Mark Grovic, Founder of New Markets Venture Partners Gives us a Status Update on Investing in Edtech

“It’s a little cliche, but when you hunker down and you focus on profitability, you do come out stronger on the other side of a crisis.”

– Mark Grovic

On a search for a frank and realistic assessment on the challenges the EdTech industry is facing amidst the ongoing liquidity crisis, look no further than this conversation with long-time veteran in the industry, Mark Grovic, founder of New Markets Venture Partners.

Mark breaks down exactly at what stage of the liquidity crisis we’re in and expresses optimism for the future – whew! 

The main themes that emerged in this conversation include:

  • An opportunity to focus on fundamental solutions and the potential for growth in areas such as teacher-focused tools, AI-powered personalized learning, and industry-recognized credentials.
  • Insights highlight both the difficulties and opportunities present in the current investment landscape, offering valuable guidance for edtech and workforce development stakeholders navigating this uncertain period.
  • Why adoption in areas like skills-based hiring and credentialing is slow even though there is big potential for growth and development.

Give this conversation a listen, and don’t hesitate to Contact Us if you have any
questions, comments, or feedback. 

About our guest, Mark Grovic:

Mark Grovic co-founded New Markets Venture Partners in 2003 and is a General Partner. Mark serves or has served on the Board of Directors for American Prison Data SystemsCredly (acquired by NYSE: PSO), Fishtree (acquired by Follett), Galvanize (acquired by NYSE: LRN), Graduation Alliance (acquired by KKR Global Impact), Orchestro (formerly Vision Chain, acquired by E2open), Think Through Learning (acquired by Imagine Learning), MediaSolv (acquired by Nasdaq: TASR), Lightningcast (acquired by NYSE: TWX), Moodlerooms (acquired by Blackboard) and Mark also serves or has served as a board observer for Aldagen (acquired by NASDAQ: CMXI), American Honors CollegeAndera (acquired by NASDAQ: EPAY), App AcademyAppfluent (acquired by NASDAQ: ATTU), BioSET (acquired by Ferring Pharmaceuticals), Mantra HealthMashableNoodle PartnersOverture TechnologiesPAIRINParatek Microwave (acquired by NASDAQ: RIMM), and Questar Assessment (acquired by ETS). Mark also co-founded LifeJourney, an online educational company that allows students to test drive real life careers in specific corporations.

Mark has been investing in high growth companies since 1992. Prior to New Markets, Mark was a Portfolio Manager for the Small Enterprise Assistance Funds (SEAF), a $200 million managed emerging market venture capital company, Director of Estonia-based Baltic Small Equity Fund, a Co-Founder and Principal of the Templeton Emerging Europe Fund, as Principal of Templeton Direct Advisors, and a Portfolio Manager of Private Equities at the Calvert Group.

Mark is a Senior Advisor to University of Maryland Global Campus (UMGC), advising on corporate development and entrepreneurship, and was a Professor at the R.H. Smith School of Business at the University of Maryland, where he taught Ethics, New Venture Finance, and an award-winning Private Equity Clinic for 18 years. Previously, he was VC-in-Residence at the Smith School and Deputy Director of the Dingman Center for Entrepreneurship. He has earned three awards for his instruction at UMD and at Howard University, plus a fellowship awarded for the innovative use of technology in the classroom.

Mark helped to found and served as Board Director of the Baltimore Chapter of the Network for Teaching Entrepreneurship (NFTE), is Board Chair at Emerson Preparatory High School in Washington, D.C. and serves on the board of Partners for College Affordability and the Public Trust. He is a member of the Industry Advisory Council for the American Public University System and of the Innovation Advisory Board for the Lumina Foundation. Mark is also a member of the Washington Baltimore chapter of the Young Presidents Organization.

Mark graduated with Honors from the University of California, Berkeley, where he majored in political economies and received a Juris Doctor from Georgetown University, where his focus was in international, tax, and corporate law. Mark has also completed graduate work in accounting and finance at George Washington University and Pace University, and completed the Private Equity and Venture Capital Executive Program at Harvard Business School. He received a certificate in teaching entrepreneurship from the Babson Symposium for Entrepreneurship Educators. Mark lives in Silver Spring, MD with his wife and two children and is a mediocre musician and triathlete.

