A Q & A with an Analyst
(Mock interview with Cassy Weber, Ed Tech analyst)
Q: Within EdTech, as an analyst, what is the biggest hype at this moment in your view and why?
A: Cassy Weber -- There are several segments which have received significant interest from the analyst community. The CBI Insights report from June 2017, as listed below, highlights hot areas of digital Ed Tech -- including the broad online space, career development, tech learning, early childhood education, learning analytics, study tools, online to offline, and so much more. One of the hottest clusters, in my opinion, includes broad online learning/learning management system/classroom engagement. These three areas are what I follow with interest as an analyst in the Ed Tech space.
(Mock interview with Cassy Weber, Ed Tech analyst)
Q: Within EdTech, as an analyst, what is the biggest hype at this moment in your view and why?
A: Cassy Weber -- There are several segments which have received significant interest from the analyst community. The CBI Insights report from June 2017, as listed below, highlights hot areas of digital Ed Tech -- including the broad online space, career development, tech learning, early childhood education, learning analytics, study tools, online to offline, and so much more. One of the hottest clusters, in my opinion, includes broad online learning/learning management system/classroom engagement. These three areas are what I follow with interest as an analyst in the Ed Tech space.
Q: What are the top criteria to consider when analyzing an investment opportunity for an investor?
A: Cassy Weber -- Top three criteria include:
A: Cassy Weber -- This is a tough question since the technology landscape is quite disruptive, but in general the broad online learning and LMS generation 1 spaces are highly populated, whereas the engagement platform space is newly emerging. I expect to see consolidation across these three spaces, and so, as an analyst, I'm looking to see if a venture offers this potential.
Q: As an analyst, what has (have) been your biggest mistake(s) and lesson(s) learned?
A: Cassy Weber -- Biggest mistake has been to over-valuate a venture based on enthusiasm versus facts. The lessons learned are significant and most importantly, better to be conservative when assigning a valuation.
Q: What are the hottest Ed Tech market segments you are currently looking at as an analyst? Why?
A: Cassy Weber -- As in the above question, my expertise is in the broad online learning, LMS, and engagement platform space. I think, in general, these segments are already embedded in the education ecosystem with channels into market and validated pricing models. The market opportunity for this space is significant, and is showing growth year over year, with projections expected to hit the U.S. $5 billion mark in just the USA. So, what I'm looking for as an analyst are ventures which show consolidation opportunities.
Q: What are reasons that, as analyst, would make you recommend a "not to invest" in a company?
A: Cassy Weber -- This is a tough question, but generally as an analyst, I map where the company should be in terms of commercial success, based on money-in. Example, if a company has $25 million invested into it, but they've not yet achieved a customer base, but the customer base requires another $10 million, it is difficult to recommend this investment when the equity based is already highly diluted. I look for lean, bootstrapped ventures, ideally that have not been over-diluted, otherwise, we have to do a cram-down on the prior investors, which is not ideal.
Q: What are typical deal sizes/term sheets in Ed Tech, generally speaking?
A: Cassy Weber -- There is no clear answer here, generally, deal size depends on where the company is in terms of technology readiness and market development. The first money in is usually the most expensive in terms of equity because the first money in carries the highest risk. But, if a company has proven its managements' abilities, product validation, and is now focused on growing customers, then the risk element is lower than a company who has none of these proof points. Typically deal sizes range from $2 million up to $60 million.
Q: In your view, what is the value a startup accelerator can add and why?
A: Cassy Weber -- Accelerators are a good source of new leads for me to analyse. An accelerator does as the name suggests, helps a tech company accelerate its offering into market ie. accessing revenues. So the accelerator can focus on helping the venture create efficiencies in tech development and market validation by providing access to talent and capital. Since the accelerator is tapped into these necessities, the timeline for ventures is accelerated.
Q: Before your career as an analyst, you were an entrepreneur/intrapreneur for several years. How do you feel your own experiences have helped/changed your view on analyzing startups?
A: Cassy Weber -- All things begin with the management team. I've learned that management has a tendency to showcase the positives, but hide the negatives. As an analyst, it's difficult if not impossible for me to truly analyze the opportunity, weighed against the risks without full disclosure. Revenues are frequently way too optimistic and so, this is where I spend a significant amount of time. If the management team really knows its stuff, then revenue outlook is reasonable, but if the management team is not clued in to the realities of the market, then the revenue outlook will be unrealistic.
Q: What should startups think about before contacting a VC? What kind of questions impress you? What kind of questions make you run?
