Edtech Insiders

The Future of EdTech: AI, Mergers, and Strategic Investments with Reach Capital’s Jomayra Herrera and Owl Ventures’ Lyman Missimer

Alex Sarlin Season 9

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Jomayra Herrera is a Partner at Reach Capital, where she leads investments in companies like Guild Education and Handshake. She is passionate about diversity in venture capital, serving on the board of SomosVC to promote Latino representation.

Lyman Missimer is the former Head of M&A and Partnerships at Newsela, where he led key acquisitions, including Formative. Now at Owl Ventures, Lyman focuses on corporate development and strategic investments in EdTech.

💡 5 Things You’ll Learn in This Episode:

  1. The biggest EdTech challenges and opportunities driving investments and acquisitions.
  2. How AI is transforming education and what it means for schools and EdTech companies.
  3. Strategic choices between building, buying, or partnering in today’s market.
  4. The increasing importance of non-academic outcomes like mental health tools in K-12.
  5. Why trust and relationships are crucial for successful exits in EdTech.


Episode Highlights:

  • [00:03:56] EdTech investment trends focus on solving labor shortages and mental health.
  • [00:07:10] M&A driven by data consolidation, build, buy, or partner decisions. 
  • [00:14:46] Trust and relationships are key in successful M&A.
  • [00:17:00] Go-to-market approaches differ for various EdTech tools.
  • [00:20:25] AI is a tool; strong models and data ensure success.
  • [00:22:39] AI adoption in education needs proper educator training.

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🎉 Presenting Sponsor:

This season of Edtech Insiders is once again brought to you by Tuck Advisors, the M&A firm for Education Entrepreneurs.  Founded by serial entrepreneurs with over 25 years of experience founding, investing in, and selling companies, Tuck believes you deserve M&A advisors who work just as hard as you do.

[00:00:00] Alex Sarlin: Hi, this is Hillary Clinton, and this is EdTech Insiders. Hi, this is Sal Khan, and this is EdTech Insiders. Hi, this is Nicholas Griswold, and this is EdTech Insiders. Hi, I'm Rob Bonta, and this is EdTech Insiders. Hi, this is Rajen Sheth, and this is EdTech Insiders. Hi, this is Margaret Spellington. You're listening to EdTech Insiders.

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In this special episode made in collaboration with New York EdTech Week, we're going to talk to Lyman Missimer of Owl Ventures and Jomayra Herrera from Reach Capital. We want to make sure that everybody knows that New York EdTech Week is a really exciting place to catch up on all things EdTech and both of the venture capitalists we talked to here will be there talking about all their amazing work. Let's do some introductions. Lyman Missimer has spent his whole career in the EdTech space. He began his work at Google for Education, where he did jobs focused on bringing Chromebooks, G Suite, and Google Classroom to the global K 12 market. Lyman's final role at his six year Google stint was running business development and partnerships.

And in this role, he founded the Google for education partner program, which now has hundreds of members globally. He also led VR content development for Google expeditions and developed strategy for the Google. For the K 12 small and medium business segment, Lyman ran M& A international expansion, investor relations, and product partnerships at Newzella, K 12 instructional content and assessment platform.

He sourced and led four acquisitions for Newsela, including their latest deal, Formative. These deals included tech and team tuck ins and scaled product integration projects. Lyman owns the whole M& A process from sourcing to integration. Lyman is now at Owl Ventures where he's helping support mergers, acquisitions and support for the whole Owl Ventures portfolio.

Jomayra Herrera is a partner at Reach Capital, an early stage venture firm dedicated to investing in companies focused on elevating human potential through learning and economic mobility. Jomaira At REACH, she focuses on companies that help empower the worker. Before Reach, Jomayra was an investor at Cowboy Ventures and at Emerson Collective, Laureen Powell Jobs family office.

While at these firms, she championed investments in companies like Guild Education, Handshake, Career karma and Contra at reach. She sits on the board of work. While Kaipod step full and Winnie Jumeirah is passionate about increasing diversity in the venture capital industry and sits on the board of Somos VC, a nonprofit dedicated to increasing the amount of Latinos in venture capital. 

Welcome to the podcast. 

[00:03:30] Jomayra Herrera: Thanks for having us, Alex. 

[00:03:32] Alex Sarlin: Yeah. Thanks, 

[00:03:32] Lyman Missimer: Alex. 

[00:03:33] Alex Sarlin: Excited to be here. 

[00:03:33] Lyman Missimer: Yeah. 

