Impact investing in EdTech - with Marie-Christine Levet and John Soleanicov

[Music] Financing Impact is a podcast about funding and scaling societal impact. To bring you fresh ideas, we conduct interviews with thought leaders from different backgrounds. This podcast is brought to you by Sci-Fi, the societal impact financing initiative, the ESMT Berlin, and I'm your host Olga Elmquist. In today's episode, I speak with John Solianikov and Marie-Kristin Lowe about impact investing in Edtech. Marie-Kristin is a founder and partner at Edu Capital, a European venture capital fund specialized in Edtech. John is co-lead for Learning Schools at the Jacobs Foundation. The Foundation has committed a total of 40 million Swiss francs towards Edtech, the bulk of which is not a grant, but an investment. And one of their investees is actually the fund that Marie-Kristin is running. We discuss how philanthropy and impact investing can complement one another, and how the research that is being funded by the Foundation aims to inform sector-wide learning. We also talk about the role of the private sector to spur innovation, and the type of incentives Marie-Kristin has put in place to motivate her team and incentivize her team towards impact. We also touch upon the role of policy for educational sovereignty and accessibility. So, without further ado, I'm delighted to share the conversation we had. Yes. Welcome to the show Marie-Kristin and John. I'm super excited to have you on here today to talk about impact investing in Edtech. I'd like to give you the occasion to kick off by introducing yourselves. Let's start with Marie-Kristin. Hello, hi, nice to meet you and thanks for the invitation. Olga, so I'm Marie-Kristin. I'm the co-founder and CEO of Edu Capital. Edu Capital is an investment fund dedicated to Edtech and future of work. So, I've been in the tech industry for the last 25 years, first as an entrepreneur. I founded and was CEO of different internet companies. I founded Lycos in Search Engine in France, then I was the CEO of an internet service provider, and CEO of an internet media group. And then I switched to a VC 10 years ago, you know, participating in the creation of one of the first early stage VC fund in France. And then the idea came to launch a fund dedicated to Edtech. For two reasons, the first reason it was a personal will to make impact. I think that you know, you can invest in a lot of different things in digital, but selling clothes on the internet doesn't change the world. And I think that when you invest in education, you really make impact at your own levels. That was really a desire to make impact. And then, you know, I was the disposition of VC in the digital area, you know, I was seeing, you know, young entrepreneurs, you know, disrupting a lot of sectors. And basically, I was turning home, and I was looking at my children, you know, having the same education I had, you know, 20, 40 years ago. So, and then I told myself that, you know, the education sector was one of the last one not to have lived its digital transformation, and that, you know, investing in young companies and young entrepreneurs that can really bring innovation should really help, you know, the education sector, which was also facing crisis. Wow, very impressive. I mean, both from personal motivation side and also your background in the world of finance. I think it would be very nice to tie that into with a presentation of John, basically because you're also an investee of what John is doing. And I think, let's bring that perspective in. Let's hear about you. Yes, Hi, Olga, Hi, Mark Christine. Very nice, nice seeing you and thanks for having me on your podcast. So my name is John. I'm the co-leader of the Learning Schools portfolio at the Jacobs Foundation. I am a Romanian by birth American through my education and upbringing and Swiss by virtue of where I live today in Geneva. The Jacobs Foundation is a Swiss based foundation. We've been around for about 30 years. We focused on child and youth development. Now, our most recent strategic plan going through 2030, the core of our focus is what we call learner variability. That's the idea that learners learn differently based on attributes, background history, genetics, etc. And that one size fits all education systems. Don't do a great job at addressing that reality. And as a result of that, we've decided to focus on edtech as a specific field. I'll come back a little bit to that. In terms of my own background, I started in financial services on Wall Street. I've been in education for about, I would say, 17 years or so. First, at the World Bank, IFC, so the Investor and Armored World Bank looking at education investments in emerging markets. I've also started an organization called Teach for Romania, which is the part of the Teach for All Global Network, which focuses on finding young people and getting them to become teachers and low income settings in Romania. And for the last five or so years, I've been on the philanthropy side. I was at the UBS Optimist Foundation doing innovative finance and education. And for about two years now, I've been with the Jacobs Foundation. So in terms of edtech, we do a lot of different things. Probably what's relevant here is we really decided to use investment as one of the levers in which to shift the system. In edtech, we think there is simply not enough evidence around the products that are coming to market. There's a lot of interest excitement energy around edtech. We see it everywhere. It's in the children's classrooms. It's at home, but how much of these what is the impact of these products, both positive and negative. It's an under researched phenomenon. And we think we can do something to help change that. So we decided to invest in most of the edtech focused venture capital funds globally. So many were in the U.S. summer in Europe with the goal of firsthand learning about the sector and the trends and what's happening. And on the second hand, trying to influence the way investments are done, the way companies are supported, all with the lens of more evidence around what works