The Next Ten Years in EdTech Will Be Exciting - Deborah Quazzo, Managing Partner at GSV Ventures

SHIV GAGLANI: Hi, I'm Shiv Gaglani. As the U.S. economy continues to recover from the pandemic, employers are facing headwinds finding the skilled workers they need in healthcare and many other sectors. This has put renewed attention on the country's education and training capacity.

Our guest today is perfectly positioned to help us understand what's happening on that front. Deborah Quazzo is a managing partner at GSV Ventures, a female-led fund investing in the $7 trillion global education market. Its portfolio of companies include leaders in the space, many of whom we featured on Raise the Line, including Course Hero, Guild, Coursera, Turnitin, and others. She's also on the board of Ascend, whose CEO, Greg Sebasky, we had on the show a couple of months ago. 

Two small-world connections before we begin. First, her daughter Caroline was in my entryway as a resident tutor back at Harvard. When I was at HBS, Harvard Business School, where Deborah also graduated from, I was actually funded in part from a scholarship named after her father. When I visited Deborah and team in Chicago, I actually picked up the hot-off-the-press HBS case about GSV and about her, specifically. Deborah, thanks so much for taking the time to join us today.

DEBORAH QUAZZO: Thank you, Shiv. Thank you. I love that you did my dad's fellowship; that's really cool.

GAGLANI: Totally, very small world and that was in 2015, so five years have passed since then. I obviously know a lot about you, and anybody in education tech knows your background, but since our audience comprises a lot of healthcare students and professionals, do you mind giving us a bit about your career highlights and specifically what got you so passionate about education?

QUAZZO: Yes, sure. I've really been working in education innovation for 25 years with my partner, Michael Moe, who's based in Silicon Valley. I'm generally based in Chicago. I really got there through, Michael was a Wall Street growth strategist. In the mid-1990s, actually relevant for the healthcare world, he put out a thesis that said the education sector was ripe to become a critical emerging growth investment category and that it had many analogs to healthcare— second-largest percentage of GDP relative to healthcare. Looking at healthcare and how it had turned over time, there was very little application of technology for education versus healthcare at that point. Highly fragmented, but an essential service, and relatively few emerging great entrepreneurs at the time—again, back in the mid-1990s. Pretty abysmal results, and yet, such a critically important delivery. It just looked like a category that would be ripe for great entrepreneurs to enter and look to build novel businesses and great solutions at scale. 

He was a little bit early in predicting that in the mid-1990s. We really didn't begin to see movement in building great-scale businesses until around 2010 period, when you had companies like Coursera, Course Hero, Duolingo, Quizlet, and others begin to be formed.

I was an investment banker, did begin working with Michael 25 years ago so I've been in the segment way before education technology got sexy, which is a relatively recent phenomenon. I just got impassioned, I had been a broad-growth-focused investment banker but really got hooked on education and its importance and the good you could do getting out of bed every morning, working with great entrepreneurs who are creating great solutions like you.

Michael and I founded a company called ThinkEquity Partners, sold that in 2007, and left in 2008. At that point, I decided I was going to hunker down and basically devote my entire personal and professional career to education innovation and education technology, specifically on the professional side. Our mantra is that all people deserve equal access to the future with ALL, A-L-L in capital letters. We believe that the wedge for that really is offering high-quality, low-cost education at scale is the way that we can get there. That's been the singular mission since 2008, and it worked out to be pretty good timing to drop everything and get involved.

GAGLANI: We had Burck Smith from StraighterLine on the podcast, also, a couple of months ago, and he said a quote that I really liked. He said, "If you stick around long enough, your timing is perfect." Clearly, you guys were very early on to the education tech sector, and certainly leaders. This past year and a half has a lot of incredible tailwinds for online learning. I'm sure it's pretty validating. Do you mind giving us your assessment of how the last 18 months have gone? What are the macro changes that you think are here to stay in higher education?