[00:03:33] Alex Sarlin: Jomayra, let's start with you. We're in such an interesting moment for ed tech venture, you know, as an investor who focuses on. Both education and the future of work. Tell us about the, you know, what you're seeing in the ed tech space right now that's shaping your investment strategies.

You know, what do you think is coming and where are these fields moving from your perspective at reach? 

[00:03:56] Jomayra Herrera: Yeah. So for us, we have always tried to focus on being first principle investors and investing in solutions that are solving really big problems and really big pain points that hasn't changed. And honestly, that won't change regardless of the environment or the ecosystem.

I think what we know now is that it's been More so than ever important as consumer discretionary spending starts to tighten. And we also see school districts and institutional spending start to tighten. And I don't know if you saw the labor market revisions that came out this morning, but the labor market is even cooler than we anticipated.

It was with the new revisions. And so this is going to be especially true now as we think about investing. And so if you look at the areas that we're investing, it starts with like, what are the biggest. Challenges that school districts are facing, right? So we think about labor shortages. We actually have a shared investment with owl and swing education because it becomes incredibly important.

Or when you think about the challenges that school districts are facing and the things they talk about, oftentimes it's things like behavior management or mental health issues. And so We have investments in companies like cartwheel that help to deliver behavioral health into schools. Or the other thing that we never forget.

And I know our friends at owl also spent a lot of time here is high quality curriculum is quite frankly, the lifeblood of schools. And so we have investments in inquire ed and in Nova mat that's focusing on inquiry based curriculum. And so. That's what we really try to focus and hone in on is like, what are those big pervasive problems that are really, really hard to solve?

And how can we invest in high quality solutions that can solve them? Because districts will find money for that. Districts will make budget for that as opposed to investing in point solutions or ancillary solutions that don't have a clear pathway into building these bigger platforms. 

[00:05:53] Alex Sarlin: Yeah, I really appreciate that principled answer.

I feel like, you know, as sort of journalists sort of in the space, we chase the next shiny thing all the time. We're always trying to cover, you know, whatever's happening this week, literally. But being principled, looking at the real problems in education, the ones that are not going to go away, the ones that actually affect lives and sort of putting your money there.

Makes a lot of sense. And it's nice to hear you talk about that in such a reasoned way that it's not about just chasing whatever is new. It's about really understanding the need and these macroeconomic trends like, like labor shortages and things like that. So really, really neat to hear. Lyman, you have a really interesting background.

You have done mergers and acquisitions. You've done partnerships at Nuzella, one of the most recent ones. Successful ed tech companies. It's in some humongous percentage of K 12 schools from your background. You know, what are companies doing when they're approaching the decision right now to, you know, deal with this current moment in ed tech?

It's a strange moment. There's a lot of mergers and acquisitions. So companies have the chance to partner or even buy out smaller companies, or they can invest internally and try to build new things. How are companies thinking about that kind of decision at this particular moment? A hundred percent. Yeah.

[00:07:10] Lyman Missimer: Former company is also owl and reach on the cap table as well. So a big part of my role at owl, aside from the venture investing piece is thinking about MNA strategy writ large for owls portfolio, whether that's enabling and supporting buy side activities from corporate portfolio companies, or thinking about longer term exit strategies and those paths that some of our companies could take.

So a big part of, you know, my job. Over the last month is I've been talking to, I think I've spoken to 16 or 17 different corporate development leads across higher ed workforce and K 12. And from, I'll get to build and partner in a sec, but from a buy perspective, the strategics market is pretty interesting.

It's like collectively, almost everyone wants. 5 million of ARR or above, which is a really good benchmark for product market fit. I mean, K 12, they want core subject instruction or career and technical education needs to be profitable. I have a clear path, US B2B SAS, all like really out of the box, safe things.

And then Jamyra hinted at some of the potential volatility in the consumer market that could be coming up as well. Um, and then, you know, our higher ed friends want things that help with enrollment and student retention. That's kind of it. And so an admin focused K 12. Buyers want the same. So, you know, there's a ton of pent up demand and desire to execute an M& A from all the acquisitive strategics.

And it does seem, and you hinted at this, Alex, that founder and board expectations seem to finally be coming back. Back down to a plattable level, the bid ask spread over the last couple of years was just massive, mainly because a lot of, you know, the valuation inflation we saw during 2020, 2021, 2022. And so I'm not sure if you saw, but Bloomberg actually just put out a report that showed that forecasted increased fees for boutique investment banks have already been priced into those stocks.