with the goal of transforming the system over the medium to long term. Wow, thank you. Also very impressive background combining financial services and long track road in education. I think to give our listeners a little bit of perspective on how big what you're working on is. Let's talk a little bit about the type of investments you have mobilized. Maybe let's start with my Christine and giving us an overview of how much capital you have mobilized. And yeah, the rationale for investing in edtech. And then we'll get back to you, John. Okay, so we have today, you know, 185 million euro under management. With two funds, we had the first fund, you know, launched in 2017 of 50 million euro, where we invested in 20 innovative companies. And we just launched, you know, a new fund, edtech capital two. We had an objective for 100 million that we achieved at the first closing of the fund. And we have now, you know, more than 145 million euro under management. And we have a goal to achieve 150 million euro. And today we are, you know, the largest, you know, European fund dedicated to edtech and future of work, and which is a good because up to no, you know, Europe was a bit lagging behind the US in terms of edtech investment. And it's the first time there's a fund that can a bit compete with US investment funds. And our objective is really to identify, you know, European edtech champion leaders and identify companies that innovate in the field of education and training. We go from little childhood up to corporate training and life from learning. And we are looking really for investment that can combine financial performance and social impact. We think that the two can do and enhance, you know, and mainly in the education sector. And we do investment from two million, and we can do up to 10 million. And we are looking for companies that already have a product market fit, you know, that already have either usage or customers or clients, you know, in their field. Wonderful. I think that's a good moment to bring in your perspective, John, because you mentioned, Maricisin, you're obviously looking for a return and for impact, John is a foundation. You're kind of bringing in more of the traditional philanthropy side, but then doing something very innovative for a foundation. Would you care to explain how basically the role of philanthropy and the role of impact investing interlinks and related to what you're doing in that tech? Sure. Yeah. I mean, it's an interesting question. So we actually have an investment arm of the foundation, a family office and we're the sole beneficiary. We get a dividend every year from the investments. We invest in cocoa dentistry. We own a chain of international schools. But all the work at the foundation is separate from that. And so generally, if you look at US foundations, which are much more developed, you know, they have either invested through their endowment, or they will invest through their grant making. And we decided to invest through our grant making because that allows us to focus a little more on impact. So we've committed to deploy 500 million Swiss francs over the up to 2030. And most of that is grant making. It's a traditional philanthropy, like giving grants. And out of that amount, 30 million, we deployed through the course of last year, in ed tech across nine funds, we are one of the investors in the Azure Capital. And really the goal, we think that this capital, we expect this capital to generate a return, and we cycle that return back into activities. We can talk about that, into activities, adjacent activities, and the foundation. But we also want this capital to be supporting companies that have products that quote unquote work, the products that can demonstrate, in fact, efficacy, and impact on their customers, students, adults, whoever is being, who's a beneficiary of the product. And so we do agree that kind of an impact, and returns can correlate, but they don't necessarily always correlate. And one of the rules we want to ensure is that we are, making sure that those things do go hand in hand when they're deployed. - I think I saw on your website that you have one initiative specifically that is seated through a ground, so that's the connecting the ATTEC research ecosystem, but that is meant to be self-sustaining at some point. Could you explain us a little bit how you think that might work? - Yeah, absolutely. So we're a foundation, so we expect, again, on the portfolio to make a return, that return is plowed back into the foundation. So what we've said is that whatever we make in terms of a return from this portfolio, we will deploy into research and the core questions around ATTEC. So we've created a, I have a research platform, global platform, hosted at the University of California Irvine, which connects researchers, multidisciplinary researchers, looking at topics linked to a role of technology in education, and really putting money to work to help these researchers push the frontier of knowledge around what works in terms of education technology, what doesn't work, the effects on the brain, et cetera. And so that's the way it's kind of a closed loop, so the returns we make go into that, and we have actually preceded that with somebody's already working, the returns will come in some time, hopefully not too long. We have to ask Mariah Christine about that, but we expect their returns to come, but until that we have pre-funded it with some amounts. We are currently engaging in various research initiatives that they go hand in hand with the investments. - Mariah Kiecki, could you tell us a little bit about the type of returns you're targeting, but maybe also about your participation in this research and learning about the sector efforts? - Yeah, so basically, as I say, we really target financial performance and impact performance. So, impact is the core of our investment process and the core of our DNA. So we ask entrepreneurs to commit on impact indicators, in terms of impact indicators, we are following free indicators. The first one is rich, because really we think that, you know, ethics should