The NEN Interview - Benoit Wirz, Partner at Brighteye Ventures
Last week Lithuanian EdTech business, Memby, announced an €800k pre-seed round to support their growth and international expansion. Memby aims to provide a one-to-many real-time after-school tutoring service for students across Europe. The round was led by Change Ventures and Brighteye Ventures, along with a number of notable, local angel investors.
I was therefore delighted to speak to Benoit Wirz, Partner at Brighteye Ventures for this week’s Nordic EdTech News interview. As well as talking at length about their investment, we discussed his perspective on Nordic and Baltic EdTech and he also provided some invaluable insights for founders to improve their engagements with VCs.
As usual, the transcript of our conversation (edited to bring you all of the very best bits) follows below.
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Many thanks, Jonathan
Jonathan Viner (JV): Hi Ben - thanks very much for talking to me today. Can you please start by explaining what Brighteye Ventures is and does?
Benoit Wirz (BW): Brighteye Ventures is a venture capital fund that invests in early stage companies that use technology to help people learn and grow. Our focus is on Europe - we were the most active VC fund for investing in early stage companies in Europe in 2020. We raised our first fund (€50 million) in 2017 and are investing from our second fund, for which we announced the first close in October 2020.
Our business is looking for companies (primarily at seed and Series A stage) that have differentiated value propositions and amazing teams. We help them to grow internationally particularly in Europe and North America, which are the markets that we know best and where we have the deepest network.
JV: What is it about Brighteye’s proposition that differentiates it from Educapital, Sparkmind or any of the other funds in the market?
BW: I think it really comes down to our core pan-European focus. In contrast, Educapital was founded out of France and so a high proportion of their investments have had to be there. Similarly with Sparkmind, who have a focus in and around the Nordics. Both of these are really fertile territories, and we've invested in both, but our vision and execution from the get-go has been to create a pan-European fund that helps companies to grow rapidly.
I think that the other piece is Alex, my partner, and I have both spent a lot of time working in Europe and the US and have built a team with extensive contacts in both regions. Being able to open doors for our portfolio companies obviously helps on both the funding and client partnerships side.
JV: What sort of differentiation do you look for in potential investments?
BW: Obviously businesses can differentiate around different axes, but we usually look in three main areas - technology, team and distribution.
With technology, we look for companies that have a really clear technological advantage and moat. For example, companies like TeachFX in our portfolio, which is a machine learning platform that acts as a coach for teachers. It helps them analyse the quality of dialogue in classrooms, both online and offline.
There's also clear differentiation around the team themselves. This is particularly true for experienced entrepreneurs, who have a lot of what Ben Horowitz calls “earned secret” around a particular problem. You School in our portfolio, for instance, provides online vocational training for blue collar professions in France and is the founders’ third school / business in that domain.
Finally there’s distribution, which is important because we believe education is still very underdeveloped in terms of technological deployment. Particularly when combined with a sophisticated go-to-market strategy. This is where we see the potential for Memby to really grow and accelerate.
JV: OK so let’s talk a little more about your investment in Memby. What’s their business proposition and what convinced you to get involved?
BW: Well supplementary academic education, which is the technical jargon for outside help that enables kids to perform better in school, is one of the few areas where Europe actually has a strong demonstrated willingness to pay relative to other regions. This is in part because such a large part of getting into university in Europe is based on final tests after secondary school.
Historically this has been delivered offline through preparation centres and individual tutors, but has been one of the few proven interventions to increase student performance. Companies like GoStudent (in Europe) and VIPKid (in China) have done well by taking the one-to-one or small group tutoring experience online and creating a classic marketplace. Everybody wins because tutors can fill their schedules more effectively, students have access to a broader range of tutors and the EdTech company takes a piece for facilitating the interactions.