And so these are a lot of the banks that are the, some of the biggest players in the ed tech market in the mid market. And so the money is already betting on an increase in activity soon as well. So I think assuming the September interest cut happens, I could come to fruition and specifically in ed tech.

So, you know, fingers crossed, because, you know, I think a lot of us do believe some, some consolidation does need to happen. And I think to hit on the second part in terms of challenges or opportunities, driving decisions around M and a I'm more versed in the K 12 side of things. But from. Challenges perspective like dropping supplemental product usage and engagement across the board is for varying reasons.

It's something a lot of companies are seeing and purchasing decentralization from district to school is also making things pretty tough, especially from a retention perspective. It's not just, you know, the top two or three districts like LA and New York that say, Hey, you need to go school by school.

It's much larger amount within the top 100. And so that's. From a financial perspective, I think affecting a lot of these decisions. And then from an opportunities perspective, data consolidation, interoperability, I think that's been called out as kind of coming up and down in waves within this market, quality vetted content, especially in this age of AI generated content.

I, you know, I personally think that we're in a similar situation that we were back in 2013, when these all was founded. And everyone was saying, content's a commodity, OER is going to win, blah, blah. But so, you know, Nozella initially just had to sell data, but then of course, quality content won out in the end.

And I personally believe, and I think a lot of folks at OWL and REACH believe that quality vetted content will win the day again and non instructional outcomes. Like. From I mentioned mental health and things like primary care for schools, I think are also big opportunities. 

[00:10:41] Alex Sarlin: Yeah, quick follow up question on that.

So, you know, the potential increase in M and a coming with the lower valuations and the decreased potential decrease in interest rates. It's coming. We have already seen a good number of acquisitions, especially some really big name ones like Bain and power school and in structure recently being sold.

But I guess my question is. If for a firm like owl that has so many different, you know, companies in its portfolio that it's double down on that are funded that are moving that are, you know, have reached product market fit, you know, how do would they go about thinking? You know, about how to be really strategic in in this moment where there suddenly might be a lot of options of who to buy, even in the same space, right?

I mean, even like you mentioned, the higher ed higher ed is looking for enrollment, you know, enrollment and retention and keeping students, you know, coming in and staying in. But there's a lot of companies doing that. And if suddenly they're all on the table, how do they compare them? 

[00:11:44] Lyman Missimer: I mean, it's tough. The first part of the question was how should it?

The companies think about it, right? So, I mean, I'm a bit biased as a former CorpDev lead, but I do think companies engaging with potential strategic exit paths as early as possible is a smart thing to do because successful, one of the bedrocks of successful M& A is, is trust, especially between management, because negotiations always get, you know, the deal dies probably three or four times, every single deal.

No matter what. And so in those moments, having some base level of trust between the management teams can really get things over the finish line and make it successful longterm. But if you're going to do that, it needs to be from a position of strength. You know, don't reveal too much about your tech and do it at a time when you're really proud of your numbers, whether it's just getting back to growth this year, or maybe finally showing profitability for the first time.

So doing it in a way where you can. You know, engage and keep your options open, build trust, but do it while showing off while not revealing too much. I think it's just a great long term strategy in terms of thinking about your strategic, potential strategic M& A, you know, exit paths. 

[00:12:51] Alex Sarlin: Yep. And then from the buy side perspective, how are buyers You know, making sense of this world when, which, you know, all of these companies that had these, as you say, inflated valuations and didn't even seem like possible acquisition targets.

If a lot of them suddenly come on, you know, the market quote unquote, at the same time, you know, maybe there, if there are more than one that have, you know, the 5 million ARR, they've reached product market fit, they have some things going for them. Is it about that trust and about that relationship building, or are there other factors that they tend to look into?

[00:13:22] Lyman Missimer: If there's a ton of options, they'll just revert to their M and A lens. Every single, you know, one of these strategics has one. Um, they have a point of view on which adjacencies based off their corporate strategy, maybe their five year plan makes sense to buy into. Usually when you get to a certain size, call it, you know, maybe north of a hundred million, you probably have a couple that could make sense to where if an asset comes on the market within that space.

Whether it's like supplemental math or interim assessment, you know, whatever it is, you have a prioritization internally that will help you bet that the different assets that are coming up. 

[00:13:56] Jomayra Herrera: I think it's just worth noting that very few, especially like these meaningful M& A opportunities are not shotgun weddings.

They're typically long term relationships. Like we advise our portfolio companies to chat with a few key strategics and a few key people a couple times a year. Keep them updated, build a relationship, understand what their strategic priorities are. So when the time comes, and you'll know when the time comes, I think on both ends, you'll have a good sense of.