provide access to high quality education to the greatest number of individuals. So really, the rich indicator is very relevant in terms of ethics and education. Then we follow an indicator of inclusion, because we really want to close the equity gap by promoting, you know, an inclusive education, you know, increasing diversity and reaching this advantage community. So for example, when we just did an investment in Germany, in a company called Cudary, Cudary is a coding platform for children and not only for people, for children to become developers, but also for children to understand, you know, the world of tomorrow. So in terms of inclusion, we really look at diversity, because there's a big problem today of the percentage of women and young girls, you know, in most of the advanced European countries that really don't choose, you know, scientific subjects, and they will basically prevent themselves, you know, to work in this digital space. So we were looking at this percentage of girls, you know, that are enrolling this program. So this is the inclusion. And then in terms of outcome, we want to measure, you know, learning outcome and learning efficiency in order to either, you know, reduce schools, schools dropouts, right? Or, you know, help people to go back to employment if it was people that were unemployed. So this is the area where, which is the most difficult to measure, because the longer it is in the age of the learner, it's easier, you know, the nearer it is to the employment performance, it's easier because you can measure people that have a time-street training, you know, find a new job or that have been restilled and that have gone into a higher position. But when it goes to children, you know, this is where many you would have to work with research to see an impact of new learning, you know, methods, you know, on the learning efficiency and learning path. Very interesting. And do you provide the kind of methodology for your investees to collect the data or do you collect the data? How does that work in PITA? They collect the data. Basically, they commit themselves, you know, to this impact business plan. And they are, and we built with them this impact business plan on choosing the right indicators. And then they are collecting the data, but it's true that for the learning outcome, you know, we encourage them to work with researchers in order to set up, you know, a good methodology. And John, you also mentioned in our previous conversation that you believe that there's a lot of investments in edtech, but that kind of research about what actually works does not yet play a big enough role. Would you care to elaborate a little bit on that? Yeah, I can give some examples. I should from the US where we see a lot of this activity. So, you know, there's a lot of companies selling into schools. This market actually has emerged quite dramatically. There's been stimulus money that's been fueling this growth. So, a lot of companies have grown. And so, when you look at many school districts and ask, how do you decide which product to buy? You know, few will say I've looked at the evidence around what works and what doesn't work. Often, the most common answer is, I got a recommendation from a colleague from another principal from other school, from another school leader. And that's really how this engineers are taking it. At the same time, a lot of products don't have this information. I think if you transpose that to Europe, you'll see some, you see it's on a smaller scale, probably the same phenomenon. And so, I think we need to change the customer side of it. And by the way, you can make the same case for parents, right? I mean, parents are what's done, but many parents probably are not thinking about if I put a product in front of my children, you know, what was the data telling me? They will look, well, if they give a medicine to their children, they'll make sure that the medicine is approved. And by virtually being approved, it's gone through rigorous trials. But they'll put a product in front of their child and they won't, you know, they won't ask that question. So there's kind of a customer issue there, which is complex to change. And we think about different ways to change this demand side. And on the supply side is where we work, obviously, because the companies themselves can start saying, you know, we're going to agree to certain standards and investors can say we agree to certain standards that we will agree to focus and put products out there that have evidence behind them. And so I think the two sides will emerge in parallel. And on the investor side, we try to do our part to help promote uptake a more evidence. And what is quite interesting, I think, is that we are in a tight, we are, I think, we are quite advanced in terms of impact measurement. Because if you look at education sector that exists for years and years, you know, and we have been having, you know, books, you know, we never, you know, measure impact of these books. You know, we never, you know, and I think that, you know, tends to technology, you know, it's true that you can have a lot of data of usage. And basically, you know, we never measure all these data before. And I think that this is really also the advantage of working in technology that when you can really measure usage, you know, of all these education tools. Yeah, I agree with that. So it's not a problem linked at tech per se. It's really an education generally that we've not tested efficacy of things that we do. And yes, technology allows us to, you know, it transforms the way we can measure the way things work. Because we get a lot more data on things that do the possibilities are much larger in terms of what we can do around assessment. And John, you mentioned earlier that a lot of products are now being sold to school schools. I think some people will say, well, education should be the realm of government. What would you say to that argument? And do you think there's a specific role for a private investment to spur innovation? Remember, Christine, you mentioned earlier that your children, your