What Memby does is to take online tutoring and combine it with a structured social learning experience which is interactive and also highly effective. Students will be learning in larger groups of between 100 and 200 students, but with a highly engaging, well-qualified teacher. These teachers have Academic Olympiad credentials, but are also expert presenters, many of whom already have a presence on YouTube, for example. In addition to the online classes, Memby provides more individualised feedback via a chat-based format. This combination of factors means that Memby can also lower the cost for students dramatically - charging €15 to €20 for a month of daily sessions while still providing individualized feedback.
So overall what they’re offering is a really high-quality product, delivered in an engaging online format with impactful educators at an attractive price point. We believe that this will open up the market for quality supplementary academic education to a completely new cadre of people. It's worked well in Lithuania and they've grown quite quickly there - we’re excited about their prospects to grow internationally.
JV: What education level is the content pitched at?
BW: Primarily secondary school. They’re covering all of secondary education (years 8-12) in Lithuania at the moment and have begun offering some courses for years 5-7. For new markets like Poland and Greece, secondary school is their focus because that’s where the pressure on academic performance really ramps up and therefore where the demand is the strongest.
JV: How scalable a proposition is it if they’re producing dedicated course content for the different curricula in Lithuania, Poland and Greece?
BW: I think that this is both the challenge and the opportunity. There are some subjects like science and maths that only need to be fine-tuned for different territories, but clearly Lithuanian lessons are only relevant in that country.
This is where using local academic influencers really helps and enables them to shortcut the process. Much of the content will be created by people who know the material really well and who are already trusted sources of instruction. Given that larger numbers of students will attend each class, the business model provides the resources to both recruit students and pay high-quality instructors attractive wages.
JV: On the instructors, it seems that they’re looking for high-quality teachers but with the engaging, sparkling personality of a YouTube influencer! Where are they going to find them?
BW: It does require a specific skill set and even the best classroom teachers might not be the best fit for this format - you need to be almost exaggeratedly engaging in these formats, particularly if you have hundreds of students in each class. However we do envisage that as this becomes a more established medium that more and more people will train for it and become more highly skilled at it.
JV: The press release from Change Ventures on their investment says that Memby are including “techniques and metrics measuring behavioural, emotional and cognitive engagement.” What does this actually involve?
BW: Well they’ve created a number of tools to find out if students know the answers and if they’re following and understanding the content. Polls and chat functionality will also help keep people engaged as well as providing an insight into how they’re coping with the course materials.
From an academic perspective, the courses involve putting questions out there and seeing how many people get it right or get it wrong. Students engage with their teachers and their peers through a chat room-style environment.
JV: What's the link between Lithuania, Poland and Greece? Why target these countries?
BW: The short answer is that Memby is looking for markets where there is a clearly defined national curriculum - this exists in both Greece and Poland. All students in the country learn the same things, so their offer has the broadest possible appeal.
Opportunistically they're also looking for countries where they can identify and recruit the right kind of instructors to run the online classes. They’ve certainly found them in both of these countries, and so that's where they're starting off. It will obviously be an experiment going forward as to which future markets come next.
JV: Where do they see themselves and where do you see them in three or five years time?
BW: I think they're super ambitious and they really do want to push the model in Europe very hard. In the next three years, they’re going to roll out across Europe.
After that, there are other markets outside of Europe where this could work. Regions like Latin America are attractive because there is the same sort of willingness to pay for supplementary academic programmes and because Memby’s price point is super competitive.
JV: The obvious competitor in the space is GoStudent. How do the two compare or compete?
BW: I think they both appeal to different demographics. But the primary differentiator is Memby’s ability to offer something that's comprehensive in terms of the subjects that it covers at quite a low price point as well as offering a highly social experience for learners.
We’ve seen some initial analysis that says that larger classes are actually more engaging than smaller classes. So once you have a critical mass of students involved and actively participating in the classroom, the lesson is more dynamic and engaging for everyone. That’s the unique social element Memby has been able to unlock for learners in Lithuania, where they’ve built up a critical mass of students already.
