Investing in Economic Mobility with Jason Palmer of New Markets Venture Partners

Jason Palmer is General Partner at New Markets Venture Partners, one of the nation’s leading education-focused venture capital firms. As a double-bottom line investor, New Markets focuses on innovative, high impact, early and growth stage edtech companies that improve student outcomes while building profitable organizations.

Jason brings twenty years of experience as an education technology entrepreneur, executive and investor, and focuses on fund strategy, supporting portfolio companies, and leveraging deep connections with industry leaders. Prior to his current role, Jason served as Deputy Director at the Bill & Melinda Gates Foundation, leading postsecondary innovation efforts to improve the outcomes of disadvantaged college students by investing in colleges, universities and entrepreneurs pursuing digital and adaptive learning, student coaching and advising, financial aid innovation, and employer pathways. 

Prior to the Foundation, Jason founded and grew three investor-backed technology and services companies before holding a series of executive positions at Microsoft, SchoolNet, Kaplan, and StraighterLine. 

Recommended Resources:
GSV N2K Daily Newsletter
The Future of Education by Michael Horn
Village Capital Newsletter

Transcript

Alexander Sarlin: 0:05

Welcome to Season Two of edtech insiders, where we talk to the most interesting thought leaders, founders, entrepreneurs, educators, and investors, driving the future of education technology. I'm your host, Alex Sarlin, an edtech veteran with over 10 years of experience at top edtech company. Jason Palmer is general partner at new markets Venture Partners, one of the nation's leading education focused venture capital firms as a double bottom line investor new markets focuses on innovative high impact early and growth stage edtech companies that improve student outcomes while building profitable organizations. Jason brings 20 years of experience as an ed tech entrepreneur, executive and investor. He focuses on fun strategy supporting portfolio companies and leveraging deep connections with industry leaders. Prior to his current role in new markets, Jason served as Deputy Director at the Bill and Melinda Gates Foundation, leading post secondary innovation efforts to improve the outcomes of disadvantaged college students by investing in colleges, universities, and in entrepreneurs pursuing digital and adaptive learning, student coaching and advising, financial aid innovation and employer pathways. Prior to the foundation, Jason founded and grew three investor backed technology and services companies before holding a series of executive positions at Microsoft school, Ned Kaplan and StraighterLine Jason Palmer, welcome to Ed Tech insiders.

Jason Palmer: 1:40

Hey, thanks for having me.

Alexander Sarlin: 1:41

It's great to talk to you today. I'm really excited to hear your perspective. So you've seen the EdTech field from very different angles, you are an entrepreneur, you are an executive, you've given out grants, you've been an investor, give us an overview of your journey through education, technology, what brought you into it in the first place, and what got you to your current role, general partner, double bottom line of outcomes and profits at new markets, Venture Partners.

Jason Palmer: 2:09

Thanks. It has been a long journey. I don't know how much you really want to hear. But I'll tell you that I started as an entrepreneur in the 90s. And started three small companies, none of them were huge, I sold the largest for, you know, hundreds of 1000s of dollars. So not a major exit by any stretch. But the third company I started was a company that was very similar to Facebook, but it was seven years too early. And I actually lost$21 million of venture capital, trying to create that third company and I lost all the money I had made on the two previous companies. So I went on a soul searching tour, Alaska, Hawaii, Japan, on my credit cards, no money to my name. This is back in 2001. So about the time of the.com Bust. And I realized that, you know, eight years before I'd almost become a Teach for America teacher, I grew up in a educator household or my dad was a teacher who became a principal and a superintendent. And I've always had this passion for education, and actually came up for I came up with a mission statement for myself to guide the next 25 years of my career, that I would focus on this intersection of education, entrepreneurship and technology, and see what I could do to help lift a billion people out of poverty. I actually like made it into a sign, put it on my wall. And it's been guiding my work ever since 2001. Through, you know, a series of various jobs that you were mentioning there at the Gates Foundation are working at Kaplan as a turnaround CEO. And now we're I'm an investor at new markets. And that really has been my North Star like I actually got laid off from Kaplan many years ago, which I usually don't talk about, but I wanted to talk about it today. Because a lot of people might get laid off and this coming year with the recession coming. And during that time, when I got laid off from Kaplan, which was like the pinnacle of my career at the time, I said, What am I going to do next. And I looked at that mission statement from 2001 and said, I need to go to the next job that has the best chance of advancing, you know, a billion people out of poverty through education and entrepreneurship and technology. And that led me ultimately to the Gates Foundation, which I had never thought of even working for a foundation. Before that I was you know, I was an entrepreneur, I was a turnaround CEO. So there's many more twists and turns in the story, but that's the shortest version I can offer you.

Alexander Sarlin: 4:29

That's really a fascinating story. I did not expect a story with that particular arc or the sort of hero's journey you know, hitting that personal crisis and then really dedicating your life to this philosophy and it's leading to all these amazing opportunities and experiences really, that is inspiring and I know a lot of people are going through layoffs right now in edtech. And throughout all tech and throughout the country. I think that we have message a lot of people would really like to hear that they can, you know go from soul searching To the heights of the industry and make such a difference in the world. More importantly,

Jason Palmer: 5:04

thank you, thank you. I don't know if I qualify as hero's journey, but I appreciate that.