impression is there being taught the way you have been taught 30 years ago? Is that evolving? And what role do private tech actress play? I always say that the private versus public debate, it's actually going to write a blog post about that. It's coming out soon. It's very heated, very ideological. And it goes well beyond tech, right? So it has to do with things like private management of schools, low fee schools, in low income settings. My own view, it's our view is, you know, if you look at a school, it's purchasing all kinds of things from private providers, right? So anything from materials, books, desks, services, linked to the school. And so all of a sudden, when we talk about the things that are core to education, we worry why is the private sector involved? So I think the private sector is not a secret, it's the engine of innovation, of new ideas, new business models, new ways of doing things. The potential to accelerate and change is much higher in the private sector, incentives are more aligned. So to try to transform education without involving the private sector, I think, is a bit of a fool's airing. That being said, Education is still a public good, right? It is still a good that should be consumed for the benefit of all citizens All people should benefit from it. So it should be taxpayer funded But how that money is deployed Whether it's public or private, you know, we don't see necessarily a problem with that We think actually too much time is spend debating this point and I can cite you know in emerging markets People put millions of dollars into lobbying their point of view And then money could much be much better spent in supporting research into what works Access to education for poor poor children So I think we need to go beyond this planet and really focus on what works and what doesn't work because whether it's private or public Let's talk a little bit more about the research We heard from my Christian that at her VC level. She's measuring reach inclusion learning outcomes Could you tell us a little bit about how you as a foundation bringing together research on different Companies ensure that you know one player learns from the other and that they're learning at sector level going on Yeah, so first I think it's important to sort of highlight this That when you when you talk about ed tech sort of ed tech investing and research is really two different worlds So the researcher is you know trying to do an experimental study that Proves are usually a causal link between one one thing to another So they need to design a kind of in a lab an intervention that can be isolated and can produce a result On the ed tech side, you know, these are companies are trying to raise money find product market fit Make a profitable company grow the business And so these two worlds really don't they don't meet very easily And so that's a bit of the role we see so we do a couple different things and we're still an emerging Emerging space, but we we have the network of researchers and we're trying to plug them into real world example, so they are for instance companies That sit on large amounts of data right and data that could be very valuable to answering My questions about the product their own product but also to around broader questions around education and public services So we're creating a mechanism through which Some of our researchers can get access to those those data and a lot here lies into how the data is shared What is it? What are the rights around that data and what happens with the results? But we're setting up that infrastructure so that researchers can better plug into certain companies that work with large amounts Data on the other hand, we want there to be much more investment around researching product efficacy so if you think about a Any company, you know, they're investing annually to get an audit, right? So their financial statements need to be independently very verified and investors. I think will be Not very happy to invest in a company where the financial statements are not independently verified So we think there's something similar here when it comes to generating impact now every company is different And ultimately what we want to say is that companies make a claim about what their product does and not all claims are the same Some claims linked to learning some claims linked to cost reduction It all kinds of different claims the question We we ask is what's the evidence that validates that claim or not? And so we think that company should really be allocating some money or their investors on an annual basis to create generate evidence around that claim now We can't put this you know a startup with three employees precede is not the same as a, you know Company that just went better than IPO. So it's not the same level There's a journey of evidence where a startup company should at least have a clear theory of change What is it arguing that will happen with its product and the impact and then as it as it matures It wants to know the difference before and after on a set set of groups It events is even more it wants to compare that result against the control group And if it gets really far it does a randomized control where where you know access to the product is randomized and then you see the impact And so that's this journey that we think company should be on and at every step we try to provide some level of support But we don't have enough resources to fund the full needs of the market for this to be sustainable It needs to be a cost it's baked into the cost of doing business We're going to be providing some kind of money to try to stimulate that but ultimately in the long term We think this is a cost just like your auditor And it should be in that level, you know, not everybody needs to do a multi-million RCT to give a result over three years It's going to be a cost that links to the annual revenues and Operating expenses of the company and that's a bit where we see things evolving Very interesting and I think it would be interesting to get your perspective on that micristened in a specific I specifically also hearing