[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 as well. 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 it is an honour to have Matt Greenfield as my guest. So Matt is co-founder and managing partner of Rethink Education, a venture firm that is dedicated to edtech and which focuses on investing in big high impact ideas and significant transformative social impact. He has a long tenure as an investor, starting out at ABS Ventures. He helped start Rethink First, which was acquired by a private equity firm. And he’s been an angel investor in several tech companies that have gone on to IPO and do other wonderful things and become kingpins in their sectors.

In between all of this, Matt has taught at Columbia University, the City University of New York, and Bowdoin College. He currently sits on many boards and is considered a visionary thinker in the space of impact education. And today we’re going to chat to Matt about what it takes to thrive in edtech right now, when so many companies are really struggling, some are even imploding. So Matt, welcome. I’m sure listeners are hoping for your words of wisdom and your crystal ball.

[00:01:50] Matt Greenfield: Visionary may be too grand a term.

[00:01:53] Debbie Goodman: All right. Well, we’ll consider it wise and very knowledgeable. You’re good with that?

[00:01:59] Matt Greenfield: Yes.

[00:02:00] Debbie Goodman: Okay. All right. So let’s start off firstly, just talking about Rethink Education. So, Rethink Education invests in diverse founders with strong social missions and you mentioned that in your most recent fund, 40 percent of CEOs are black Latino from, or from marginalized communitiesnand over 45 percent are women. I’d love it if you could just unpack for listeners, the investment thesis in a bit more detail.

[00:02:29] Matt Greenfield: Well, part of it is the mission, right? Our mission is to help unlock the potential of people from underserved or marginalized populations and that includes people who live on low incomes, both children and adults those who are struggling with basic literacy, the neurodivergent, the incarcerated or justice involved immigrants and refugees, the elderly and those who experience persecution or discrimination for other reasons. Part of it is also just the recognition that whenever there’s a structural bias against a particular asset class, that there is the opportunity in finance terms to generate alpha. So, entrepreneurs from underserved groups including black and Latino founders are an undervalued asset class.

So, the stats are quite horrifying. Apparently, there was a bit of a peak in 2021 when 1. 4 percent of all venture dollars went to black founders. The next year that went down to 1. 1 percent and last year it was 0. 5%.

[00:03:48] Debbie Goodman: I think there’s been a similar trajectory with female founders. If I’m not correct, it was slightly higher percentage being allocated, like 3 percent in 2021 to female founders and that’s just been dwindling over the last three years.

[00:04:02] Matt Greenfield: Yeah. And so if talent is evenly distributed and opportunity is not, and 13 percent of the US population is black, over 50 percent is women, clearly there is a lot of talent that is going underfunded. And I will further say that in terms of, you know, having a competitive edge in sourcing, which is one of the things that helps a venture firm to succeed, when you roll out the welcome mat and make it clear that you are friendly to talent from every quarter, then people come to you who might not otherwise have come to you. And the same goes for people on our team as well. And right now, we’re part of a larger organization, but if you look at our full time team at Rethink Education everyone else on the team is black, including both of the other partners.One of our most recent hires was also approached by Sequoia. That’s the first time we’ve ever competed with Sequoia for a potential employee, and we won and we won because of our values and our commitment to making the world a more inclusive, kinder place.

[00:05:22] Debbie Goodman: So just to go back to the question around alpha because the venture market is in, certainly in edtech, other sectors too, is really struggling. It’s been struggling for a while for, let’s say the last two years. Everybody has been asking, where is the alpha? And now you’re saying, well, it’s right in front of our eyes. There’s underfunded talent with ideas for, and that are serving marginalized communities and there’s, it’s not just about social impact. There’s actual profit to be made here. This is about this is social entrepreneurship where there is potential, not just potential, there is real upside. Why is nobody else jumping on this bandwagon the way that you guys are?

[00:06:06] Matt Greenfield: Well, there’s a funny anecdote about an AI program for matching prospective employees against the high performers within an investment banking organization. It turned out, yeah, what the algorithm extracted from a massive data about the company’s high performers was we should hire more Dartmouth graduates who rode crew.

[00:06:35] Debbie Goodman: Yeah.

[00:06:36] Matt Greenfield: There is a tendency for people to hire others like themselves and promote them and collaborate with them. And so, you know, my firm started off as four white men who made angel investments together. And it took a while before we had our first non-male team member and even longer before we had our first black team member. But then things happen to paraphrase, as Ernest Hemingway once said about bankruptcy, two ways first, very slowly then all at once.

[00:07:15] Debbie Goodman: hmm.

[00:07:16] Matt Greenfield: I have another thing to say about alpha.

[00:07:18] Debbie Goodman: yes.

[00:07:19] Matt Greenfield: So the biggest cause of the failure of early stage startups, according to a survey by crunch base, it’s a little bit fuzzy because they’re overlapping categories. But the biggest cause of failure of early stage startups appears to be failure of product market fit, which you could also describe as a failure of empathy for your intended customers, a failure to understand who your customers are and what their day is like and what really matters to them.

[00:07:48] Debbie Goodman: Mm hmm.

[00:07:49] Matt Greenfield: So failure to find a meaningful problem to solve. And that is one mistake we have never made. There are other mistakes that we make repeatedly as a consequence of our values and our business model, but we’ve never backed a company that wasn’t trying to solve a problem that involved actual human suffering. So we’ve seen entrepreneurs pivot in their approaches to those problems. We’ve never had real mission drift where they decided to solve an entirely different problem.