Alexander Sarlin: 5:09

Well, there's an arc to that story. That's very inspiring. Let's talk a little bit about about what you're doing now in new markets, Venture Partners, new markets, Venture Partners has more than 20 years of experience, investing in mission driven companies that address gaps in education and the workforce, exactly the kind of mission you were just talking about. And and this means supporting learners throughout their entire lifespan, it goes all the way down to, you know, the science of reading for early learning all the way up through adults, you know, boot camps and upskilling. And everything in between, it's a really, you know, full range of learning. So give us some insight into the philosophy of new markets ventures and how you identify those core gaps in education and the workforce.

Jason Palmer: 5:52

Absolutely. And I gotta give major credit to my partners. So when you run a venture capital firm, it's a joint partnership, and Mark robic and Rob doub co founded new markets. 20 years ago, we just celebrated our 20 year anniversary. And over time, we've honed this focus, to really look for interventions, education, technology interventions, that are moving the needle that are efficacy based, research based, moving the needle on the key milestones and people's human development that ultimately get you to your first salary job. And people don't think enough about this. But you know, think right now, those of you that are listening, like what was the first job you had, where you got paid a salary? And how did you get there, and there's a lot of research about how you got there, you probably learned how to read when you were in kindergarten through second grade, you probably mastered mathematics sometime in middle school, you probably have a high school diploma, somewhere along the way, you learn social emotional skills, which are now called SEL, they used to be called EQ, kind of your emotional quotient, that's half of success. And people's life is determined by these interpersonal skills, which are non academic, but super important, like teamwork, collaboration, communication, etc. You probably also got a college credential, and I'm using credential instead of degree because sometimes people have actually gotten other credentials, which could be like a Microsoft certification or a Google certification or CFA PMI, as a project management certification, we are now tracking 400 different credentials that are equivalent to a college degree in terms of getting you to that quality job. And then a quality job is a salary job that pays about$45,000 a year or more and has a ladder to higher economic outcomes along the way. And so we look for these education technologies that improve outcomes, and help people actually get to that next level. And those are the companies that are the most successful, not surprisingly, in terms of financial returns to, that's what new markets is focused on,

Alexander Sarlin: 8:00

it makes a lot of sense. And, you know, I think by zooming out and looking at education through the lens of going from, you know, early, early, you know, life through a salary job, it allows you to actually look at the skill sets that lead directly to, as you say, economic mobility, rather than the internal skill sets that get you through grade school through K 12. Through any version of college or alternative degrees. I think sometimes people look at those internal metrics and don't zoom out and see the entire span. So it's really interesting to hear that new markets focuses on that directly. And I think it's ahead of the curve, it's certainly something that is becoming more popular now. So new markets just announced a new oversubscribed$160 million fund to support exactly this type of economic mobility. And it's the fifth fund. It's targeting series A and B investments. That's really exciting news, especially at this moment in edtech, where we're all trying to figure out, you know, what's next, give us some insight into how this fund came about, and what you're focusing on and why a and b rounds.

Jason Palmer: 9:03

Sure. So because we've been doing this now 20 years, we've invested in more than 40 companies, and we've had more than 20 companies actually, you know, grow up and succeed and get to the next stage of life, which is either being acquired or going public. And so having that 40 examples to look at and the 20 exits, we can actually see what worked for us what didn't. And so we're looking for companies that just like that I was talking about a second ago with kind of the key milestones of development, that have a proof of efficacy, and that are helping people on this education to employment journey and in fact, it you know, in multiple different ways. In our press release we talked about it's the future of work and learning. It's this pathway from education to employment. Sometimes we call it Learn and Earn, what interventions exist that actually could scale from and now series A and B we earlier in our careers, we did seed investing a little bit. And we're still huge fans of the seed marketplace. In fact, I'm getting ready to write an article that would talk about all the great seed investors that we work with and the ones we we've been tracking that we want to work with. But series A and B is really where we think the most important developments in a company are made, they're usually grown from 2 million to 20 million in revenue. They're actually building leadership teams, they're building a real business, by the time we invest in a company, it's got usually enough customers that we can call them and diligence why they purchased the product, is it working for them? Will they renew, and then by the time we sell the company, it actually generally has reached profitability, or very, very close to profitability.

Alexander Sarlin: 10:43

So that's sort of the milestones and the development of a company, when they have enough customers to be true references, we they have traction in the market, they have product market fit, they are building leadership. That's a really interesting perspective. And, you know, this fund is incredibly exciting news for the tech field, especially in a moment, which ad tech funding has really slowed down over the last couple of years, as you well know, you know, we saw this $20 billion all time high of global investment in ed tech in 2021. And that pulled, you know, down to about half of that in 2022. And now here we are in 2023. Looking at the future. So you know, what are your thoughts about this moment in funding? And specifically, you we have a lot of entrepreneur listeners, you know, how would you recommend these entrepreneurs serve this this particular wave in time and raise in a downturn? Yeah,

Jason Palmer: 11:37

well, I will tell you that part of a funding release like this is, you know, to let entrepreneurs know we're open for business, so to speak, this is the first time we've announced a fund in almost five years, our last fund was 70 million, this one's now 160 million plus and entrepreneurs in that we're already working with. And then the ones we're talking to, we're recommending a pretty consistent thing right now, which is show your path to profitability, either by the end of this year, or by the middle of next year. At the latest, the funding market is difficult right now, like you said, it's 50%, less ad tech funding is available this year than two years ago in the height of the pandemic. But that two years ago was kind of a sugar rush, it was definitely, much more than normal. We had what I call education, tourists coming into our space, who really didn't know how education works, who were investing in kind of crazy ideas and, you know, businesses that were probably 10 years ahead of their time. And now it's back to kind of the core of solid quality investors who want to know, does your product work? Are you trying to solve a significant and real problem for teachers or students? And, you know, do you have a market? Is it can you actually show there's a total addressable market of 500 million, a billion, perhaps 10 billion, even in some cases, and do the basics of business building.

