States in terms of the commitment of parents to suspend whatever they have to get their child, the best education. I love the idea that in India, where you look at the success of a wonderful company like BYJU'S who just spoke at our ASU GSV summit for the second or third time, where parents or students are basically taking curriculum twice, because they take in school and they go home and they take tuitions again, at home. I would give my right arm if that began to happen in the US. Same thing really happens in China, we just feel China's too complex for us, we would need a much bigger team and different partnerships. So, we have great partners in China many of our LPs from Chinatown and new oriental who are the two largest education companies in the world are both LPs in our fund, but India and Southeast Asia are coming along very quickly.
Deborah: Indonesia, fourth largest country in the world, right? Again, rising middle class, they’ve historically had abysmal academic performance on like the PISA, they're always in the very bottom. So, we're just in the process of investing in a terrific company there. And it's nicely focused on helping elevate teachers into providing higher quality instruction into K 12 after school with a real focus on how they could possibly help lift the academic outcomes of the entire country. So that'll be very Indonesia focused, most of our companies are actually globally focused. But Indonesia is such a big market, that's terrific. So, if you look at it, there's all kinds of great regulatory changes in India, India began digitizing in 2004, 2005 a lot of great companies have come out of that. The entrepreneurs in India are extraordinary, changes coming in January in higher education related to the government's ability allowance of online degrees. So, all kinds of really good things happening in India, COVID has been fascinating because I'm actually on the board of Akash in India, which is the medical and engineering test prep and an honor merit nation in the K 12. Market, not actually through the funds, through another thing, but it's been so fascinating to watch. COVID forced India to go to a virtual, to an inside sales model, which is yet as opposed to the door to door selling that was more regular, and I'm sure that will come back to some degree. But the inside sales model is so much more efficient and can allow some real breakouts of companies.
Deborah: Many of the leading Indian EdTech companies came to the event that we put on at the ASU GSV summit years ago, in the very early years. Unfortunately, we didn't have a fund, I wish we had, and I wish we'd invested but we didn't have a fund, unfortunately, but we think it's there in the first innings. We think it will continue to transform the delivery of learning across the Indian continent. And so, it's very exciting. Jordan was interesting and we were spending a lot of time in MENA generally. This is just a fantastic team with very deep experience. And backers who are also deeply experienced. While Jordan obviously is a very small market, the thesis really is the expansion across MENA of a digital k12 learning product. They've gotten a lot of support from Jordanian government during COVID in wanting to spread their digital learning across the population, but the hope is we'll move aggressively into Egypt and other countries with larger populations and demand. And we think it is actually fun. The company is called ABWAAB and we had a competition, a global competition as part of our ASU GSV summit. This year was the first time we'd actually done it. And we had a call for competitors, and we had over 500 applications. And we actually ended up with three finalists, including ABWAAB and we did a live Bake Off at virtual summit event and they actually won which is totally cool. So, first time we've had a MENA competitor and winner. So, it was very exciting across the MENA region that a tech company had prevailed, that was very cool,
Pritish: Great to see a Jordanian company in the tech space making headway and definitely right. I think the Indian ecosystem has evolved over the last 10 years. And also, I think India has become a self-consuming market. Earlier it was I think, the back end of the world now it has just become the market that everybody wants to go and build for India.
Deborah: Well, I would also say actually which fascinated me is just the bias towards engineering education, so pretty much everyone is technologically competent, and which is not the case in many other countries. It is extraordinary, the engine of entrepreneurship, the various IITs are there. I mean two or three people from my entrepreneurs are from IIT. That's amazing. But one of our important theses is that I think EdTech will be one of the biggest exports for India over the next five years, it's an incredibly high-quality product being put out, an English-speaking nation, so it's easy to port it out to other countries, you're already seeing it. I mean BYJUS will have very substantial revenues in the US this year. And you're seeing a number of the higher ed players already competing outside of India, in the US and other in other countries, which I think is really interesting. So, I think it makes it even more promising for the Indian tech market is that is that they have this very clear ability to export. China really doesn't, right, because it would require complete retooling not in the same way. China, by the way doesn't need it. China's so big, that you hardly need to move outside, and China has a high appetite for paying a mandate. There's no price pressure in the China market, either. And there is price pressure in the Indian market. But yeah, it's fascinating. It's so fun. I mean, it's great to see the cultural differences. And it's so cool. Anyway.