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Open for Full Episode Transcript

[00:00:00] Debbie Goodman: Welcome to On Work and Revolution, where we talk about what’s shaking up in the world of work and edtech. I’m your host, Debbie Goodman. I’m CEO of Jack Hammer Global, a global group of executive search and leadership coaching companies. I’m also an advisor to venture backed edtech founders. And for those of you in edtech who are hiring, we have launched a fractional leaders offering.

I’ll put the link in the show notes. My main mission with all of my work is to help companies and leaders to create amazing workplaces where people and ideas flourish. And today we have veteran ed tech investor on the pod, Mark Grovic. Mark is a growth stage, private equity impact investor with 30 years of investment experience and particular expertise in education and workforce sectors. He is the founder of New Markets Venture Partners, which is a private equity firm that invests in impact oriented education and workforce tech and services companies. Mark was a private equity professor for over 20 years and most recently was a professor of social entrepreneurship and senior advisor to the president at the University of Maryland and today, So that means you’re very smart, Mark. And today we’re going to chat to mark about the state of private equity investment or just investment as a whole in the edtech and workforce sector, because honestly, it feels like it’s been taking a real beating over the last year or so. And so I’m hoping to hear some positive and optimistic news. Welcome Mark.

[00:01:43] Mark Grovic: Well, thanks for having me, Debbie, and I’ll do my best to shine a positive light on where we’re at today.

[00:01:48] Debbie Goodman: Okay, great. Keep thinking. So you and I had a pretty robust conversation a couple of months ago about what was happening in the private equity dealmaking space and it’s now Q2 of 2024. Are we still in a liquidity crisis, are deal exits of any sort still excruciatingly slow? Can you give listeners an updated view of where things are right now?

[00:02:15] Mark Grovic: Sure. Happy to. And I do think we are smack in the middle of the liquidity crisis. I think the COVID epidemic was quite severe from a demand side and we had, I think the good fortune of having a lot of stimulus take away some of the pain for a protracted period of time and that’s sort of burning off, right?

The esser money is burning off and the PPP money is finished and with the Fed tightening a little bit and them trying to unlever the balance sheet. Interest rates are up. The debt markets are really tight. As we all know, the equity markets are basically shut down the IPO markets. And so from both the debt and equity point of view capital is being very, very cautious.

The underwriting of the banks and the private equity folks is much stricter than it was a few years ago during the looser money period. So I think we’re right in the middle of it. It’s hard for me to predict where in the cycle we are. We’re always looking for green shoots. Some of the tech hirings coming back a little bit, which is important for some of our workforce companies.

And then when folks are really afraid of the esser money, the federal stimulus money that went to the K 12 schools burning off, you know, I’m quick to point out that these districts had a pretty robust budget to serve teachers and students before that money and so people survived by working with them.

With school districts and then higher ed’s got its own challenges on the demand side with enrollments being down except for the more workforce focused you know, more online, more adult focused higher ed institutions. And the community colleges are doing a little better, but the traditional four year residential type enrollment’s down.

So they’re having these budget issues. And so it’s a little bit. Hopefully we’re sort of bottoming out and things will get better from here.

[00:04:16] Debbie Goodman: Okay. Well, the, when you’re in the middle and you can’t necessarily see the end of the tunnel and you just don’t know how long it’s going to be, I think that’s also adding to the caution because everybody is just trying to figure out like, how long do we need to preserve whatever cash we have? And so that just impacts everything, particularly hiring, which is where, you know, where I see things, you know, we’re we’re In some respects as an executive search firm, and even with our fractional hiring, we’re a pretty leading, leading indicator on the general sentiment around certainly founders and CEOs, the operators of companies as to how confident they’re feeling about growth and whether they’re going to either replace people who leave, or they’re going to

hire for new initiatives is very dependent on how long the tunnel is that they feel they’re in. And we’re still seeing that things are quite slow, better than they were in Q1 for sure. So we have seen an uptick in activity and hiring activity at leadership levels, both full time and fractional since I’d say March because we see the movement really quickly.