you talk a little bit about how you incentivize for impact because we talked about that in our previous conversation I thought that was a really interesting point Yeah, because a lot of fans you know say that they do impact and it can Hope and it's only a communication and basically we think that in order to really do impact you really need to be aligned on the impact mission with the entrepreneurs and with the mission and that's why you know we have Integrated you know impact in the calculation of the carried of the team so the carried Interest you know is what really the heart of the VC business is that you know the way you know venture capital on money is that they have a percentage of the Value you know that will be at the exit of the company and Basically what we say is that 50% of the this Money that the VC will earn will be based on the reach of impact indicators So that means that it's very important for the team and that they will really be committed to this impact Indicators will follow them will do everything in order to maximize them and we really think that this in this term of methodology I think we are one of the best in class impact VC fund because you know 50% is try to a high amount and it really aligns people with you know VC analyst and all the VC employees you know to the reach of these Impact indicators makes a lot of sense John you mentioned that kind of providing data that is reliable should become baked into the coast of doing business in the future Maybe it's not yet. What is your perception around the role of regulation to go in that direction? I mean you mentioned that for example for financial reports you have an auditor now There's some kind of also regulatory developments around non financial reporting Do you believe that that is going to evolve how that is going to affect companies? Yeah, I think I think it's an only matter of time You know when you talk about you know it's hard to find somebody anywhere in the world really satisfied with the quality of education in their country I mean, maybe you'll find some people in the Nordics, but generally you know everywhere you go people are complaining around the quality of education And in many cases actually, you know problems are getting worse And so I think you're going to get a public outcry people want to understand You know for spending so much in education, what do we what do we get for again? It's beyond that tech I think it's just a broader problem around we know we invest so much in education. What do we what do we get for you know? What are what are our children learning? So I think there's gonna be more and more by giving you again the example from the US Which is not really regulation, but I think it's a step is you know They've done the every student succeed exact as of which which lays out the tears around what I was saying earlier around now They give companies the opportunity to get a kind of a certification of the level of evidence that their product has And it's it's essentially on four tiers based on you know how rigorous the evaluations of all with RCT tier one Just for a basic theory of change to your four And so that's the kind of thing. It's not really a regulation. It's kind of a guideline of framework I think you will see more of that and I think you'll see people demanding more More evidence around Education generally and I think at tech specifically and I think companies that are not set up and this is the claim we we make You know to the funds we work with is the companies that are not it's very hard to back into the data infrastructure So you started a company and you don't have the data set up in the right way To measure learning outcomes and progress on an outcome. It's gonna be very very increasingly costly and difficult to Make that transition later on so companies that don't set this up from early stage are going to be at a disadvantage Based on other companies that are set up in this way and I think you know venture is a place to talk about this issue because you know VC funds are looking at companies at a very young stage of their development and that's the place where you need to set up these These systems to allow you because down the line in 10 years, you know if buyers are asking you show me the evidence of what works Regulators are saying you know you need to have this if companies are not set up to deliver They're going to suffer in terms of valuation in terms of market share in terms of all the other financial metrics that investors care about So so we do think this will come it may not be tomorrow But it is inevitable because there will be pressure I think from from the general public From parents and from stakeholders and education systems broadly makes a lot of sense I don't want to get too far into the public versus private debate What one thing I wanted to touch upon with both of you is you know how What you do is private investors and as philanthropists interacts with what government regulation and government incentives do in the field of Attack and you also both gave some examples of people being concerned about the quality of education in their country You mentioned I think the US for this Europe, Marik Christine What role do you see also for these questions with regard to educational sovereignty and Yeah, what developments do you see basically? You know as you said your education is a further in France is the first you know investment of the Of the state so it's a big big budget and I think that in most of the countries, you know if you want to change education You need to go for the public sector This is really the key and I think this is also the key to make you know integration of disadvantaged communities. This is the key to have the social, you know, ascension to be realistic in countries. So we want to work with the public sectors. And it's true that it's quite difficult to work with, because it's very bureaucratic in a lot of European countries. And I think the key is really to go towards a much more freedom and autonomy in the teacher choice. And that teacher, you know, should choose, you know, the product and