When your grand idea for an edtech startup begins to take shape and you’re ready to get the engines revving for a team and product, it’s time to get some funding behind the idea. The type of startup funding your company requires can range anywhere from self-financed to huge outside investments. Knowing when you’re ready for each stage of investment is important to your company’s growth.
Generally, edtech startups find funding in these ways:
* Bootstrapping: Finance your startup idea solo or with co-founders
* Friends and family: Reach out to your network of friends and family members for small amounts of cash
* Angels: Connect with angels investors for larger sums of cash; these men and women are in the business of making private company investments
* VC: Approach venture capitalists (VCs) when you need large amounts of money quick and know your startup can deliver a return
If your startup has gone through the waves of early stage funding and you’re ready for large sums of money quick, gear up for lots of storytelling and networking. Before you seek venture funding, you’ll need an unbeatable story, a comprehensive plan, and a solid process.
An Unbeatable Story
Before you approach VCs, prepare a unique and unbeatable story that explains the vision behind your startup and why your team is the best group to reach your goals. You’ll need to project confidence to VCs so they’ll invest. In an environment where VCs have invested significantly less in education than they have in other industries, your edtech startup needs to catch the attention of investors fast. In education, you also have the added hurdle of having to overcome the perception that distribution is more difficult than “traditional” venture funded spaces.
When my team and I went into fundraising, our vision was clear: create free, educational content with great learning tools and market directly to students. That message resonated with the VCs we approached for our Series A investment - in particular, the fact that we had already gotten a large number of students to not only find our product but engage with it helped us tell the story with conviction.
A Comprehensive Plan
VCs want to know how you’ll use the money they invest. When you pitch them and ask for funding, assure that your plan addresses exactly what you plan to accomplish with these new funds. Of course, you’ll also need to have longer-term goals, but for the short-term assure investors you know exactly what you’ll do with their investment. Remember that they will be evaluating both the goals and evaluating you. Specifically, how realistic are your goals, how much do the “prove” about your potential product and do they de-risk the company in any meaningful way. When we set out fundraising for a seed round, my co-founders and I said we would use the money to:
* Determine if there are enough open resources available that can be organized cost effectively into free textbooks
* Build a true textbook that suits what students need and want for class
* Reach students directly in a market that has historically been disadvantageous for their demographic.
Clear goals like these make it easy for investors to see what you plan to do with their funding. Your edtech startup’s goals should be unique - but make sure you know what goals you need to achieve in order to raise your next round of venture funding (or what goals you will have to hit to become cash flow positive with your first investment).
A Solid Process
The number one way to network your way into VC funding is to start networking before you need cash. Investors will be receptive to meeting you and hearing your ideas if you’re connecting and not asking for money up front. Before you start networking try to understand which venture firms have recently funded edtech startups - and in particular which partners like education investing. Approach VCs you think will be interested in your company by looking at their portfolios; look for opportunities where education and technology would blend well with their experience. When you network with these investors, be confident about your company and knowledgeable about your industry. When you start out networking, seek out warm introductions from the connections you already have or attend relevant events.
After you’ve built a solid network and are ready for funding, you’re ready to start fundraising for your edtech startup! To get more tips on the fundraising process and venture capital, I recommend checking out VentureHacks or Both Sides of the Table.
Ariel Diaz is the co-founder and CEO of Boundless. Boundless is making education more accessible and affordable for students everywhere with its an innovative learning platform that curates the world's best open educational content. Boundless has raised $9.7 million in funding to date. Follow Ariel on Twitter @arieldiaz.