It makes sense. It's not a, okay, well, let's figure it out. No, you've been building the case for making this happen over the last six months, over the last year of the last two years, however long you've been actually building that relationship. And that's when we actually see exits be most successful and pan out in positive ways that both folks expected.

[00:14:46] Alex Sarlin: Yeah, that's a great point. So it sounds like. The best time to start thinking about exit strategies is yesterday, especially as this change in the market starts to happen. Jamara, I want to follow up on a combination of things that you've both said, which is like, there is this interest in non academic outcomes.

You mentioned, you know, mental health is a problem that it's grown a lot in schools, but it's been persistent for a while as well. Teacher shortages, persistent problem, you know, as we are getting to this moment where. You know, there is a splintering of the purchase decision where districts are less likely to buy things as much for a whole huge district.

There's more decision making happening at a smaller level at a school level. And there's these new types of purchases. I mean, schools haven't traditionally had lots of mental health tools. You know, there's sort of new markets happening and new buying patterns happening. I'm curious how you advise your companies to deal with these interesting changes.

They're sort of swimming in opposite directions in some ways. I'm curious. 

[00:15:44] Jomayra Herrera: Yeah, I think that it totally depends on the company and the offering for things like behavioral health. For example, the way to set it up for success, it's likely not going to be a bottoms up product that is done in one small level.

In fact, it's probably going to be a district wide priority. They may pilot in a couple of schools first, but it actually has to be something that is more of a tops down priority. Because behavioral health has so many different stakeholders involved, and I think it's too difficult to try to make it disjointed strategy.

For things like, we have companies like Curipod that are doing more of the classic Nearpod bottoms up model. And that works because a teacher can use it in their classroom, figure out how best to use it. They can get ton of value out of it. They don't need a bunch of different stakeholders and then ideally be able to get that to the school or the district level that works because you can actually create value in the unit of the classroom.

And so each company, you just have to think about how much value can you create at what unit, and then have that define what makes sense for your go to market strategy. 

[00:17:00] Alex Sarlin: That's really interesting. Yeah. So it depends on what type of product and at what level it would be a strategic purchase for your customers.

Is it a district wide initiative? Is it bottoms up? Individual teachers are looking for AI solutions like cure pod. That's a really interesting distinction. I appreciate you putting that together. So speaking of AI, You know, I want to ask both of you about this. I know that, you know, we talk endlessly about AI on this podcast.

We are very enamored with it, but it's also feeling like we're getting to a place where, you know, some of the real hardcore business, you know, I feel like ed tech is getting more fundamental about the financials, you know, what is going to actually work, what is actually makes money, what is actually retaining customers.

And at the same time, there's this. Still this flood of hundreds of very small companies that have just emerged from the ether because of AI. That's a wacky moment. Let me, let me start with you. I mean, do you see in, in the potential wave of mergers and acquisitions that may come over the next year? Do you think that.

The AI companies are going to be targeted there. It wasn't one of the priorities you named as one of the, uh, things that people are looking to buy, but do you think I'm curious how you see this playing out? Yeah, that's a great question. I 

[00:18:11] Lyman Missimer: personally, I don't see any big exits coming for, let's call it some of the more AI forward products right now.

And that's because a lot of strategics are playing the wait and see game. They're trying to build it themselves, or they're trying to utilize the technology in a way that makes sense themselves. Some are good. Some are not. And so I think you will see the folks that maybe can't build large strategics that have a lot of capital that maybe can't build out the right feature successfully, maybe pursue some of these more AI forward companies in a few years, but I think just like in buying similar to investing, I don't think it's a category, you know, they've all popped up around the same time and they're relying on LLMs to drive like a majority of their feature set, but it's not a category.

I think companies, whether they're AI powered or not. The ones that are going to win the ones with the best business models there, you know, they're going to be the ones that are continually creating structural competitive advantage and stay laser focused on that. And so if you've got an AI different product feature, that could mean having access to proprietary data that makes your feature unique to the product.

And you also need the talent to be able to utilize that data. I can't tell you how many M& A teasers I've seen that say, Hey, we also have a massive proprietary data set that's just waiting to be unlocked. It's like, Oh, like, why didn't you? Unlock it already. So, yeah, I think it's going to be same playbook as always, like products that are able to create like drive value creation and create real structural advantages for, and their products and within their markets are going to be the ones that are exiting and the ones that aren't, whether they're AI powered or not, we'll, we'll see.