But But still decision making is kind of slow and a bit sluggish. So, as a value investor versus a unicorn hunter to use the term, which you actually proposed. So, excuse me if I’m being blasphemous, but what thematic opportunities do you see in the sector going forward?

[00:05:44] Mark Grovic: it’s interesting because I feel like we’re back to basics a little bit. We could talk about things that have been hot or not in the past, but in some ways, in a time like this, when you go back to the landscape things like teacher focused becomes really important, right? Like, and you can get away from a K12, K12 has its problems and it’s in or out of fashion.

But when you’re back to basics, you realize there’s a large number of students there and great teachers matter and they continue to need upgrades in content and more relevant skills. Higher ed has gone through some transitions around using outsourced providers for OPM, and so they continue to need instructional design and online learning help, and new models are required now to serve them.

And then in the workforce, there’s the skills based hiring and being able to better find folks that that will stay with the company and provide the types of attractive jobs that this youth needs, which are a little different than maybe when I was coming into the workforce in terms of the quality of jobs that people are looking for.

So. I guess we’ve always been fundamental, you know, block and tackle and haven’t been facing the trend of chasing the trend so much. I mean, it’s hard to ignore AI as as a powerful tool. And even in the last few years, my personal view of it has changed. It’s becoming more and more powerful and relevant.

Initially, I saw it as a feature and shouldn’t be an investment thesis in and of itself. But as I see some companies really unlock the power of their products and services with it. I’ll give an example of maybe some really high end tutoring that can be individualized and, very good at the fundamental learning object level of how somebody thinks, you know, one person versus the other different learning styles and its ability to adapt there because we’ve invested over the years in personalized learning and, you know, Newton and Acrobatic in those sort of companies where we’re in fashion about individualized pathways and something like AI

is just a whole nother level of an individualized set of attention. So it’s hard to ignore, but I’m still not sure it’s an investment thesis in and of itself absent other types of solutions.

[00:08:31] Debbie Goodman: Okay. Well, those are some pretty good thematic landing places for us to continue the conversation. I would like to pick up on skills based hiring because I obviously that’s more in my domain of of expertise and I’m hearing a ton of noise about this about how it’s the way of the future how jobs of the future gaining one, advancing one, earning, will all be based on the skills that you have versus your educational background or your prior company that you worked for or the job that you had but i’m not seeing a lot of real adoption in most companies.

Let’s talk about US centric right now. So what is your view of the adoption and practicalities of implementing skills based jobs and hiring? Right

[00:09:26] Mark Grovic: without a lot of action, but as a investor, I see that as a big opportunity because I think the noise speaks to a desire, a demand for different types of recruiting and assessments and a wider base of applicants to choose from. And so there is the need for that.

And it has been validated. I’ve heard, you know, if I summarize conversations I’ve had with chief human resource officers at big companies, I would say something like, if you have a company that can really help us find, evaluate and onboard a nontraditional applicant. in, that would be terrific.

And that word really help us, I think is the key. And what we’ve learned through investing in the space over the years is actionable data for hiring managers is really key. So a lot of companies think that they have solutions. But when you talk to a hiring manager, if it doesn’t really improve their ability to be successful, then the data is not as valuable as maybe the entrepreneur thinks it is.

And so even what does that mean? Helps the hiring manager be successful, right? You could really dig deep into that. And ultimately there’s some in getting data through the applicant tracking systems and the HR systems around who’s winning and who’s not over time and running that data back into profiles of folks that are applying, right?

That, that will come, I would have thought it would have come faster, but there will be longitudinal data that speaks to the ability of non traditional applicants to succeed and companies that are in that data flow with predictive assessments and evaluations will win and it will come and companies will be happy, but it has not taken shape.

And for me, there’s a lot of opportunity around in identifying internal skills of the company and skills gaps within the company. We’ve, we played in one in some of those spaces with some companies like Credly, and then understanding the skills that a non traditional applicant has besides degree signaling.