JV: Following GOSU this will be your second Lithuanian investment. What is it about the market that’s attracting your attention at the moment?
BW: We have a great relationship with Andris at Change Ventures and we’ve been looking to do a deal with them for a while. We were both really excited about this one and are delighted to be working with them on it.
In the Baltics we’ve also found companies that go international quite quickly, which is certainly our orientation and preference. There’s also a good level of digital penetration in households and increasingly in schools. We believe that you can build global-class companies and prove the model even if it's on a small basis in Lithuania. We’re certainly open to doing more deals in the Baltics and the Nordics.
We’re also seeing an increasingly broader distribution of deals and funding in Europe and that's great. This is moving beyond the markets like the UK, France and the Nordics, which have historically punched above their weight in EdTech investment. I'm certainly seeing increasingly interesting deals coming out of Southern Europe particularly Spain, Portugal and Greece.
JV: You mentioned the Nordics. What is your perspective on the Nordic EdTech landscape currently?
BW: I think that it's a super interesting market for us. Obviously for a long time the Nordics have had the advantage over other European countries in that their digital penetration in schools and adoption by teachers have both been very high. And so you can create really high-quality products for a local market, which are also very internationalizeable in big markets like the US. Kahoot! is the best example of this, but companies like Lexplore and others are also doing it quite well.
The Nordics also have the advantage of having a highly-developed venture capital ecosystem. Sweden for example has the highest VC funding per capita in Europe. So the combination of those things means it's really fertile ground for education technology in particular. We're continuing to look for more deals in the area - it's a strong market and will remain so going forward.
JV: Schools are already back across much of Europe. What role do you think EdTech will play in this slightly uncertain Covid environment?
BW: We’ve obviously seen a massive increase in device penetration to school children throughout the pandemic and that’s not going to go away as schools ensure that there’s at least one computer or one device per student at all levels. As I’ve seen in the US, once there is sufficient device penetration and sufficient broadband access in classrooms, then EdTech really takes off as teachers feel confident in using it and can buy the products they actually need / want to use. That increased adoption may be free at first, but will lead to more paid adoption in the long term.
What we’ll also see is the continued rise of supplementary academic education, which is where Memby is gaining ground. The barriers to online education for parents have dropped dramatically as school children have all been exposed to online learning at home over the past 18 months. Parents’ willingness to pay for and experiment with services has also increased dramatically. And that’s a trend that we’ll see continuing to expand.
JV: Two final questions for you. What three things could founders improve when they approach Brighteye Ventures for investment?
BW: Well, the first is a pet peeve of mine and that’s for founders to pay more attention to their financial projections. These tend to be something of a throwaway in the current funding environment as many founders focus on topline revenue and annual recurring revenue and give short shrift to the rest of their financial model. But going through the key assumptions on both costs and revenue is a really important exercise, particularly around the amount to raise and the burn rate moving forwards.
The second is to understand and highlight the manner in which they truly transform how people learn. This is typically around four areas: reducing cost, improving learner engagement, more efficient delivery and relevance. Understanding which of those axes you’re changing and delivering value around is really helpful for us as investors. I think it’s also really helpful for founders because it allows them to clearly articulate what they're doing well and the impact they’re having.
Finally founders, particularly first time founders, tend to be a little bit intimidated by the whole VC process and wait too long to have everything “perfect” before they make an approach. But starting a fundraising process is a lot like launching a product - it will be terrible the first time you do it, so you might as well just get started! Get out there before you need the money and start asking questions and developing relationships.
JV: At the risk of filling your inbox, how do you prefer founders to reach out to you?
BW: I’m always happy for people to send an email to bwirz@brighteyevc.com and founders can also submit pitch decks through our website. We’ve also started running office hours sessions which are an opportunity for founders to ask us any questions they might have outside of a traditional pitch. Each slot is for 20 minutes and our next available sessions are in October - again founders can easily apply online.
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