Pritish: If you look at the physical schools and the top 20 schools, the Ivy League’s, and whatnots, I think their 100-year experience, or their legacy is built on the alumni that they have put forward. Right? Maybe EdTech is too young to consider that. But do you see that there is a space for actually building a platform for the alumnus of the EdTech graduates? Like this Coursera?
Deborah: OH, for sure. I think we're already seeing. I think IIT and the Ivy League, and all those elite academic institutions are effectively recruiting machines, right? Because they do all the work, right? And they bring in the students of the highest promise, and they spit them back out, but they can't spit them out at enough scale to make a difference in the workforce. I think that the other thing is just this breaking down of degrees into certificates. I think we're already completely seeing Coursera's certificates on LinkedIn or the largest number of certificates on LinkedIn. And I think their employers are totally breaking down the employer attitudes about who they will hire, I think are changing very dramatically. It's really interesting. We were an investor in a company called field education, which is a very American company, because it relies on American tuition benefit plans, which employers have, which are unique tax benefits for US employers. So at least today, and probably for the near-term goal will be focused here, but they've been a crazy successful company, one of the fastest, certainly the fastest scaling EdTech companies in the US ever. And what they're doing is they're taking the frontline worker population, who maybe didn't finish high school, almost certainly didn't finish college. And even if they didn't finish college, they now need to be upskilled and rescaled, because they're working in a distribution center, and Amazon's gonna replace them with robots, and so they need to be upskilled. And employers increasingly realize that it is their responsibility to make sure their workers are re-equipped.
Deborah: So, it's really exciting to watch companies get excited about the idea of retooling workforces and making sure that whether it's to retain employees in different jobs, or whether it's to train employees to actually seek work, or other companies, because there are no jobs left and their companies, they've automated them out. So, I think there's a lot of optimism. We all focus on the content. The reality is only 30% of the US has a college degree. I got the number wrong. It's like 7%, it's like remarkably low, right. And people in the US think in their heads like 70% of the population has a college degree. They don't. So, we tend to focus on the elite Stratta who don't move the needle in terms of numbers. I think some of the really exciting work is happening at both for profit and not for profit universities and online learning providers that may have a degree and may not, there may be a credential of some sort.
Deborah: I think the most exciting work is happening against that group, it’s a much bigger return on population and a much more critical group to rescale and upskill. It’s what we like to say," it's about all people", ALL in capital letters, having equal access to the future. And that really means a future economy. And if we aren't providing that kind of educational and skilled support, we're going to lose a lot of people. And it's not going to be pretty for society. So, it's an exciting time that we find out we have a lot of offers. And as you well know, COVID, perversely is horrible for so many people, it has created a profound change for the world of digital education and we believe accelerated the entire market by at least a couple of years in terms of just changing behavior patterns, changing people's thinking about what's acceptable, what's not acceptable in terms of doing digital learning. So, it's a cause for optimism, I think
Pritish: One of the listeners questions is actually based on COVID. And he wanted to ask is, would the roles of primary and secondary and tertiary education, do you think they will change as we come out of the lockdown and get to normal?
Deborah: Yeah. It's interesting, and I don't wanna be so parochial and US focused, but if we look at pre-K to Gray education. And so, we think that certainly, it's gonna be interesting, and certainly here in the US, and around the world, k 12, parents have now seen in their living room, the delivery of education, right? Well, or not, right?