A: Cassy Weber -- As an analyst, the first thing the VC will do, is look for a pitch. If the pitch is not bullet proof, then the VC closes the door. Get the pitch nailed! If the VC opens the door, that's a critical first step. But the next step is me. As analyst, I will dig deeply into the opportunity and give a recommendation as to whether the venture is solid, and if it is aligned with the VCs investment criteria. Entrepreneurs need to understand the aspects of the venture that will be subject to analysis in order to be prepared. When I find a company that has not understood how to scale its operations/revenue base, then this is likely to signal a 'run', i.e. recommendation to not invest.
A: Cassy Weber -- Top three criteria include:
- Depth and breadth of experience of Management team, in particular, proven track record in building out the IP.
- Unique value proposition, which speaks to ability of innovation or IP to disrupt the value chain.
- Proof points of success. So, what are the key milestones that have been accomplished? This is indicative of the venture's ability to pivot and shift appropriately.
A: Cassy Weber -- This is a tough question since the technology landscape is quite disruptive, but in general the broad online learning and LMS generation 1 spaces are highly populated, whereas the engagement platform space is newly emerging. I expect to see consolidation across these three spaces, and so, as an analyst, I'm looking to see if a venture offers this potential.
Q: As an analyst, what has (have) been your biggest mistake(s) and lesson(s) learned?
A: Cassy Weber -- Biggest mistake has been to over-valuate a venture based on enthusiasm versus facts. The lessons learned are significant and most importantly, better to be conservative when assigning a valuation.
Q: What are the hottest Ed Tech market segments you are currently looking at as an analyst? Why?
A: Cassy Weber -- As in the above question, my expertise is in the broad online learning, LMS, and engagement platform space. I think, in general, these segments are already embedded in the education ecosystem with channels into market and validated pricing models. The market opportunity for this space is significant, and is showing growth year over year, with projections expected to hit the U.S. $5 billion mark in just the USA. So, what I'm looking for as an analyst are ventures which show consolidation opportunities.
Q: What are reasons that, as analyst, would make you recommend a "not to invest" in a company?
A: Cassy Weber -- This is a tough question, but generally as an analyst, I map where the company should be in terms of commercial success, based on money-in. Example, if a company has $25 million invested into it, but they've not yet achieved a customer base, but the customer base requires another $10 million, it is difficult to recommend this investment when the equity based is already highly diluted. I look for lean, bootstrapped ventures, ideally that have not been over-diluted, otherwise, we have to do a cram-down on the prior investors, which is not ideal.
Q: What are typical deal sizes/term sheets in Ed Tech, generally speaking?
A: Cassy Weber -- There is no clear answer here, generally, deal size depends on where the company is in terms of technology readiness and market development. The first money in is usually the most expensive in terms of equity because the first money in carries the highest risk. But, if a company has proven its managements' abilities, product validation, and is now focused on growing customers, then the risk element is lower than a company who has none of these proof points. Typically deal sizes range from $2 million up to $60 million.
Q: In your view, what is the value a startup accelerator can add and why?
A: Cassy Weber -- Accelerators are a good source of new leads for me to analyse. An accelerator does as the name suggests, helps a tech company accelerate its offering into market ie. accessing revenues. So the accelerator can focus on helping the venture create efficiencies in tech development and market validation by providing access to talent and capital. Since the accelerator is tapped into these necessities, the timeline for ventures is accelerated.
Q: Before your career as an analyst, you were an entrepreneur/intrapreneur for several years. How do you feel your own experiences have helped/changed your view on analyzing startups?
A: Cassy Weber -- All things begin with the management team. I've learned that management has a tendency to showcase the positives, but hide the negatives. As an analyst, it's difficult if not impossible for me to truly analyze the opportunity, weighed against the risks without full disclosure. Revenues are frequently way too optimistic and so, this is where I spend a significant amount of time. If the management team really knows its stuff, then revenue outlook is reasonable, but if the management team is not clued in to the realities of the market, then the revenue outlook will be unrealistic.
Q: What should startups think about before contacting a VC? What kind of questions impress you? What kind of questions make you run?
A: Cassy Weber -- As an analyst, the first thing the VC will do, is look for a pitch. If the pitch is not bullet proof, then the VC closes the door. Get the pitch nailed! If the VC opens the door, that's a critical first step. But the next step is me. As analyst, I will dig deeply into the opportunity and give a recommendation as to whether the venture is solid, and if it is aligned with the VCs investment criteria. Entrepreneurs need to understand the aspects of the venture that will be subject to analysis in order to be prepared. When I find a company that has not understood how to scale its operations/revenue base, then this is likely to signal a 'run', i.e. recommendation to not invest.