Alexander Sarlin: 13:00

Tell us a little more about what those basics are, I think, you know, understanding how an investor with as much experience as you have, you know, see that path to profitability, and what are the sort of signals of a business that's really investment worthy? I'd love to hear you double click into that.

Jason Palmer: 13:16

Sure, there are 10 criteria that we use to judge the companies that we see. And I don't know if I'll go through all 10. But you can drill in and ask me for more. The top ones are, you know, not surprising, if you read anything about venture capital in any space? Is there a founder mission fit, sometimes we call this leadership as well, but is this person or this co founder team, really the right person to solve this problem? So for example, if I met two former Teach for America, teachers who had taught, you know, stem in high school, and they were running a company, that's a brand new company, to kind of get more women and girls into STEM and get more middle and high schoolers into STEM and computer science, then I would say that, you know, this is a good founder market fit. That's exactly what they used to do as teachers, maybe they even use some of these ideas in the classroom. And now they've got, you know, 100 different schools or districts working with them around the country, you look for things like that, or maybe someone who didn't go to college and actually got, you know, to making six figures themselves by earning a bunch of credentials, but never actually going to college. And now they're actually running a boot camp to teach people cybersecurity, which might have been the field they got one of their credentials, and like these types of things, we look for founder market fit, and do they have the right leadership to take the company to the next level? The second is, what I talked about a little bit before is efficacy. Is there actually a desire and perhaps even some research that this solution actually changes lives? Like in the example of boot camps, for example, are they tracking how much people were earning before they started the bootcamp and how much their salary was afterwards? Did they actually get a boost in earnings and by the way, most boot camps do have somewhere in the neighborhood of 80 percent to 120% salary grain from before you do the bootcamp to afterwards. And it's pretty consistent across many, many boot camps actually. The third is, you know, do they have a capital efficient approach? And this is kind of unique to new markets. But we look at an enterprise other investors don't look at this, how much capital have they raised? versus how much revenue do they have? And if they've raised 10 million in capital before they talk to us, and they only have 1 million in revenue? Well, that's a pretty bad ratio. But if they've raised 2 million in capital, and they somehow use that 2 million in capital to get to 3 million in revenue, well, that's a great ratio. And so we look at that capital efficiency, and try to figure out like, if we gave this company another $5 million, what would they do with it? How far could they get? What are they going to build? What could they get their revenue? Up to? And that's just the first three. But there's another seven criteria, which we could dig into, if you want. Can we

Alexander Sarlin: 15:59

do two more? I think these are incredibly interesting. Sorry, Rick, definitely to do

Jason Palmer: 16:03

our so the next most important is do they have enough scale? That we can actually look at the customers and talk to the customers and find out? Do they have an ROI for why they're buying the solution? So just talking to a customer find out? Are they satisfied? Are they happy? That's not good enough. What we do when we talk diligence to customers is why did you buy? How much did you pay? Could you imagine this going district wide or college wide and becoming a bigger contract over time? How would that happen? Exactly? And then at the end of your engagement with them, what's going to cause you to renew? What are the exact metrics you're looking for now? So here's an example, you know, invested in a company called Learn platform, and learn has done very well, they just announced that they got acquired by Instructure, back in December, just a couple of months ago. And when we diligence their customers, we said, what are you looking to see, and they said, Well, we use all this education technology. But we don't know what's working. And we don't know what's being used and learn platform provides us this dashboard, where we can see that we're really only using two thirds of the EdTech we're paying for. And this allows us to stop using the 1/3 that we're not using at all. And you know, we thought when we were going to call the customers, they were going to talk about improvements in student outcomes. And you know, how the products that they were using were really improving outcomes, which is definitely a big part of what learned does. But some of the district's their need was much more basic, like we don't want to be paying millions of dollars for Ed Tech, we're not using, we want to use that money and kind of double down on the stuff that we are using. So that's the fourth one, the fifth would be scalable sales motion is possible. And so what's really interesting is that the series a a lot of entrepreneurs haven't had time to kind of calculate this out themselves. But we have them walk through Well, right now you have two salespeople, and how many sales did those people make last year? And they actually have to go back and research this, often they don't know it off the top of their head, and they come back to us and I say, well, the salespeople sold on average, 14 different customers, and the customers were $25,000 Each and you kind of multiplied out, you say alright, and what is the sales motion? Do they do you know, video calls? Do they have to go to conferences? What's the maximum amount of sales a salesperson could realistically generate in a year? And how many salespeople are you going to? And you actually build a whole spreadsheet that says, This is the sales motion that the CEO thinks will work? And then you apply some discounts to it and you see what it would actually be? What's the cost per sale to generate these customers? And what's the renewal rate? And that's actually a percentage that you can calculate to, and you can kind of mathematically solve all the way through How expensive is this company to scale? How could it scale? How fast could it scale? How many people would need to hire, how much capital would it need, and it literally is the scaling function is almost a mathematically derived formula, that you can then figure out how it compares from company to company, which company will scale the best, the fastest and have the best outcome.