QUAZZO: Yes, I think that it's just such a fundamental habit change. We look at pre-K to gray, education and skills, and obviously, as my partner Michael Moe will say, "1.6 billion people were thrown into the deep end of the online learning pool overnight, and forced to sink or swim." Some sank obviously, and some swam, and some got to the edge of the pool and got out, and don't want to come back. For the most part, it was—even in such, obviously, there's a lot of mixed delivery in the K-12 system. But even there, I think, what you've seen is just such—you now have four-year-olds facile with Zoom, all teachers in K-12 and all faculty members are now totally facile with being online instructors. While things can improve, it certainly got people over the—if there was anyone reticent to begin delivering their learning, their teaching, online, the reticence is now gone. It's really interesting. I was on a board call today just talking about the movement, the things that happened, like textbooks no longer being relevant, the whole COVID move where textbooks were already becoming less and less relevant in the move to digital content, but in digital, obviously, you have digital textbooks but animated and active and adaptive digital content. This company was actually showing in their numbers the complete drop off the cliff of textbook-related materials in their business, which is related to math. 

I think it's really across the board. Corporations were already trying to get rid of gatherings in hotels and things like that, and I think corporations have seen the ability to deliver synchronous online learning and hybrid online learning. I think many don't just want to stick a video in front of people and see if people can learn, I think they want multifaceted delivery. Everybody was forced to do that, and I think it worked pretty well. 

Of course, in the higher-ed space, higher ed is such an interesting beast because it's got to be defined so much more broadly. It's not the 30% of people who get degrees on-site in the 18-to-22-year-old category, it's the entire adult population on the assumption that everybody needs continued education or needs education if they didn't get it in the first in the first go-round.

The demand far exceeds the ability of physical buildings to supply it, particularly in developing countries like India and elsewhere, China, et cetera. Universities were already going online pretty aggressively. We have so many great innovators here in the US, like Southern New Hampshire, Arizona State, Purdue, and Western Governors. 

We saw it in the Coursera numbers from January. They launched a Coursera for campus, I think in February, which was an overnight turnkey solution to move online for universities all over the world, including the packaging of Coursera content with other universities. They launched the product in February, coincidentally, right ahead of COVID, and I think they had a million learners on the platform by May. I think we'll see people go back and certainly in the K–12 system, children need to be together. But I think even there, you've seen this concept of remote learning being such a stupid term because remote learning means you're learning at home. Shouldn't all children be learning at home? Shouldn't we make sure that all children have the ability to have bandwidth and devices to be able to learn at home?

Great things are happening around the funding of getting low-income kids the right access to bandwidth and devices that leaves me really optimistic. I think that while we'll have some companies see pullback, I think, in general, it's just vaulted the sector forward by two years. We're projecting hitting a trillion-dollar category in ed tech in 2027–28, versus previously, we would have thought it would have been in the '30s, so it was a pretty extraordinary event.

GAGLANI: Those are some incredible numbers you were sharing. I remember one of the things that always stood out when you and Michael spoke at these ASU GSV events was how the relative market cap in education was only in the tens or hundreds of billions relative to a $7 trillion global industry, showing that there wasn't as much general consumer interest or investment in the space. But now, obviously, there's so much, so many mega-rounds and things happening.

You mentioned Coursera a couple of times. Obviously, we're talking just a couple of weeks after 2U announced the acquisition of edX. We've had all the CEOs on the podcast. Apollo just acquired McGraw Hill; There's so much consolidation and movement happening in the space. Do you think that's going to continue for some time and it's going to outperform?

QUAZZO: Yes. UpGrad from India just acquired iD Tech in the K–12 space, which is a technology training business that has typically partnered with universities to locate these physical camps, and then obviously in COVID moved to digital camps for young people in college campuses.

I think it's interesting because I think you're beginning to see companies like BYJU, UpGrad, and there will be others, begin to aggregate assets across the pre-K to gray continuum. Not everybody will do that, but I think a few select companies will. We're spending a lot of time thinking about who's going to be the first $100 billion category in the tech space and how do they get there. I think that will be a combination of very high organic growth combined with very smart acquisitions.