Deborah: And I think, at least in our market, in the US market, we've seen just a blossoming of innovative ideas of entrepreneurs, creating hybrid solutions, tech only solution to deliver high quality education at low cost. I think we'll see more of that, there's gonna be all kinds of pressures, like waves of retirement. I think teachers are going to be retired. We've already seen that here; the saddest part is we've lost just a lot of children. Here in Chicago, our enrollments are down to something like 12%, the kids have just disappeared. I think low-income kids are just not able to get online to do this virtual learning. And there's going to need to be this recovery. And that will put a lot of pressure on the system. Higher ed was already moving, online or hybrid. In the US, the demand for higher ed is declining, because we're having population declines, like most developed countries, but in places like India and the rest of the world where populations are increasing, the demand for higher education is massive, and there was no way it was going to be supplied only by the building of physical buildings, because that just would not literally be possible.
Deborah: So, I think you already had a lot of innovation happening in higher Ed and this has just accelerated it. You're going to see more high quality providers providing digital education, there will always be a place for people to go physically to school into college of K 12 and to college but I think there will be a lot of pressure on mediocre providers of site based education, particularly in higher Ed, we're seeing it here like crazy, lots of schools going out of business. And the development of online and hybrid offerings by physical schools to if they want to. We will have a lot of permanent change, come out of COVID. And also, just focus on making digital learning better, more outcomes driven, more results driven, more job driven, job linked, so that people really are bettering their lives by doing this.
Deborah: One of the other questions somebody had was, how does your team groom the startup for the investments that you make over a long period?
Deborah: Yes.
Deborah: So, we try to operate as like, we call ourselves an ensemble. So, we have entrepreneurs in our team. One of my partners, Julia Stieglitz was a founding team member at Coursera. And she ran Google Apps for Education before that. I've just been in the ed tech ecosystem a very long time as a financial investment banker and have been deeply into the Ed markets for a long time and lots of relationships. So, we are very hands on. I mean we help companies hire people; we help companies create new business. This Indonesian company that we're investing in, we're so excited about, was on the phone with us on zoom with this week. They want to understand how they can deliver good assessment scale.
Pritish: Brilliant. And what are the major differences that you see between the US market and the Asian market now that you're exploring the Asia market?
Deborah: So, I'm on the board of ETS, the testing Service that does the SAT and the TOEFL and everything else. So, we had them on, I got two very senior site learning scientists or psychometrician at ETS, and we were just talking about what would make sense to put in place into their product, to allow them to measure efficacy as they were delivering learning for kids in Indonesia, and actually doing better with teachers.
Deborah: I help people recruit, we help people recruit boards, we help people find next investors. We pretty much whenever somebody wants, we do it, if they need advice on real estate, we'll find that. It's because we're sector experts that, we have the expertise that's very complementary to a generalist fund that wouldn't probably spend a lot of time trying to know, hundreds of superintendents and principals in K 12 settings, or hundreds of university presidents and progress in higher ed, or hundreds of learning leaders in the workforce. We try to bring all that to bear, we are very hands-on and by the way government is tied on so, we have already Duncan, the former Secretary of Education, US, extraordinary human, doing amazing work for low-income people of colour here in Chicago now, Arnie's on our advisory board, we talked to him all the time, about how do we how do we get people to help when companies are trying to tackle a problem and because obviously, the education sector is emerging of a public sector and private sector. We have this context and we've got a real global footprint. EdTech is so increasingly global, they're always going to be local government stuff. But in general, it's really become such a global category, that's really fun, too. And that's really synergist, it creates great synergies too.