Alexander Sarlin: 19:03

incredibly interesting, I can almost hear the scratching of notes on these different criteria. I mean, it's fascinating how many of these are really mathematical, as you mentioned, their, you know, past profitability of their paths of market, they're really under, you know, founder market fit is one that's a little more ephemeral, but But it's, you know, you know, when you see it, it's really interesting sort of rubric set of criteria you've developed.

Jason Palmer: 19:29

Thank you. Thank you. And it definitely credit to the whole team. This has been a group effort that's honed over our 20 years of making mistakes, and then having a lucky break here and there, investing in great entrepreneurs, VCs are really the supporting cast in the background is the entrepreneurs and their teams that do all the hard lifting to build these companies.

Alexander Sarlin: 19:47

Really interesting. And I know those final five I think people will be curious about but we'll save that for part two of the interview someday, you know, beyond your work in new markets. You're also the board chair of village capital, which provides Each stage investments to impactful ideas in economic mobility, but also in climate, to access to economic services really, you know, impactful set of, of missions. That's all seed stage. And I'd love to hear you talk about the major differences between seed stage investing, versus Stage A and B, you touched on it earlier. But, you know, because you keeping a foot in both of these worlds, you know, at all times, what do you look for in a seed stage company, to know that there's really some momentum there.

Jason Palmer: 20:28

Thank you for asking that. So I would say my affiliation with village capital is my favorite volunteer affiliation. I've been working with village capital for five years, first as a mentor, than as a board member. And recently as board chair, the organization is phenomenal. It also lets me keep my foot in the global space that I used to work with at the Gates Foundation, whereas new markets primarily invest in the United States, whereas those capital, we think, is the largest investor and accelerator of startups globally in all those different areas you just mentioned. So at the seed stage, and the village capital team had built a really great tool, it doesn't necessarily have the best name, it's called the viral tool. Vi Ral that actually goes through all the different stages of seed stage development along, there are also 10 to 12 dimensions there. And similarly, it's like leadership, Product Market Fit total addressable market, things like that. Honestly, at the very seed stage, having seen probably 200 of these investments, now some myself and some through village capital, the number one thing to look for, if you're a seed investor, is the tenaciousness of the founder, they are never going to give up, they are going to figure this problem out. And it's very hard to understand or, you know, look for tenaciousness. But I've noticed that if you ask people, you know, explain to me a major difficulty that you've overcome or challenge that you helped lead in your life, people will tell you some really interesting stories about their early life, like Jonathan Finkelstein from cradley was a seed stage investment. And Jonathan told me about how he was a magician when he was a kid, and how he actually would do magic at birthday parties. And he was like a mini entrepreneur at age 1213, and built his own whole magician business. And that was a surprising thing to hear another founder told me that she had been a figure skater and tried out for the Olympics, and just didn't quite qualify for the team. And when you ask people about these challenges and adversity, that they've overcome and striving for long term goals, you find out about their tenaciousness and their ability to kind of create, not necessarily businesses, but outcomes. And that is super, super important. In the seed stage, the seed stage is brutal. It's three to five years to get yourself sometimes to a million in revenue. And you know, for a long time, you wonder, Am I actually even running a business, it's just you, for volunteer friends, and maybe like an assistant who's an intern, it can be very lonely at the beginning, if you're lucky to have a co founder. And by the way, I would say that's a big success factor, although the research now says, not necessarily. But I've always found that having a co founder is a huge success factor in whether a company will succeed or not.

Alexander Sarlin: 23:14

That early phase, it's really about staying the course. Because you have to focus on a problem, be able to continue to be tenacious and head towards it and you know, maybe pivot or change things as needed for what's happening in the market. And then, you know, once the business hits, you know, a little bit of traction has some renewing customers has some, some real market, then it starts to look at profitability and some of the metrics you've been mentioning, from new markets, it's it makes a lot of sense. It really feels like this lifecycle of companies. That is replicable, but difficult, obviously difficult. There's a lot that's

Jason Palmer: 23:50

true. I want to highlight one sentence, you said in there that where you have to stay the course and be this tenacious, never die person. But you also have to pivot. And that is really hard for entrepreneurs to get I think about a half of companies that fail fail because they didn't find product market fit in that seed stage. And it's because sometimes entrepreneurs are too tenacious about their vision. And they keep running towards a vision that customers won't pay for that they can't get the users high enough. And you have to sort of be tenacious in towards your vision but listening to the market and tweaking that strategy, tweaking iterating it's sort of an you know, there are books written about it. It's agile development for business strategy is really what you need to do. You need to be adjusting your strategy every two to four weeks, based on that feedback, but still tenacious towards the ultimate goal.

Alexander Sarlin: 24:46

Keeping that Northstar you know, in your space, no matter how you're gonna get there. Totally. I want to drill into the double bottom line. You know, you've mentioned learn platform being a new markets, portfolio company, and that's all about F efficacy and how new markets is looked at. And you in particular have looked for efficacy outcomes and learning outcomes as one of your prime criteria. You know, new markets has made investments in 40, more than 40 companies, as you mentioned, it's affected almost 50 million Americans and make $3.3 billion in value for shareholders. So there's the profit, but it's changed lives, it's changed, you know, made economic mobility easier and clearer at those milestones for 50 million people. So you care about both of these sides, you're looking for strong businesses that are truly going to, you know, create a return for investors, and also businesses that are really going to be impactful for learners of all ages, getting over those milestones. Let's talk about that double bottom line, how do you ensure that your portfolio companies hit both of those incredibly important goals?