I was on the board, as you well know, of Aakash, the medical test prep company in India that BYJU acquired for a billion dollars. I think that was a really fascinating and very smart acquisition by Byju. It sort of double jumps them into a whole different part of the market, ed tech into higher ed, more specifically, professional test prep. It also gives them both a site-based model to combine to create hybrid. Because I think hybrid is the future, right?

I think that's the other really interesting thing. We're seeing hybrid in K-12, we're seeing hybrid in higher ed, we're going to see hybrid in corporate. I think that's another really interesting thing. The M&A activity, whether it's site-based companies merging with online companies, or just companies extending their reach, I think we've got a lot of way to go on consolidation. With some of these companies, like Duolingo getting public, with others getting out there with currency—obviously, Chegg ran a truck through the opportunity when they had a public currency. They've done I don't know how many acquisitions, probably more than 20 at this point.

Dan Rosensweig took great advantage of that currency; I would expect Luis von Ahn to do the same thing. He's actually the opening keynote at ASU+GSV this year. I think he'll take that currency and become a very aggressive acquirer, because if you read his prospectus, he says he wants to be a very broad learning platform and language really being only the first stop on the train line. I think we've got 10 really interesting years ahead of us, as people try to figure out what it means to create broad-based, scaled learning delivery.

The 2U-edX merger acquisition is fascinating and brilliant on both sides. There have been some snarky reviews of it, but I think that's naive. I think it was a really, really smart move by both Harvard, MIT, and by 2U. It solved issues on both sides, and creates a powerhouse that can effectively compete, particularly in the areas of student acquisition costs, with Coursera. I think it's great to have competition. I think that's a healthy thing for companies, and it'll push Coursera to even—Coursera is our largest holding, and our first fund, so I'm certainly biased, but I think it'll push Jeff Maggioncalda, Coursera, and his team on to even further greatness. So yes, some really, really smart things going on in the market, which is really fun to see. 

GAGLANI: Yes, super fascinating breakdown, especially what you were just describing there with the omnichannel, like how there's hybrid, like Aakash—which, by the way, thanks again for that intro. We'll be having him on the podcast I think next week, actually. But we've seen this in other sectors like e-commerce and healthcare. How do you deploy omnichannel? Warby Parker did this, Peloton's done this, obviously, with having in-person and online, and so it just makes sense that there's the physical and the digital. 

You've mentioned the ASU+GSV Summit. Obviously last year, all 5,000+ people were very disappointed that because of COVID, we had to delay it, but I think next month in San Diego will be even bigger. What are you most excited about for this summit, especially after, I think, 18 months since we've all seen each other in that setting?

QUAZZO: Yes. I think we are excited to be there. The Hyatt keeps selling out, and we have to keep pulling more rooms. We're excited about the momentum on attendance and that other people are excited to be there. I think that we have a really great broad set of programs, everything from Arizona State—it's pretty remarkable—they've done a partnership with the former DreamWorks founders called Dreamscape and they're creating a physical experience on campus at ASU but also around the country in some very large pods, where you'll go in, and learn in a multi-sensory way using AR and VR and simulation. They're actually bringing a pod to San Diego and the capacity is limited, so it's going to be a very hot ticket to get in. I can't wait to actually do it. Apparently it's just mind-blowing in terms of the future of education and how you can experience it in this contained environment where you're learning in all kinds of different modalities and with different delivery. So, I'm very excited about that; I think it'll be very cool. Present Crow is actually bringing Walter Parks, the famous movie producer who's their partner in this, and they're going to do a talk about it on Monday morning before the summit officially kicks off. 