Deborah: I think there's a much bigger propensity for parents to spend in the Asia markets. Indonesia has to test that they haven't done that yet. But I think in Singapore, India, Vietnam, we're gonna spend some time and now they've got some developing businesses. There is the discipline and aggression around learning, it is definitely of paramount importance. I will say, I think we're increasingly optimistic that there has been a change, in some point, we'll figure out how to measure it in consumer spend or change in attitude around consumer spending education here in the US, towards the positive, which you think is great. In India, you have doubt solving companies in the US that translates into, companies that help students when they get stuck, but they're basically saying the same thing. I loved that as a concept and as a term. So, I actually think hierarchies of teachers are doing it, but there is generally a move on the part of entrepreneurs to do things like elevate teachers, give them other sources of support in faculty members, etc. So, I think there because I think price sensitivity is very different. Because GDP per capita is very different. It’s fascinating that Indonesia is substantially higher GDP per capita than India today, still, which is interesting and in the US its much higher and yet, we still don't spend but the GDP per capita is really important as you're thinking about people's ability to spend, and you have to think about how to change your product in a local market to address that, but obviously, the language refers to the fact that in India you could have so many different languages and you can really be advantaged if you actually serve people in all those different languages. So, everybody would like to be able to speak English, but if you can get people there through the whole host of other languages, not just Hindi, it's compelling so, less of that, obviously, in a country like the US. It’s one of my favourite things about this job is that I get to get a flavour for both how similar we are and how different we are, and I can't wait to travel again, because I need to plant myself in India and Southeast Asia for a couple of weeks. So, anyway, looking forward.
Pritish: Looking forward to having you in Asia. Excited. I would like to get your views and the learnings that you have got from running the most successful EdTech summit. You have hosted some amazing leaders. So, what has been your major learning? And who has been the most fascinating and impactful speaker? Ever?
Deborah: Oh, my gosh, that is really hard. We have had so many good speakers. I loved him, we had President George Bush speak two years ago. And I think our audience was skeptical that President Bush would say things and they resonated for them. And that was one that I loved, and he was delightful. He was funny, he was interviewed by Carlos Watson, who runs Ozzie media, he is a dear friend and partner of ours and it was great. And he was witty, he was funny. What I loved was how surprised people were that they loved it and how gracious people were in saying that they loved it when they had not expected to so, it restores your faith in humanity that people will open their ears to listen to a person that they think they're diametrically opposed to and actually be willing to do that.
Deborah: I would say we did same thing this year with Charles Koch, he was a speaker on our virtual summit this year, he was part of a panel and it was all virtual, so it wasn't live like President Bush was but he has an extraordinary intellect, and he is doing incredible things in the US, supporting everything from prison reform to education reform. And again, I think he surprised a lot of people as I watched the reaction. So, I liked that. Malcolm Gladwell this year was fantastic. Isabel Wilkerson wrote a book called caste where she actually looked at the caste system in India and issues in Germany and bringing it back to the issues of race here in the US. It's I think, one of the more brilliant books of the year and she was fantastic this year. So, it's hard to pick out who's great, who's the best. But my partner Michael Moe always has a really fabulous opening keynote, which he did again this year, but to at least frame the issues that we're trying to think about and in the potential impact of education technology.
Deborah: But the event is a great opportunity. We're pretty proud. The coolest thing about being virtual this year. Because obviously, people would rather have been live in San Diego and having fun and having dinners and hugging and shaking hands, which one day we'll do again, but what was cool in having to do it virtually is we'll always have a hybrid from now on. And over 15,000 people attended, which was great. And we actually have a follow up coming next week, next Friday with General David Petraeus, and his daughter in law. He was also in the military, and but we had at least one representative from 70% of all countries in the world, they actually attended. So, we had Bhutan, we had Iceland, the list was really quite amazing, which of course we would never be able to do on the ground. So, it also I think speaks to how energized people are around the potential for education innovation in the world. I hope we can be back live in a hybrid event in July but it's more optimistic today. We'll see.
Pritish: Absolutely. Now, are we going to get into a rapid fire three questions, one word or one sentence? Are you ready?
Deborah: I am.
Pritish: The hardest thing about your job.
Deborah: Telling companies, we don't want to invest.
Pritish: One book or a blog that has influenced you the most.
Deborah: I think caste this year has absolutely influenced me the most.
Pritish: One person who has influenced you the most.
Deborah: My dad.
Pritish: Thank you, Deborah. It was a pleasure having you.
Deborah: Thank you. Appreciate it. It’s an honor.