Like, how do you really identify it? There’s a nice assessment regime that can come from that. There’s even behavioral analytics around how people are applying for the job that are indicative of performance, resilience, and all kinds of neat stuff. Okay. I think there will be some big breakthroughs in that, but in the meantime, you know, folks come out and say, like you said, we’re going to drop the degree requirement and, you know, only 5 percent of folks that they’re hiring don’t have the degree.

So it’s not changing really the the applicant base like you would think it would.

[00:12:30] Debbie Goodman: Yeah,

[00:12:30] Mark Grovic: But but I think that will come and it’ll come slowly, I guess. Maybe that’s another way. You know, there’s a good quote that things don’t change as fast in the next five years as you think they will, but they change much faster in the next 20.

As you think, I think it’s a quote and I’m probably getting the numbers wrong, but I do believe in that sort of

[00:12:47] Debbie Goodman: yeah. So it’s slowly, slowly and then fast. So I, I think that there is enough conversation happening and it’s going to probably start within the big fortune 500, 1000 companies that have got the resources and the extra capacity and capability to start experimenting with the technology

 that works and doesn’t work and eventually probably trickle into your mid and small and small companies. There’s a lot of inefficient inefficiencies in the system and I guess that’s what you’re pointing to where there’s inefficiency, there’s opportunity. What we’re still seeing is that even that for example some of the newer technology around cv parsing for example the way in which an organization When they post a job either internally or externally they’ll get a ton of applications and it’s no longer humans that are assessing resumes it’s it’s Robots, it’s the ai that’s doing the assessment in one way or another and and how are they?

How how are they? How is it? Making good decisions around whether somebody has a relevant skill or not. And I think we’re still really in the, in the very early days of that. I think what we’re also seeing compounded right now and possibly contributing to the slowness is that the talent marketplace certainly at, at the professional levels is pretty fluid right now there are many candidates in the market.

And so companies. Actually have more of a choice than they had two years ago when it was really like can you just show up for work? If you’ve got a beating heart, we will hire you And right now there is a ton of choice Or there’s certainly more choice And so if I think old older behaviors or traditional behaviors around choosing somebody who’s got a degree or certainly even one from Maybe a top university with a top brand Or worked at a top tech company You that is still very entrenched.

I’m not seeing a lot of that changing yet. And so I think with the adoption of, of this new trend, a lot of it is around, you know, behavior, the behavior of people. And I think that that’s the bit that takes long. Right.

[00:14:58] Mark Grovic: it goes back to where we started the conversation, this liquidity crisis exists, you know, all the way from the big tech companies down to our portfolio companies. And so there’s a focus on profitability and extending cash and even the biggest higher employers have really focused on profitability over growth.

And we’ve all seen some pretty big reductions in force across the big tech companies, which I think is what you’re, you’re alluding to in some ways. And so, you know, With all that talent in the marketplace. Yeah, it’s a little easier for employers to find who they need now, but that will change.

Another thing that came to mind in addition to the helping employers parse, right? With a more skills eye and less degree signaling is can the marketplace do some of that work for the employer through things like industry recognition around credentials? And so, you know, there are a few credentials from, you know, CompTIA, A plus sort of things all the way through PMI.

And then. You know, we were talking about JD’s or CPA’s. Right. There’s obvious non degree credentialing that has labor market value with industry recognition. But there is an opportunity, I think, to do more of that. You know, the the bootcamp craze has come and now I think it will revive itself with a little more of a realistic back to basics.

You know, we have some bootcamp investments and getting a little more focused on producing candidates that are clearly identified as having the skills. That employers want, I think will be another part of the market and part of the responsibility will fall on the employers to innovate and part of that will fall on traditional and non traditional educators or workforce trainers to create non degree signaling on the

 on the supply side of the

[00:17:00] Debbie Goodman: Right. Because I think the biggest question in this whole skills based environment, the conversation is how on earth do you evaluate a skill? What is a skill and how do you evaluate it? And so if there are organizations or bodies or companies where their credentialing has got validity, that then will have some measure of power

and just as if you come from a, if you’ve done a degree at a top university, that will have a signal of, well, this person must be bright in order to have gotten through to that particular course at that particular university. Similarly, those skills based credentialing could have a lot more value in the future.