the service they want to work with in their classroom. And this is the way you will be able to work with innovation. And we really believe that the cooperation, private and public is key, because innovation will not come from the public sector. And it will not come also from the traditional publishers, because it's very difficult to innovate when you are in a city, in your existing business. And we've seen that in all the areas, you know, Airbnb was not invented by Marriott, or like, you know, Blavla Carr was not invented by a big, you know, cartoon structure. So innovation is always easier when it's, you know, young independent companies that are eager to really change the world. And that's why, you know, we really push, you know, cooperation between private sectors and the public sector. And we think it's very important also on a European basis to construct a net tech industry, because otherwise, you know, we will really be dependent on, you know, US actors and mainly Gaffa. And we've saw that with the COVID crisis, the big winners were the Gaffa, because basically when everybody had to use a tech product, you know, most of the countries were not prepared. Teachers were not trained. They didn't have due to the connections, you know, they didn't have due to the products. And basically they use Gaffa products, you know, people, teachers did classes on YouTube, you know, they use the WhatsApp for. And basically we know that all these companies do not have an education purpose. And basically they are on a different model, you know, you like it and not like it, but they are on a business model based on advertising and the nature of data to give you a good advertising and the right to your needs. And it's not the model for education. That's why we really think it's important that there's a consensus on European union to really develop this tech industry. And that's why also we have a money from the European Commission to really be able to invest in tech champions. But there need to be a cooperation between the public sector and the private sector, because otherwise, you know, what we could see is that we could have at one point an education with two speeds, with public education, not that innovative and a private education that is very costly for the parents that use a lot of innovative solutions. And that's why, you know, I think measuring impact is very important, because when you measure impact and you measure reach, you at one point you will not invest in very small elite tech companies that sell very expensive products to parents that can afford it. So that's why you link impact with the sense of the business. So basically the question of measuring is also something not only to demonstrate quality, but also demonstrate accessibility, because we often talk about impact investing, having a big rationale in terms of you can have potential for scale, but then you need to also pay attention to not, you know, widen disparities, but rather help tackling them. John, I remember seeing on the website of the Jacobs Foundation that you're also working on informing public policy through what you do in the field of tech, would your care to explain how that fits into your work? Yeah, we spent a lot of time thinking about that, and your public policy and education in Europe at least still at the national level at one of the problems actually in my Christine says, so, you know, as much as we'd like to have a European tech initiative right every country owns this budget, decides what to do, has its own rules of procurement, and so a company that wants to sell into Europe has to figure that out, they have to figure out in every country, sometimes it's not even at the national level, it's at a state level or even smaller. So we, you know, it's a difficult problem to tackle. We start in Switzerland, that's our home market, and Switzerland's like a mini EU, so we have a lot of contons, and a lot is actually the contonal or at the municipal level even. And so the question is, on the first hand, how can you get more information out into the hands of decision makers? And so we're trying to work on a kind of a product showcase to give people this information. We're also looking at the idea of developing a test pad, so these have popped up in many places in the world. A tech test pad essentially is a place where teachers and companies can come together and we co-create products that really address the needs. You'd be surprised at how many companies develop products never having gone into a class or were spoken to a teacher, and those are not very likely to be successful when they're done that way. But at the same time, teachers often lack the experience or comfort or confidence in working with technology. And so the test pad kind of addresses both of these. On the one hand, you get companies into the classroom to better understand the problem. You get teachers more comfortable with technology. And then there you create a much higher likelihood that technology will be adopted at scale through this. And there are things beyond that we do a lot of work in emerging countries through our beyond scope of this discussion. But ultimately, the problem will be solved at the policy level. And if we talk about Europe, I think at the European level, and what Mark Christine has mentioned previously, Europe has to sort of come together, consolidate a little bit, create a framework or an ad tech and make it place much more attractive. Because I fully agree it's much easier for the Google's Microsofts of the world to come and sell to the government. They know how to do it. And the space for a young startup to get in is very limited. It's very difficult. The barriers are very high. There's a lot of discussion on data protection, right? And guess what? The bigger companies are much better set up to deal with that. Just let's talk about efficacy. So you have products that are very strong from a data protection point of view, very weak from an efficacy point of view. They get in and companies that maybe have a journey to do in data protection, but maybe have a lot of potential around efficacy. You