Jason Palmer: 25:52

Yeah, well, it's core to new markets from the beginning. So when Mark graovac, and Rob DAB started the company, they both worked at Calvert group before, and Calvert was one of the early pioneers in what used to be called socially responsible investing Sri in the 1990s. And so it's always been in the DNA of our company to be focused on this double bottom line, how we get our companies to do this is we asked them to send to us every quarter, not just their financial results, but their impact results. And when we talk to them, even before we invest, they often say like, what does impact results mean? And we work it through with them, we try to figure out what is your impact theory of change if your product is adopted, and use the way that you think it should be used? What's the outcome you're looking for either in terms of improve literacy for elementary school kids improve math fluency, more people getting these credentials with labor market value in the case of cradley more schools using data to drive decisions about Ed Tech in the case of learn platform, and we write out that theory of change. And that becomes a an actual agreement between us and the company. And then they report on those metrics to us every quarter, just like they do the financial metrics. And then every two years, we put together an impact report that actually summarizes and that's how we were able to get up to that 47 or 50 million number that you mentioned earlier, is, you know, this is how many students or workers are being affected at this company versus this company versus this company, and you add up all the 40 companies, you reach that 47 to 50 million number

Alexander Sarlin: 27:26

makes a lot of sense. If you treat that learning outcome metrics as seriously and report on them as seriously as you do on the business metrics, then, you know, measure what matters, it will definitely ensure that the companies are paying attention to them, measuring them collecting data and moving them in the right directions, making sure they're going up into the right as we always say, investment. We're all there, as people say an investment world. That's really interesting. And we're seeing this moment right now, where efficacy is really taking a sort of front seat. We've talked to Karl Rove tennis from learn platform on the podcast a couple of times, and he's mentioned how efficacy and really, really caring about what's used and what's working, is becoming more and more of a central focus for the whole edtech. Industry. I'd love to hear your take on that given that new markets has sort of always had that in its DNA.

Jason Palmer: 28:17

Yeah, well, that's part of why we found Carl or Carl found us I mean, it's kind of a, you know, who found who, when a company gets invested in, we have been focused on impact metrics since the beginning. And so we've always wanted to invest in a company that was focused on education, technology metrics. In fact, actually, myself and Mark robic and a gentleman named Bart Epstein were co founders of the Jefferson education exchange at the University of Virginia, which was created about the same time as learned platform to focus on actually doing research on education technology initiatives to figure out if it was improving outcomes from a research perspective where you would like attach an academic researcher to a project and actually measure its results, and then come out with a report at the end. And there it would actually cost about $300,000. To do each one of those reports, we got a number of foundations to fund it, including the Gates Foundation, Dell Foundation, huge credit to BART Epstein, who got that up and running as the CEO of that organization. But we quickly realized that this wasn't going to be a scalable operation if we had to put an education researcher on every project. And that led us to finding Carl, and realizing that learn platform was one of the organizations that have found a tech way to do this, that now I believe they sell kind of an efficacy evaluation program for you know, you'd have to call Carl to get the exact price, but I think it's in the 50 to$100,000 range for those research reports. And you can do it over the course of a single semester. You don't have to wait multiple years like a research project would do. But we weren't certain if this would be you know, an economically viable thing to invest in. We wanted to invest in it but we weren't sure if it company like Carl's could scale. So we had to run it through the 10 criteria test is Carl, the right guy to build this company? Yes, he's been a researcher, he started a nonprofit. Now he started a for profit company, then we diligence with the customers, did the customers actually have an ROI story as to why they were purchasing this platform, how they intended to economically benefit from it and improve learner outcomes? double bottom line? Yes, they did. Right down through the list. Had Carl been capital efficient. Yeah, he got to 2 million in revenue on less than $3 million in capital raise, that's pretty capital efficient, product, market fit, etc, etc, scaling motion. So that's a bit about how we found Carl. And you know, it gives an example of how we've always had this focus on impact metrics in our DNA.

Alexander Sarlin: 30:46

Yeah, it's really powerful to see the world that way. And, you know, we've talked a lot on the podcast about the chasm, as you mentioned, between being able to do really, really effective, you know, RCTs, or just, you know, academic research, that's peer reviewable, that's really viable, and the cost and the time that that takes versus the speed of entrepreneurship, and the fact that people are pivoting and constantly changing the products, it's always been a little bit of attention. So it's really exciting to see people focusing on faster loops for for efficacy and less upfront costs, because it's just going to, you know, I we've already seen it with learn platform, but we also saw, you know, reach capital and an owl put out, you know, parts of their yearly reports are now about impact, and they do something a little bit similar to what new markets has always done. It's really exciting to see that just becoming woven into the EdTech. World, I personally, it just makes me it's delights me to know, and I'm really happy that is becoming such a core part of investment strategy.