So, I agree around around the credentialing situation. I’m not noticing yet that that is having a lot of weight. I know a lot of people think that they do a course here and a course there, and it’s going to add to a it’s going to have value, and it’s going Can at some time at some points in time and, and not in others, I do see that resume parsers and and recruiting managers will often overlook those unfortunately still let’s talk about,

[00:18:00] Mark Grovic: Well, it’s just one, one comment. Sorry, because it’s super interesting when I was thinking it through. So I was at the University of Maryland for 20 years and towards the end of my tenure there, it was a lot of lip service, at least to micro credentials, right? Let’s, we have to get into that, that’s the, at Harvard and Yale, probably not a lot of

conversation around that. But at the community colleges, I think they’re actually doing a decent job with credentialing for local employers. So it, it would be nice if it were flipped in a way where, you know, the Ivy’s were really leading the thought leadership. industry recognized, but their degrees are so valuable and so expensive that I don’t think they’re going to cannibalize that.

Where at the community college, I am very proud of a lot of that work in terms of employers leaning in with community colleges around credentialing that have

[00:18:56] Debbie Goodman: Real value.

[00:18:57] Mark Grovic: labor market value.

[00:18:58] Debbie Goodman: I think that’s the thing, the real value. And that’s what I’m hearing around the the bootcamps is thatthere’s been a removal of investment or the bootcamp popularity has shifted certainly from individuals that would stay You know, taking these coding courses, et cetera, and now not able to find a job.

And so the value of these bootcamps as it relates to workforce readiness is has diminished more recently. So I just noticed another article yesterday around bootcamps UK related in terms of one of one of the U S big corporations that that’s just closed down. So, so let’s actually pick up on the conversation around, around apprenticeships, workplace readiness, workplace learning. So you’ve mentioned before that you think that it’s a really that there’s no easy money to be made in workplace learning. Say more about that.

[00:19:50] Mark Grovic: Well, it’s a heartbreaking point of view because I also think it’s the most important catalyst for a majority of the youth in this country. It’s an opportunity that’s being missed. So one of our guiding principles is to just look at the data around who really is completing college with a job that requires a BA, and it is about 15 percent of the population.

[00:20:18] Debbie Goodman: that again.

[00:20:19] Mark Grovic: Yeah, so if you run the numbers, 85 percent of folks graduate high school of that 85, 56 enroll in college of those 56, 30 graduate and of those 30, 15 get a job that requires a BA. So by the time you’re through that system, 85 percent of folks are washed out.

And our higher ed system is not serving arguably 85. And maybe you could argue it’s serving not serving 30 or it’s serving 15, but it’s not serving it over half.

[00:20:48] Debbie Goodman: Mm hmm.

[00:20:49] Mark Grovic: And so really the, the way to address folks that are trying to make ends meet and you need to pay them to learn. And the ability, even free education doesn’t solve the problem for a lot of people that, need to put food on the table and pay rent and increasingly expensive world.

And so this, this work based learning or earn and learn, however you want to talk about it. You know, you can get really academic across vocational opportunities in Europe and lots of people have been heading over there to look at the Swedish system of apprenticeships and some really brilliant people in the US working on that issue. But the reality is it’s aspirational still.

[00:21:32] Debbie Goodman: Hmm.

[00:21:33] Mark Grovic: And there’s been some great companies that have projects you can do while in college that help companies and you get a little online apprenticeship credit. Really good ideas haven’t particularly scaled. Lots of people trying to help companies

build apprenticeships, good people doing hard work, haven’t scaled. You know, unions are really the only places with any number of real numbers for apprenticeships and, and the quality of those opportunities and experiences are challenged in some ways. And so there is not a robust where folks can get

even a livable wage to get trained. The employer’s ability to provide educational training is limited from a tax incentive point of view to their W 2s. So you have to be a W 2 before you’re entitled to any of that, and some folks like Starbucks or Amazon have tried to do some nice training for frontline workers, and that hasn’t scaled for different reasons we could go into, so it’s a little heartbreaking for me, because if we had for that 80 percent of the population not being well served by the current system, if we had real work based learning I think, and not to get grandiose, but things like the, the mental health, substance abuse, suicide, disaffected youth.

political what’s the word? Dissatisfaction, right? That youth are, it would go a long way to address that. And and it makes me sad and it’s, it’s one of our main things we keep our eye on to try and go after, but not seeing a lot of scalable solutions.