know, I have a tough time scaling. And so that's a big policy problem that I think needs to be addressed, ideally at the European level. What's your take on this, Mark Christine? What do you agree? I don't think you agree. I completely agree. There's a big, big effort to defend our European sovereignty and the limit, you know, intrusion of the FAM, that really give their products for free. You know, that's really the result. They give their products for free because at one point they don't care about selling product to the education sector, but they want to get the user as soon as possible and then be that they use their products to all their life-loan for this advertising business model. And basically, and they are really well equipped, you know, in terms of lobbying and in terms of our nation. So that's why we need to help European head tech startups to enter schools, because it's very difficult for European startups in head tech to really sell to schools. And there's been a big initiatives in France that is very helpful in the life-loan learning area, meaning that we have a platform now that everybody can use. It's called the CPF, a tone personnel, the formation, that everybody has its own, you know, training account where everybody can choose, you know, and it's paid by the company. And for an employee, people, it's paid by the state, you know, the, we got, you know, 500 people, 500 Euro per year per employee, you know, to really train himself as much as he wants. And basically, you can choose your training on this platform. And this has been a big initiative to really help people risk kill themselves, you know. And I think that this such an initiative can be also perhaps done in other European countries. I know there's a discussion on the European level to extend this CPF to other countries. And we need to do that now in the K-12, which is a primary school, elementary school area. I want to switch gears a little bit and take you from the policy and ed tech perspective to the regulation on investments in the EU perspective. One of the things that we touched upon in our prep call, Marik Kisin, was that you're actually one of the funds that is falling under the SFDR article 9 regulation. Basically, guiding also investors how to identify certain types of investments. Could you explain a little bit the role that plays for you as a VC? And why, whether you think this has an importance in terms of signaling? I think this really makes impact at the core of our process, you know, from sourcing to due diligence, to negotiation, and to the support we give to the company. In terms of sourcing that really helps us, help us exclude, you know, tech companies whose impact mission is questionable. There are a lot of companies where you know, they want the other in the area, but the impact mission is not the core of their process. Then, you know, in terms of due diligence, we begin to do impact due diligence. You know, I think this is something we really, I completely agree with, a general idea. And this is really something that we'll generalize. And as we do financial deliverance, we will end legal deliverance. There will be impact deliverance for the moment. There's not that many data. It's really the beginning of the way there. But I think this is something that we'll generalize. And then in the negotiation of the terms of the agreement, and we really set up this impact business plan. So really it's very important. And then in the support, because we really follow this impact indicator. So we've been even further than article 9 by putting this 50% of our carried interest into impacting the data. And the way it works is that we calculate for the fund. At the end of the fund, we will calculate an impact store of our fund. And that means that we will be able to say and see if we have respect in the engagement. I would add one thing here. A very interesting phenomenon, an article 9, fund raising. So you know, Mike Christine, you raised your fund before the market went crazy. But they're funds down the US raising, struggling. And so what did they do? They come to Europe. And how do I get article 9? And so actually this regulation has affected funds outside of Europe trying to raise in Europe. It's very interesting from what I hadn't thought about. So they come to us and ask, we're not really experts in this field. But it's an interesting kind of impact of having at the investor side, in effect, actually investments in other parts of the world. I think that article 9 is good because it makes impact important cases. But I think that aligning your carried interest and your policy, remuneration policy, with impacting the details is much more stronger than article 9. And John Marie-Kristin has described to us how she sources her investments. Would you care to describe a little bit how you do it at the foundation? Yeah, I mean, it's not-- it's a much simpler problem that what Mike Kristin faces. There is a finite universe of attack-focused venture capital funds. We sort of have an idea of who they are. We put them through the diligence process. And we are-- we're looking at many things. Every fund is a different place. Impact link carry. That is unique, I think, to add your capital. In some fund you discuss, you ask the question. They change the subject. And so every fund is a different place. The question we ask ourselves is what impact can we have to our investment? And so that's a bit of a different question than, you know, it's not a-- is the fund great at impact or not great at impact? So if we ask that question, you know, with our strict definition, we probably wouldn't invest anything, maybe at your capital. But we really are trying to see where funds in their journey, what can we do to support them? Are they open to evolving? Can we have an influence? And so that's the question we ask. Of course, we do the general checks, you know, we want to make sure we're going to make a return. You know, we're not taking excess amount of risk. We're diversified. But we really go through this process of understanding, and very deeply where the GPS, how authentically