We have some terrific programs around equity and access. We've got some great medical ed tech panels that you kindly assisted on, as well as Ascend and others; I'ld love to see that part of the ed tech sector become more and more and more robust. We have very rich content in early childhood and the care economy, obviously what COVID has laid bare, which we all sort of knew, is just the impact on women of having an inadequate care system. The pandemic hit women particularly hard in terms of women leaving the workforce. So we have some fantastic conversations around the care economy and what those implications and how do we solve it, and  that sort of thing, and then that abutting important conversation because unprecedented funding for early childhood education is coming out of all the Biden relief bills and we know we are sitting at a once-in-a-moment, once-in-a-lifetime opportunity to adequately fund early childhood, K-12, and even higher education, from some of these packages coming out of Congress in the Biden administration. So that's really exciting to talk about because it really is a potential game-changer on a lot of levels. 

We have great workforce learning content, we have some fantastic people from some really great companies coming to talk. We've got Common and Tiffany Haddish doing an opening keynote. We have Mindy Kaling doing a closing keynote. We've got Ronan Farrow and some wonderful little stars mixed in the mix, too, which is fun. Jeremy Lin coming in with some conversation, and then we have just really, really rich conversations across pre-K to gray education skills, and I'm really excited for that. So all good. 

GAGLANI: All that sounds awesome. The ASU exhibit, I don't know if I'll be able to get in, but I know them to be- I was first introduced to ASU through, obviously, your summit. But then just this year, we signed a contract with their nurse practitioner program so it's exciting to start working and seeing how innovative they are even on the ground, apart from the summit.

QUAZZO: They are crazy innovative, yes. 

GAGLANI: I'm very excited about all of that stuff, but honing in on workforce development real quick because, you were—early on, many of the companies, like Degreed—obviously you were in Guild—that specialize in workforce development and skills training, Pluralsight is another example. Last year, at peak, 22 million jobs were lost in the US from COVID-19. There's been a great rebound, and now it's actually called the “Great Resignation,” where a lot of companies are losing 30%, 40%, 50% turnover as people decide, "Oh, I want to work remote or distributed. I don't want to work as much, three or four days a week instead of five." 

What are some of the big trends in workforce development that you think will come out of this Great Resignation? One thing that you said in this case study that was really interesting, is how these companies decided not to pull their learning and development budgets in 2020 even while they were suffering from COVID, and that includes in fast food companies and service and retail companies, not just the tech companies.

QUAZZO: Yes, it's really interesting. People can't find workers. I mean, my soon-to-be daughter-in-law owns a mental health clinic for youth in Seattle, and she is just—it is very hard to hire; I was just talking to her about that—and really, at all levels.  

So what comes out of it? I do think that that one of the great things that's happened in the workforce market is that employers have embraced the idea—I don't know if they call it this, but they've embraced the idea that they are the fourth educational system. I was on a Zoom yesterday with a lot of university faculty, and I'm not sure they understand that, and I don't know if they even like that, but I think the reality is that corporations, whether it's a situation like—we're investor in Guild education, where Guild is bringing the online universities into the corporation, connecting them to frontline workers, as you described. Which were not typically the workers who got the attention in terms of learning and development and giving them high school equivalency degrees and university degrees, and then up-skilling, re-skilling certificates. 

Guild is the fastest-growing ed tech company that's ever been in the US, and one of the fastest-growing SaaS companies, period, across all sectors. That's not only reflective of the genius of its wonderful founder, Rachel Carlson, but it's also reflective of companies getting it. They've got to be in there, using tuition reimbursement, tuition assistance, to support the programs they deploy, and in the Guild situation, to actually support their employees to give them upward and career mobility and life mobility, whether they stay at their company or not. 

But back to your point about the Great Resignation, it puts more pressure on the need to take the people who haven't resigned and still sit in your company but just don't have the right skills, and actually get them up-skilled and re-skilled, versus having to go out and recruit and do the same thing. So I think if this all works properly, we should have a lot of action around upward mobility. Because we would be taking the folks who want to work, getting them skills that give them higher payment outcomes, higher income outcomes. Nursing and healthcare is a poster child for all of this. It should have, over the next decade, a really positive impact on earnings of the whole populace for those who want to stay in the game and be very active. 

