News & Analysis

Education technology was a pandemic-era darling. But as lockdowns ended and most students returned to in-person learning, investor interest in the category returned to pre-2020 levels.

So far this year, the sector has raised only $1.6 billion across 206 deals, according to PitchBook data. At that pace, investors are on track to raise only a fraction of 2021's $17.2 billion across 1,770 deals.
But such a stark deceleration hasn't stopped Reach Capital, one of the most prominent edtech-focused VC firms, from raising its largest fund ever. The San Francisco-based firm announced Monday that it closed a $215 million fourth vehicle that will focus on seed through Series B investments in companies that serve K-12 classrooms, higher education, and workforce training and reskilling.

Despite the downturn, the fundraising process was not more challenging than that of the firm's third fund, which closed on $165 million in 2021, said Esteban Sosnik, co-founder and partner at Reach. "We benefited from having results in our first two funds," he added.

The firm's $83 million second vehicle returned 51.8%, which nearly places it in the top-performing decile of the 2018 vintage, according to the latest PitchBook Benchmarks.

The majority of LPs from Reach's previous funds re-uped with this latest vehicle, according to co-founder and partner Wayee Chu. But the firm also gained new LPs, including impact investor Impact Engine. Ander Iruretagoyena, a vice president with Impact Engine, said that the firm had been looking to invest in an education-focused VC fund for a while, and Reach's performance and positive impact stood out from other edtech funds.

Reach has backed some of the biggest names in edtech. It's an investor in ClassDojo, Outschool, and Lovevery, a toy subscription company that is planning to go public in the next two to three years, Axios reported.

For its fourth fund, Reach is sticking to its knitting and backing primarily seed and Series A startups, leading those rounds and taking board seats.

While digitization in schools may not be moving as fast now as it did during the pandemic, it's still an important trend amid teacher shortages in US classrooms, where many hope tech tools can fill part of the gap.

With generative AI threatening to replace many white-collar jobs, the biggest opportunity for Reach may now lie in workforce retraining across sectors. While generative AI companies may seem like a foe to employees who may be in danger of losing their jobs, the new technology will inevitably be important to education, and the firm is receiving a plethora of inbound pitches from AI startups.

"In many cases, [these companies] are technologies in search of a solution," said Chu. However, Reach doesn't want to put the cart before the horse, and prefers to invest in companies that start with a problem and develop a solution using the most appropriate technology.

Although Reach may still be sifting through potential AI investments, the firm can already boast about one significant portfolio company in the vertical. Replit, which last month partnered with Google to compete against Microsoft and OpenAI's code-writing tool Copilot, has been in Reach's portfolio since 2018.