[00:23:17] Debbie Goodman: Okay. That is sobering, Mark. And so we’re going to just have to pick this energy up and talk about what’s actually working. And what are you, what are you seeing in a, in a more positive light? What needs to shift with investors, with founders, with the funding ecosystem? most what are you most excited about for the year ahead or for the medium term future as we’re like trekking through the tunnel?

[00:23:46] Mark Grovic: So I’ll start with the the. And then go to some specific investment thesis that I’m excited about. So in terms of the market, you know, the benefits of age is you’ve been through many cycles. And so this is another cycle and it’s a little cliche, but when you hunker down and you focus on profitability, you do come out stronger.

You have to delight your customers. You have to only have the expenses that are absolutely necessary and people that survive with which most people will, they come out stronger and better. And and there’s a flight to quality right now. So if you have a highly efficacious solution that’s even growing moderately, like people are funding that and, and, and the bar is just higher, but it’s, things are getting done.

I like the flight to quality. I like the coming out stronger. And and really keeping your eye on the ball, building a fundamentally efficacious cashflow positive business is a good philosophy for everybody. And everyone’s been forced there. So I like that from a macro point of view and people who survive, which most of it will come out stronger. From an investment thesis point of view, COVID was really wonderful in forcing everybody to have broadband and one to one computing across K 12, and most higher ed students are now having flexible, even the full time residential programs are taking some blended learning, and the outcomes are best when you have a blended learning. We have some online and some in person.

One or the other is not as good as is a combination. So we’re moving into a world where everybody has access to technology that continues to improve. There is focus on more engaging curriculum, which has always been as a professor, one of my leading philosophical tenants that I think curriculum now is, project based, engaging, relevant, student led, all these sort of pedagogical philosophies that are core to great learning ever since, you know, Dewey and Wiggins, right, are now being finally embraced with more dynamic content.

And so I do think the student is being increasingly seen as the customer that needs to be engaged and not taken advantage of through, you know, 1950s and get lectured to, and it’s been complained about for 20 years. And I think in the past five or 10, it’s starting to be dealt with where people need to address that. It also needs to be relevant in terms of really interesting things like social skills and 21st century skills and emotional intelligence and seeing the whole student and the whole person has lots of benefits in terms of more success in the workplace and better mental health and even better civic citizens and relationships improve

and so I think we’re getting to a little more of a holistic forward thinking slightly enlightened sort of view of how to educate students and the CTE curriculums being work ready is a mantra that most people are picking up. I’m not hearing as many college presidents say, we can’t try and guess what the workforce needs because it changes every three months,

so we just have to teach you how to think, you know, increasingly people are saying, let’s try and get people work ready when they graduate. Let’s try and create pathways for employment and the employer is starting to see human capital as an asset and not as a cost center. And so, as we go to a knowledge economy,

I don’t know exactly the statistic, but 50 years ago, the majority of the assets of the fortune 100 were hard assets and capital. And now the majority of the assets, like 80, 90 percent are goodwill. It’s software, it’s human capital and companies who are investing in their employee ease and their intellectual property, which comes from humans, are the ones that are winning.

And the HR folks are now at the table, C level, our human capital is our most important asset and training and helping them grow is not just a cost, but an investment. And I think that’s here to stay.

[00:28:25] Debbie Goodman: Well, Mark, that was like five positive things, which balanced out the rest of the, the rest of

[00:28:32] Mark Grovic: It’s a moment in time. It’ll make us stronger. Right,

[00:28:35] Debbie Goodman: yeah, yeah. That was really great to hear. Thank you so much for sharing your insights. It’s been an absolute pleasure. I hope that 2024 plays out really well and that we will soon all be through the tunnel of despair and into the light again soon.

[00:28:52] Mark Grovic: Thank you for a great conversation. And I look forward to speaking with you soon.

[00:28:55] Debbie Goodman: Bye now. 


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