Edtech VC Firm Reach Capital Raises $215 Million for Its Fourth Fund

  • Reach Capital has closed its fourth fund with $215 million to invest in education startups.
  • The announcement comes at a time when edtech startups have seen a pullback in new deals. 
  • Here’s why Reach is still betting big on new startups in edtech and the future of work. 

San Francisco-based Reach Capital has closed $215 million in fresh capital for its fourth fund, the largest in the firm’s history. Consistent with the previous fund, Reach IV will focus on education and future of work investments in the earlier stages, such as seed to Series B, and in companies based both in the US and abroad. 

Reach plans to double down on its plan to invest in education and education support startups for K-12, higher education, and career upskilling and reskilling, including an interest in companies that can support teachers dealing with shortages and burnout. The team is also looking to back more companies using generative AI in education, Reach Capital founding partner Esteban Sosnik told Insider. 

“I think overall at the growth stage, some activity has slowed, but we’re actually seeing some really unique opportunities on this side from companies who are coming back or thinking about some more conservative round goals,” said Reach Capital founding partner Wayee Chu. 

Edtech investing hit a high in 2021 during the post-COVID lockdown boom with $16.8 billion in funding going to startups, according to PitchBook data.  But just as the venture capital industry experienced a record-breaking year for fundraising and investments, the market wavered in 2022, and so did edtech investing. Near the end of 2022, edtech investing had just reached $8.89 billion in 2022, according to PitchBook. 

While generalist investors still have some interest in edtech deals, some of the hype has worn off. “It’s a down market for everyone but some LPs are saying things like, ‘I don’t invest in edtech,” said Katelyn Donnelly, the managing director of the early stage edtech fund Avalanche VC.  “It’s funny because every category is hard. It’s not like medical devices or clean tech are a sure bet.” 

But for Mark Berryman, the director of impact investing at Caprock and one of Reach’s returning LPs, this specialization in edtech is what attracted him to backing Fund IV. “When we looked at other education funds that had the same number of vintages, Reach often had a more focused strategy — while others were investing in more companies with the hopes that just a few do well. Reach outperformed their peers in terms of overall fund performance and had created more exits,” Berryman said. 

The firm was founded in 2015 by longtime edtech investors and former educators Shauntel Garvey and Jennifer Carolan along with Sosnik and Chu, and to date has ranked as the most diverse venture fund based on the gender and racial backgrounds of its key decision makers, The Information reported. 

Reach Capital nears the top of the list of the largest venture funds that are focused specifically on edtech, right behind others like Owl Ventures, which closed over $1 billion in new funding at the beginning of 2022, Learn Capital, and GSV. Reach has also backed several edtech startups that went on to become unicorns, or reach a valuation of over $1 billion, including Outschool, ClassDojo, and Handshake. 

Also, by focusing on early stage deals with a sweet spot between pre-seed and Series B, Reach Capital has been the most active edtech investor by deal count metrics. As of mid-March 2023, Reach was the most active investor in edtech deals since 2018 as of mid-March 2023, with 72 startup deals closed, according to PitchBook data.

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