Jason Palmer: 31:47

I think it's worthy of people knowing that this didn't happen by accident. So back in 2016, four of us investor groups got together, it was actually SJF ventures, new markets, City Light capital and bridges. And we said, you know, is there some way we can brand, what we're doing, you know, what we're doing is double bottom line investing. And we've had a number of conversations with reach, and owl and rethink about this too, and they just didn't happen to be at this particular, you know, get together that we had, but quickly, you know, joined the movement and using the impact name, and we found it a group called Impact capital managers, you can look for it out there online impact capital manager just started out with four organizations to start that were investors that were focused on double bottom line, and we were really focused on generating market rate returns, that actually was capitalism for good. And some of those were sort of in the initial come unique, or whatever he would call it that came out of the little four organization summit. The next time we got together, 20 of us, and I definitely remember, reach and rethink, we're at that second summit. And now it's up to 100 organizations across not just education, technology, but Climate Technology, all kinds of, you know, I would say developing world investing all kinds of areas that are improving human flourishing by using for profit mechanisms, basically, using capitalism for good. And this wouldn't have come about if it wasn't for David Kirkpatrick at SJF was really, I would say, the major driver for this, and we just awarded him kind of a Lifetime Achievement Award for helping to sound this organization, now, seven years ago, and now everybody thinks, wow, there's all this impact investing that's coming out of nowhere. Bain Capital is $1.8 billion fund and KKR. And BlackRock and all these major firms. And a lot of it was just those for, you know, small, we were tiny back then I think we had maybe $50 million under management for all of our funds, not even one fund just all of our funds. But you know, the field has come a long ways. Now, last I saw, there's something like $500 billion being invested in impact globally. According to the global impact investors network, g i n, which is also I think, only about 10 years old itself.

Alexander Sarlin: 34:08

I did not know any of that. And I imagine many of our listeners might not know have known that as well. We've been talking about that growth and impact for a while. And that

Jason Palmer: 34:17

kind of seems like it came out of nowhere, right? It's been slaving away in the trenches. And now they're they're an overnight success like SJF and my partner Mark robic here at new markets.

Alexander Sarlin: 34:30

It's amazing. And it ties right back into your thesis statement about how to make economic mobility, the core of your mission as well that it's not about, you know, investing in companies for just purely for their own exits and the ROI to investors. It's companies that can truly move the needle on helping a billion people, you know, move to economic mobility and I imagine that many of the other investors you're mentioning have some version of that in their heads as well. How they went into investing was to do you know, do well by doing good And as they sometimes say, really interesting, I want to dig into some of the new markets portfolio companies while I have you here. And, you know, I think we could do a little bit of a sort of flash round a lightning round here. Sure, because you have so many companies, some of which have exited, some of which are currently in the portfolio. I'll name a company. And you tell us a little bit about you know, what you love about it, and what educational outcomes they're working to achieve. Let's talk about the impact and the business. Sure, let's

Jason Palmer: 35:28

do flash round. Let's do it.

Alexander Sarlin: 35:30

Let's do it. So let's start with climb credit.

Jason Palmer: 35:32

So climb is the leading provider of loans for people to attend high quality boot camps around the country. There are about 1000 boot camps around the country and climb works with the 250 highest quality among them, how does climb determine that they actually evaluate the pre and post salaries of people that go into these programs. And then they've partnered with Goldman Sachs to make more than $350 million in loans available. And they now know exactly which bootcamps have the ROI can help get you to that $50,000 a year job.

Alexander Sarlin: 36:06

Yeah, well, that's right at those outcomes. And I think that reminds me of the milestone you've been mentioning as well. Yeah, it

Jason Palmer: 36:12

does. It does see how it all fits together.

Alexander Sarlin: 36:14

It really does. Let's talk about path stream.

Jason Palmer: 36:18

So past stream is a very fast growing company that partners with some of the leading tech credentials in the industry. So think Tableau, Google unity, gaming platform, project management, and they work with colleges and universities to develop programs that then students can take for between 1005 $1,000 over a six month period. You could think of it like a boot camp, but it's a wholly online experience. And at the end, you get a credential with labor market value, that helps you get a job for 50 to$100,000, somewhere in the industry. They're growing super fast. Because of their partnerships with leading universities. They also have a key partnership with guild education that allows employees at Walmart and Amazon to use the program. Super fast, inexpensive way to get a credential that gets you to a $50,000 job.

Alexander Sarlin: 37:09

There we go. Fantastic. How about this is a really interesting one. APDS

Jason Palmer: 37:14

APDS is one of my favorite companies right now. APDS works with prisons and jails around the country. They're in 19 states. And last I saw they were working with at one prisons and jails, although that number changes every month. And what they do is they provide education and mental health counseling to people who are in prisons, especially as they're approaching release, the goal is to reduce recidivism help people get jobs once they get out. And honestly, the company is growing by leaps and bounds. They just announced a major partnership with Amazon to help train people who are incarcerated in Amazon Web Services skills so that when people get out, they can even get 90 or $100,000 a year jobs. super impactful company definitely, you know scored near the top almost a perfect score on our impact metrics,

Alexander Sarlin: 38:02

a population that has such an incredible potential to use education to create economic mobility, sort of the core, there has not been served well enough, you know, outside of this

Jason Palmer: 38:14

completely, completely.

Alexander Sarlin: 38:16

Yeah. How about kids to prose?

Jason Palmer: 38:19

Kids, the prose is growing by leaps and bounds as well, although I honestly could say that about almost every company or companies are doing very well, right now. Kids to prose works with school districts around the country. It was started by a woman named Pooja Shah, who couldn't believe she had been an executive at Google and executive at Apple. She couldn't believe that somebody in her family had to be home when school got done at three o'clock. This is a dual income family, how come there's nothing going on at the school at the elementary school from three to 6pm when she and her husband are still working. So she started a program that would enable schools across the country to have after school, CTE and stem. So think robotics, computer science, actually also the arts and music that might have been getting cut from the curriculum. So from three to 6pm, after school, your kids get all the 21st century skills that you want them to be getting. And you as a parent don't have to come home early, you could actually have your same full time job, your kids are loving it. You're loving it, et cetera. That is such high demand right now. There are somewhere in the neighborhood of 30 million students who don't have after school programming right now, an even bigger number need programming during the summer. And so the company is you know, because it's focused again on this economic mobility, learning stem and CTE skills, you know, learning social emotional learning skills. These are super important skills that parents want their kids to learn, but not always enough money for them to happen during the K through five school day. So now they're happening from three to 6pm They're getting so many parents signing up, they on athlete can't keep up with the growth, there's so much growth there.