Likely be unsuccessful. Yeah. 

[00:19:43] Jomayra Herrera: Yeah. I think it's worth just like double or putting a plus one on AI is not a category, right? Just like mobile is not a category. Uber is not a mobile company. Uber is a transportation company. When we think about our portfolio companies, Curipod is not an A company, AI company.

Yes. It leverages AI. It's a lesson content delivery platform and it's leveraging AI to do that. And so. I think like that's the biggest thing to hone in on is first principles. What is the problem that you're trying to solve? That's the type of company you are and you should be using AI at this point.

Like if you are a technology or software company that is not leveraging AI in some way or some form, I would be very nervous. 

[00:20:25] Alex Sarlin: So Jomayra, last question here. This is fascinating. I feel like my neurons sort of expand listening to both of you talk about this. I think you think about it in really sophisticated ways and I really appreciate it.

I'm sure our listeners do as well. So, you know, you have been somebody who following the new trends in tech for a while. You were one of the first guests on this podcast when we started years ago, you've been thinking about emerging tech and how it can influence the landscape for quite a while. At this moment, given that, as you say, AI, as you both say, let's say, you know, AI is not a category, but AI is getting baked into so many, virtually every ed tech tool.

And many of them are relying on it. Do you see basically schools embracing AI over the next year more than they have? Or do you see regulation starting to creep back in? And there, you know, another potential about face and reversal? Just the way we're starting to see schools and states ban cell phones now in school and in really large ways.

Do you think that there's going to be another backlash against AI or will people start to realize it's normalized, that it's part of their everyday life, that it's in the tools they already buy? Like, how do you see this playing out? 

[00:21:33] Jomayra Herrera: So we have to think in 10 year timeframes, right? Like that's just the nature of our job.

And so in 10 years, the through line is up to the right in terms of, let's call it AI adoption, like over time, school districts, 10 years from now, more school districts will have adopted AI than have now, and maybe it's the majority. And maybe we've hit the late majority at that point, there will be ups and downs in the meantime, and we're already seeing that in school district leaders that we're talking to all of them are saying.

We want to embrace a I, we want to figure out how to do it, but we want to do it in responsible ways. And everyone's dealing with it differently. And everyone's equipped with different tools and resources to be able to handle it. And so we are going to have the. Like LAUSD meltdowns, we are going to have a lot of these pushbacks.

It's going to happen. But the truth is like 10 years from now, which is a time frame we have to invest in most, I'm assuming majority of school districts will have embraced AI in some meaningful way to drive change in the things that they care about. 

[00:22:39] Alex Sarlin: Yeah. So there'll be bumps on the road, but overall.

You know, acceptance is inevitable in some ways because it will just get baked into our lives, but there will be bump like the LASD. 

[00:22:51] Jomayra Herrera: The other thing too, is all the incumbent software they're using has already released AI features, whether or not they want them or not. Right. 

[00:22:58] Alex Sarlin: Exactly. Every software 

[00:22:59] Jomayra Herrera: update, you're going to get it.

So they're in some ways like forced to embrace AI. The question is like the scope of what that looks like. And most importantly, and this is what I care about is. What's the change management process, right? What I don't want is what happened when, you know, computers became ubiquitous and then they all just ended up in a closet collecting dust.

I don't want the equivalent of that for AI. We have to actually train our 

administrators, our teachers, our educators, our staff to think about how to leverage these tools in meaningful ways so that it actually augments what they're doing. Not just use it as something that makes you. 

[00:23:42] Alex Sarlin: I love that metaphor of, you know, uh, you want the technology to actually be used, whether that's a AI feature in an existing platform that you adopt, like an Instructure or Nearpod or anything like that, or, you know, a new AI focused company.

You know, unless it solves a problem, unless there's training in place, you know, there's really, it could just sit in the closet, collecting dust, really, really interesting. Thank you both so much for being here. I have learned a lot. This is Jamiro Herrera, partner at Reach Capital and Lyman Missimer. Of owl ventures and formerly nuzella and Google, two of the most influential and biggest funds in the ed tech space, the really driving the field in some really exciting ways.

Thank you both for being here with us on ed tech insiders. 

[00:24:26] Jomayra Herrera: Thanks for having us. Thanks, 

[00:24:27] Alex Sarlin: Alex. Thanks for listening to this episode of ed tech insiders. If you like the podcast, remember to rate it and share it with others in the edtech community. For those who want even more EdTech Insider, subscribe to the free EdTech Insider's newsletter on Substack.

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