Courtesy of Pearson
Owen Henkel, investments director of Pearson Ventures
- On Wednesday legacy
education company Pearson announced Pearson Ventures, a venture fund with an initial capital commitment of $50M over three years. The fund will focus on early stage companies. - The fund will decline to lead Seed and Series A rounds, opting instead of a co-investment structure that does not influence Pearson's larger merger and acquisitions strategy.
- The idea, says investments director Owen Henkel, is for Pearson Ventures to allow its parent company to dip its toes into the water with new technologies and business models, without having to commit to a pricey, complex acquisition.
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On Wednesday, $8 billion digital education company Pearson announced Pearson Ventures, a venture fund with an initial capital commitment of $50M over three years. The fund will focus on early stage startups, with an eye towards investing in companies that can help Pearson adapt to the modern world of education.
In an interview with Business Insider, investments director Owen Henkel explained the fund is taking a passive approach to portfolio management: Pearson Ventures won't lead any rounds in any companies, and will instead rely on co-investing with strategic partners. Pearson won't take board seats at its portfolio companies, nor is it interested in acquiring any of them down the line.
"We want to be clear with the people with invest in that we are not trying to gobble you up. We want to be good investors and partners," said Henkel.
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Traditionally, early stage investment funds make small bets, early on in a company's life, in hopes of seeing large returns as the company matures. Henkel explains that Pearson Ventures is less focused on the magnitude of the returns it generates, and more about forcing parent company Pearson to stay up to date on emerging trends and technologies. That's also why it's focusing on startups that are young, but that at least have a product.
"We are not playing in seed [funding] because ultimately we are a big business and we think like a business. It is hard for us to derive learnings when there isn't a product, and learnings are relevant to a company like Pearson," said Henkel.
Henkel points to coding bootcamps as an emerging trend that Pearson is tracking. He says he sees current iterations of coding bootcamps as an initial version of an exciting business model - the coding training bootcamps offer is not new, he says, but the business model for learning highly technical skills is.
He says the next version of the coding bootcamp concept will focus on different skills for different industries as more employees are displaced and require additional training amid large-scale economic change. This, he says, is an area that Pearson Ventures could watch, and help its corporate parent understand what it's all about.
The fund will invest between $1.5 million and $5 million in each startup, and will focus on companies that serve its core markets: the US, the UK, Brazil, South Africa, India and China. Pearson Ventures will also inherit a position in the six portfolio companies currently funded through the existing Pearson Affordable Learning Fund.
"In India, for instance, there is a massive industry around test prep and college admissions, so secondary level test prep is something we would look at for India. In the UK, there isn't this test prep industry, so we would look at technical qualifications outside of [secondary education]," said Henkel.
Because Pearson Ventures will live under corporate parent Pearson, Henkel explains the business is hesitant to acquire companies that could, in a worst-case scenario, have an adverse effect Pearson's bottom line. He says the fund is a good compromise that allows the business to learn without taking unnecessary risks in areas in which it is not well versed.
"Because we are taking stakes early on, any change will be a balance on our overall balance sheet instead of contributing to our [profit and loss report]," said Henkel. "Rather than buying your business, we want to partner with your business."