When I started Listenwise four years ago, I didn’t know anything about raising capital. In fact, I was probably a little naïve about the fact that I would need to raise money to fund the business until revenue ramped up.
I’ve realized that finding funding and investors for an ed-tech startup with a mission is a bit different than for other businesses.
The revenue growth is slower in ed tech because sales cycles in the K-12 market are longer. This means no quick, easy exit for investors at some of the insane multipliers like we’ve seen with apps such as Twitter. Three years after Twitter was founded it was valued at $3 billion.
So, while we have the largest angel investment group in New England backing us, we have also found a group of investors that I didn’t expect.
Social impact investors. These investors care as much as the social impact of what you are building as they do about returns they hope to get.
At first I thought I wouldn’t be able to compete against startups tackling renewable energy, food security or poverty. How does building students’ listening skills with National Public Radio compete with those weighty social issues?
Funding by Investors that Care About Outcomes
I soon learned that social impact investment includes education. What better way to ensure a healthy, successful, and economically sound future if not to ensure an excellent education for everyone?
Not all education companies are eligible for social impact funding. They need to be improving student outcomes or reaching disadvantaged populations. We do both.
These investment groups take equity in exchange for their investment, usually on the same terms as other investors who are putting in money. But they often ask more about impact metrics–number of students using your tool, improved educational outcomes–in addition to your revenue numbers.
Our first social impact investment came New Schools Venture Fund (now Reach Capital), a fund that is solely focused on improving educational outcomes for disadvantaged students. Becoming part of their ecosystem has been one of the most important events for our company. They help us measure our impact by providing free services to help us track it.
Social Impact Investors Like Ed-Tech Startups
We have also been very lucky to have the backing of angel investors who are part of the social impact group Investors’ Circle. IC is the largest and most active early-stage impact-investing network. It is a national group with regional chapters, which can help you expand your investor base among IC members.
Most recently we were accepted into the AT&T Aspire Accelerator–an education accelerator run by the social impact fund of AT&T.
This type of social impact investment is vital for education startups because our companies have a hard time competing against the next social media app or medical devices for investment.
Our growing base of social impact investors aligns with our mission to inspire tomorrow’s citizens by connecting their education to what is happening in the world around them using the power of listening.