Alexander Sarlin: 40:03

Amazing. It makes a lot of sense. And you know, kids are pros and paths stream, I think, share a little of their DNA and that they're sort of bringing career education into spaces that are usually not dedicated specifically to career education. So paths stream is bringing certifications into the college world. And Kitsy pros is bringing career and technical education into after school programs, which are often not dedicated to that kind of world or not even there at all, as you mentioned. So working in sort of the transition points between different pieces of the educational environment, you can just see it loud and clear. Let's do one more. You ready? Sure. How about motive Matic,

Jason Palmer: 40:41

Moto Matic is a super interesting company founded by a gentleman named Alan Tripp. And Alan had been successful with two previous businesses. He sold inside track to Strada and he sold another company called score to Kaplan. And Alan took about two years of thinking before He created mode automatic. And the idea was, if there's all this money spent on digital advertising, and it's just to help, you know, make people buy the shoes that chase you around on the web, or, you know, encourage you to add that extra thing at checkout, when you're buying your Amazon cart. Is there any way we can use digital advertising for good. And so Alan came up with this kind of genius idea that you can use the power of retargeting to remind people about long term goals they have like, you can chase them around on the web with an ad that says, you've always wanted to be a nurse, make sure to study for that midterm. Don't forget, you wanted to start your own business, finish your business degree. And over time what Mona Matic has learned for many, many experimental trials, and also Allen retiring and us bringing in a world class growth CEO named Mahir Shah is that you can use advertising to drive social outcomes. And so they're actually improving retention and completion at colleges and universities by between three and 10%. By just targeting people with ads that remind them to do the good things that they wanted to do for their educational goals. Amazing. To see how it all ties together to it does all kind of fit.

Alexander Sarlin: 42:17

I do know, they really do. They all need that thesis, you know, dead on. It reminds me a little bit of the origin story behind Sesame Street, which was also about taking advertising techniques that were getting more and more popular in the 60s and taking more and more of kids attention and turning them and trying to literally sell letters to kids. That was some of the original idea. Jim Henson was an advertising at the time and the right yes, yes. No interesting. There are plenty of more portfolio companies we could ask about. I love this kind of lightning round, but I can't let you go. Right now without asking you about generative AI. I know that is probably something it's on everybody's lips. It's starting to feel like it's overhyped. But at the same time, it is a technology that has so many tech entrepreneurs and investors abuzz. It's so exciting. For a company like moto Matic, you know, you just mentioned it's all about, you know, how do you get the right message in front of the right kind of person at the right time? What is your take on generative AI as a technology? What's it going to do for innovation? What's it going to do for Ed Tech? I'm curious how you thinking about it?

Jason Palmer: 43:27

I'm glad you asked. Because if anybody's listening out here, who was also at the Ed links event in New York City, that was hosted about six months ago, I was asked about generative AI before chat GPT had come out and before GPT three, and I said I didn't think that AI was really going to transform edtech I've seen so many waves of this over the last 20 years. It's always overhyped, and under delivers, I was wrong. 100% wrong. This is very real and a huge change to our marketplace. So we have a bunch of companies moto Matic is one of them creator up is another, we're going to try to get all of our companies to quickly adopt as rapidly as they can generative AI technology into their products into their services. Now, this is not a 100% pivot, but it is leveraged this technology. It enables coders to code twice as fast with you know, half the bugs, to just simplify it to coding alone. It allows you to actually deliver targeted, personalized messages if you have a text messaging or chat platform. There's so many we've barely scratched the surface on this. I wouldn't be surprised if I'm not able to build a JSON bot to do this podcast for me in about a two years time. Because I will have fed into it all of the audio and all of the writing that I have done and then it will know what I know and it could talk with my voice Ace, this might even be possible within a year, not two years. For real. This is a very different moment. This is the biggest change since the invention of Google for search, or even just the invention of search engines, because they all you know, many of them came about around the same time between 96 and 2001. And big deal will transform edtech for the better, I hope

Alexander Sarlin: 45:25

that resonates with me, we've made a prediction on this podcast that every deck every pitch deck in 2023, is going to have at least one slide about how they're going to use generative AI to be more efficient to reach more people to be more personalized. To accelerate operations. There's so many different options. So really exciting to hear that from such a seasoned investor who was not convinced even as recently as six months ago, I think a lot of people

Jason Palmer: 45:52

when I was looking, I was on the dolly beta list. I've impressed with many things about AI. I've been studying it since the late 80s. But I had become too jaded that this was unsolvable. At this level, or maybe not unsolvable, but that we were a decade away, I thought we were a decade away. So I'm quite surprised. We've gotten here already in 2022. Now all that said, self driving cars, I own one, I love my self driving car, it's still, it's still gonna be a little while until we have 100% penetration of self driving cars probably 15 years on that one, if you'd asked me.