they believe in impact, how willing are they to evolve. And so that's the process we put them through. We're also very interested in looking at new funds, especially in new geographies. So we really try to do a lot of work in emerging markets. There's one fund that we're looking at called Kaizenvest, that's Singapore-based looking at India. We've been looking at African funds, Latin American funds. It's a much more challenging environment there. You know, if you think Europe is difficult, you know, try to go do ed tech in Ghana. But, you know, there's a potential. And so we're all in the lookout for those opportunities. And we think that there's a great chance. But it's not unlimited universe. So really, it's going through that process and finding all the players. Very interesting perspective. This investor impact versus company impact. That's something we touched upon also and some of the other discussions for this podcast. Thank you both so much for sharing. I would love to end this conversation on a note, like asking you both for your outlook on the sector, whether that's kind of where you're going to go with your investments or the regulatory framework or how do you see the European space evolving versus other geographies open to you. What is on your mind? I think that we are in a very good position in terms of ed tech because the COVID crisis has really accelerated the ed tech world. I think we gained five to 10 years in terms of adoption of new usage. And we were really very late in Europe versus many in the US. You know, US have been investing in ed tech constantly since 2015. Like in the first year, like in 2021, Europe is coming into the scene. In 2021, there were like 21 billion in investing in ed tech and Europe has invested three billion. So it's the start of ed tech in Europe. And there's a big market in front of us because the education sector is digitized with like three or four percent. And it's expected to raise to five percent. But we are very, very far behind media sector, which is digitized about 60 percent or retail at 25 percent. So I think that digital should enter this sector and like it has entered all other areas in the world. That doesn't mean that every teacher should use and should be forced to use ed tech. It will be the freedom of the teacher, but ed tech can also help for a lot of other things, administrative things, you know, corrections. You know, there's a lot of usage of technology in the education area. And right now, you know, there's a big crisis in the tech that is arriving, you know, and we've dropped out in valuation and, you know, questions. And I think that we have the chance to be in a very resilient sector. We need education and we need innovation in that area, which is perhaps not the case in the 10th, you know, startups that propose a new service of food tech, you know. So basically, I'm quite confident about the resilience of this sector and the fact that, you know, it's one of the most important areas to invest in, really, if you want to face the challenge, you know, of the 21st century, you know, being in school at the early age, but also in cooperation, cooperation have a huge challenge, you know, to re-skill their workers and adapt to this new way of life. So I'm quite confident for the importance, you know, and the resilience of our sector. Thank you for sharing. I think that's a lot brings us back to the relevance of why to invest in the sector, very insightful. John, what's your take? Yeah, similar. I mean, I think it's hard to talk about the future where that really acknowledging that the crises were in. I mean, you know, we're in a big macro crisis, right? The markets talk about valuation. I mean, we're broadly public spending, you know, as you know, governments are going to force this idea, you know, do I spend money on subsidizing gas prices or education? I know it's a difficult decision, right? And how will that evolve? In the US, there's a so-called funding cliff on stimulus money. So although money has been put into education, it's going to expire, I think, some point next year. We have an education crisis. So we have a lack of teachers in many countries in Europe in the US. But I think other crises come great opportunity. And that's the way I would really think about it. So in the big companies of today were created in the last crisis, right, in the Lehman mortgage crisis. And I think the big companies tomorrow are being created now. And that's where there needs to be venture money for these companies now. And I think the crisis on teacher shortage, I think people are going to come with a solution. I think there's an entrepreneur somewhere with a great idea on how to deal with this teacher shortage. Now, it's much more challenging education. Because again, policy plays such a big role in it. But I think there are also policy entrepreneurs. There are people in policy settings that can come with new ideas. And I think if the space allows for it, you will see a lot of transformation in the education sector. I think the biggest transformation education is in front of us, not behind us. And I think in the next 10, 20 years, I expect a lot of things to change. I expect a lot of new ideas, new companies to be created, and hopefully offer better. And hopefully to make societies more effective, students better able to learn and better be better prepared for the new world of work and the new world than what you are going into. Hard to really say for sure, but overall, I say, cautiously optimistic. Thank you for bringing a note of optimism in these times of crisis. And I also really like the idea of policy entrepreneurs that you just brought in. I think I might be interested in exploring that in the future episode. It has been super interesting listening to you. And yeah, thanks for taking the time. I try having you. Thank you. Thank you. Goodbye. This was Financing Impact, a podcast by SciFi, the Societal Impact Financing Initiative at ESMT Berlin. If you have feedback on the show, or would like to suggest a guest for a future episode, grab us a line at [email protected]. Thanks for listening.