So I think it's frustrating right now. I think it's also going to cause—and you can already see this—it's really going to also force companies to do some more automation than they had been doing. You're already seeing articles about companies trying to replace manual functions that people either don't want to do, and they can't hire for. So I think that'll be another outcome, but I think in general we're going to see just a huge pull on re-skilling and up-skilling. 

GAGLANI: Absolutely, and we're seeing a lot of that. Obviously in healthcare, our friends at Doximity just went public and their IPO popped in large part because they help employers find doctors. I mean the cost to replace the doctors—

QUAZZO: I love Doximity. I bought stock when it came out. It was such a simple yet brilliant idea, because LinkedIn just can't meet the needs of certain professional groups. I'd be surprised if we didn't see some more Doximities, because it is a very unique issue within the healthcare sector around jobs, communication requirements, and all that sort of thing. That's hard to do through a generalist platform, so I just think it's a really, really smart company.

GAGLANI: Yes, there's Incredible Health and Trusted Health, which may have come across your radar. We've had both of them on the podcast as well, and all are trying to figure out how to reduce the friction in the nursing labor market that currently exists and was exacerbated last year. 

I know we're coming up on time. So the last two questions I have for you are: First, what advice would you give to someone right now at the beginning of their career as far as meeting the challenges of the post-pandemic world?

QUAZZO: Huh, what advice would I give? My advice would be, one, to have technological fluency even if that's not the job you want to do. I think it's just smart to have—whether it's coding, or real understanding of AI, because AI is becoming like air and water, and it's impacting everything, and so I encourage—and encourage my own children—to just have fluency. Don't think you need to be in a box that doesn't include things like that, because these things are bleeding into each other. So I think to equip yourself with real fluency makes a lot of sense. 

I kind of went up through traditional roots of investment banking and then ended up being a venture capitalist over time in this sector. But we did start a couple of companies so we did do the proverbial startup thing, but within the financial services sector, not in tech. I probably regret not having had that experience. I would just encourage people to take risks. We're looking at 100-year lives and there's lots of time to try things, and no need to feel like you need to put yourself in a box too early. Taking risk can really end up with some pretty great reward. So that's what I would encourage.

GAGLANI: I love that, and it plays into the pre-K to gray as well. One of our teammates, their father just graduated from law school at 80 years old. You know Alan Patricof is one of our main investors. He's 86 and he says, he's just getting started now.

QUAZZO: Alan's amazing. 

GAGLANI: Well, my last final question: is there anything else you'd like to share with our audience before we let you go for the day?

QUAZZO: I think I've covered most of it. If anybody wants to come to ASU+GS, anyone in the San Diego area August 9th through the 11th, I'm happy to give an Osmosis discount, if anybody's listening and wants to go. Shiv could help me on that. I think it's just going to be a great productive gathering of people who just have a lot of pent-up energy coming off of the crazy, and perversely very positive year for the sector, in face of the tragedies. But yes, I think it's certainly fun to have the wind at our backs in ed tech right now, and the way I think about it, and people ask me—potential investors—whether we worry about competition, and my reaction is, "No, the worst thing was that education technology was so underfunded for so many decades and it was such an important problem. Without appropriate capitalization, the problems were never going to be solved." 

So I come away incredibly optimistic, with all the money flowing into ed tech, that it's just going to pull out more entrepreneurs, come up with more great ideas and more great solutions. Sure, some companies aren't going to work, and that'll be too bad, but that's life. So I'm really, really excited about the future 10 years here, and think it's going to be all to the benefit of global learners. Global learners are everybody these days, so it's to the benefit of all of us, so all good.

GAGLANI: Yes, I share that same sentiment about competitors being actually collaborators because we're all trying to create and make more robust this category of education and learning. With that, I definitely will vouch for ASU+GSV; it's my favorite conference. I was bummed I couldn't go last year, obviously, nobody could but very excited about next month. So, Deborah, thanks so much for taking the time to be with us. 

QUAZZO: Alright, Shiv. Thank you. 

GAGLANI: With that, I'm Shiv Gaglani. Thank you for checking out today's show. Remember to do your part to flatten the curve and raise the line. We're all in this together. Take care.