Alexander Sarlin: 46:26

Yeah, but it feels like the difference between, you know, opening, I just released these API's that are being used in a variety of contexts. We just reported on Quizlet, putting out first you know, tutor trained on its own immense 60 million set of learners. The difference between that self driving cars where you have to have a sort of a whole highway system and city and you know, user comfort, all change and generate AI which can just be plugged into the coding framework or plugged into the customer success, or it put a chatbot. And as part of, you know, answering the phones, it feels like a very different rate of adoption. And we're just seeing it everywhere. It's amazing how many things have already happened and ad tech, in five months, your since we've heard this technology has really been at, it's an exciting time

Jason Palmer: 47:11

plus, one 100% Agree 100%.

Alexander Sarlin: 47:14

So we I mean, this is just an absolutely enlightening conversation. I feel like sparks going off and all sorts of ways, lots of connections being made. But we are coming at the end of our time. And we always end the podcast with two questions. I'm very curious about your answers to them. The first is what is a particular trend that you see in the EdTech landscape right now that's sort of just coming in. And you know, other than AI other than impact, because we've talked about those that you think, hey, listeners to a podcast like this should really keep an eye on this thing.

Jason Palmer: 47:48

So I'm going to mention something that people are going to say, hey, this isn't brand new, this has already been happening. But it's a big deal that people haven't fully adopted it into their thinking yet. And it's credentials over degrees. So I was mentioning before the climb credit works with these top 250 boot camps, and cradley was one of our companies. At this point, it seems like credentials and boot camps are everywhere. But we ain't seen nothing yet. Right now, there are 19 million people in colleges and universities around the US. And the number of people who are graduating from boot camps is around 40,000 a year. So it seems like their boot camps everywhere. And maybe this whole thing has, you know, kind of jumped the shark so to speak. But it's just the beginning. With cradley, they were up to 40 million people with credentials with labor market value, all these different technology certifications, I'm positive, if there isn't already, there will soon be a chat GPT certification. And there'll be multiple levels of it. So every technology tool is going to have certifications as new technologies are created. Twitter has certifications for Twitter advertising, for example, there will always be those certifications. And then the kind of the corollary to this, it's even bigger than I now see is lots of people around the world are now saying, Well, I don't want to spend all this money to go to the US and get a college degree, isn't there some way I can just pay $1,000 or$2,000 and get a credential that allows me to get a job for a global company. And oh, by the way, we're on Zoom anyway, and I could be in Nigeria, or the Philippines or wherever. And also think about how important English language is to there are many companies I've seen now that help kind of reduce your accent improve your English. And at first I thought wow, this almost kind of feels a little bit racist, reducing your accent. But then I saw the actual stats on how much more you learned, the more your English is improved and the more smooth your accent is you get paid more money for all the various jobs you could have. And so this is really important and people are there are more people His speak English in China and India now than there are in the United States of America, US is now third on the list of English speaking countries. So those are three trends boiled up in one. They're

Alexander Sarlin: 50:11

really, really interesting. And you know, you mentioned credibly and Pat stream and some of the companies in the new markets portfolio that are already heading down that path and really paving the way. And yeah, I agree, we have seen nothing yet. I think we've come to think of boot camps as all for coding. And then recently, you know, they've gone into data analytics, that they've been some sales boot camps. But if you really start to think about, you know, the idea of a rapid, much less expensive pathway to really lucrative job, that could happen in a lot of different fields a lot. And we're really I agree, I think it's a really interesting moment, we used to have debates at Coursera, about whether to invest in degrees or certificates, because literally Coursera does both. And it's really indirect, right? actually really interesting to see that this change happening. And our final question is, what is a resource that you would recommend to our listeners, that could be a book, a blog, a newsletter, a, you know, anything, that for somebody who wants to learn and go deeper into the topics we talked about today, which is, you know, almost everything under the sun, and that tech gets really exciting.

Jason Palmer: 51:18

Totally, totally, I can't help but recommend three and rapid fire. So number one would be the G S v newsletter that comes out every day. And Deborah Collazo and her team put together a great newsletter of kind of the three to five most important things that happened in edtech. It's a message read every morning. Second would be micro horns newsletter. Really excellent thinking through innovation trends, and understanding what's going on. And then the third would be to sign up for village capital's newsletter. If you want to go beyond just education and edtech and start to dabble a little bit like I'm doing in kind of global impact investing across multiple different sectors, health care, climate change, etc.

Alexander Sarlin: 52:04

Terrific suggestions all around. And we will put links to each of those newsletters in the show notes for this episode. That's the GSV a newsletter. I think it's the n 2k. One is that right?

Jason Palmer: 52:15

Yeah, GSB and TK, I don't actually know what all that branding means. But yes, that's the one.

Alexander Sarlin: 52:20

I think it's it's for news to knowledge. I think that's what they're going for. I don't know. Then Michael horns newsletter and the village capital newsletter. Fantastic suggestions. We will definitely put them all in. I suggest everybody check them out. I'm definitely I'm not familiar with the village capitals work. So I'm really, really excited to lean into it. I think economic mobility and Ed Tech are, you know, kissing cousins in the world. And it's really exciting to see how they can connect. Yeah, of course, you know, this. This is the core of new markets. Jason Palmer, thank you so much for being here. I think this was a truly mind opening episode. I feel like understand all these disparate areas of edtech much better. And I'm sure our listeners do as well. This has been absolutely terrific having you here and welcome back anytime to give us the second half of the last five criteria for new markets. Thanks so much for being here with us,

Jason Palmer: 53:09

Alex, I really appreciate it. It's been great. It's been great.

Alexander Sarlin: 53:14

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