[00:08:23] Debbie Goodman: So, what I’m hearing you say is that it’s hard to identify something new when you’re looking at the problem or you’re looking at the issue through very similar eyes. And so part of the transition for your organization was really making sure that the people on your team who started to become more diverse over time would be able to see. things with very different eyes to the way that you and your white male colleagues had been looking at things up to date. I’d actually heard a stat that said that on leadership teams and on boards, there’s been a shift and a idea that, well, if we just have at least one woman on the board, we’ll be able to think differently. And apparently that makes no difference whatsoever. It takes at least two, it takes at least two people who are different to the rest of the group to actually make any difference whatsoever. So you’re Ernest Hemmingway quotation about it’s slow and it’s nothing and then it happens very fast. I don’t know about the very fast, but certainly if it’s just a drop in the ocean, it’s really hard for those shifts to happen. I start, you know, my company, I’m the founder and we started out as an all-female team and we were all female for a really long time. And our diversity came when we started hiring guys to men to join, to join our team and they had a really hard time integrating. So, I get that there’s always that early stage that gnarliness of, of trying to, to make those shifts and it’s can be really slow at the beginning. But what I see in many venture funds is that the diversity comes when the people on the team who are diverse are usually in operational roles. They’re like in HR or marketing, or they’re the executive assistant, and they’re not actually in investment roles. And so the real shift happens when you’ve got enough diverse, like when you’ve got a team that’s diverse enough in actual investing roles. 

[00:10:23] Matt Greenfield: Yes, and there’s abundant research that says that diverse teams make better decisions. And in addition to its race and gender biases, there are two other very important biases in the venture industry in the United States right now. And they’re biases that people don’t conceal. They don’t know enough to conceal like the race and gender biases for the most part. One of those biases is an age bias, right? An idea that if someone is over a certain age, say over 45, over 50. That person is not an interesting entrepreneur. In fact, the evidence, particularly for enterprise companies, does not bear that out. It helps to have some domain knowledge, some experience in a sector. And you do see companies where the first 20 employees are quite young, and then they have to hire people of diverse ages and struggle to include them and their perspectives. And that can have real business consequences. I think you know, Facebook and Snap are among the examples of that. If you want to sell to large advertising agencies, you probably do want employees who are over 40 people who have relationships there who understand entities work. And then the other bias that people are not ashamed of is degree snobbery.

[00:11:48] Debbie Goodman: Oh, yes.

[00:11:50] Matt Greenfield: So I have three degrees from Yale, a BA, MA, and PhD. I never bothered to apply for the MPhil. I sometimes describe myself as a recovering prestige. I’ve also taken non degree classes at Middlebury, Johns Hopkins, and Stanford, and Skidmore to name a few. It’s a very natural thing in the venture industry to hone in on people who come from a very small set of schools and not to recognize that typically those schools have roughly 10 percent of their entire student body coming in with a Pell Grant, meaning, you know, from a lower income family and that a degree from UC Davis or Cal State Fullerton or even the University of Phoenix may not indicate that someone is less intelligent. It almost certainly indicates that they came from a less affluent family. I think for a working adult to complete a degree while working and possibly also raising a family shows a truly heroic level of grit

[00:12:58] Debbie Goodman: Pretty phenomenal, right? For somebody to achieve that, regardless of where they went to university.

[00:13:05] Matt Greenfield: Yes. I doubt that I could achieve it.

[00:13:08] Debbie Goodman: Yeah. I mean, you put it in, it’s a great term, degree snobbery. I’ve certainly encountered this over and over. I’m from I’m from South Africa. I’ve moved, relocated to the US a number of years ago, and I had not imagined that there would be as much of a close, and I don’t want to necessarily call it a boys club because it’s not just that it’s certainly an alum club where it seems that if one has at least done a postgrad or possibly an MBA at the same institution, there will be, as you said, roll out the welcome mat that’s definitely greases the wheels to, for both founders and just partners in, in venture firms. And so that has seemed like, that’s really. of restriction in opening doors to alternatives that I, I didn’t realize was, it was going to be quite as entrenched as it has, you know, as I, as I’ve discovered over the years. Okay.

[00:14:09] Matt Greenfield: Yep.

[00:14:09] Debbie Goodman: And let’s not even go into age bias. I’m of the generation that feels like I’m aging out of things. So I’m often the oldest person on the call these days. So yeah, ageism and age bias is a real thing and nobody is ashamed of it. nobody even thinks there’s anything wrong with it. Okay. In every venture capital portfolio, there’s going to be a mix of companies, some are going to wash their face and break even some just like, don’t go anywhere. There are a few that shoot the lights out, but when you invest, you invest hoping that they’re all going to shoot the lights out. I mean, that’s the reason for investing. You don’t go into an investment going, Oh, well, you know, if this one just meanders, it’ll be okay. So you do your due diligence. And you do, there’s a lot of rigor to that. I’m really curious, you know, why do some fail? Why do so many fail actually? Because there are only a number, a few that really, that really do the big, the big high growth that everybody’s hoping for.

[00:15:11] Matt Greenfield: Yeah, a lot of people think about competition, but that’s rarely the reason. The wounds are almost always self-inflicted, and a lot of the time, it’s the problem I mentioned before of not listening closely enough to the customers and not figuring out what it is that they consider their most urgent problems. Sometimes it is building a bad piece of technology. I’ve been lucky enough to be involved with a number of companies that had really excellent technology teams and punched above their weights in some ways. But occasionally someone will hire the wrong CTO and build out something in a way that builds up substantial tech debt. And ultimately it becomes hard to even maintain the product, much less to extend and enhance it.

[00:16:06] Debbie Goodman: Mm hmm. Yeah.

[00:16:08] Matt Greenfield: There are also macro shifts that are hard to predict. So there were things that worked really well in 2020 at the onset of the pandemic that stopped working. There is a funding cliff in K12 and we don’t yet know how that will affect education technology businesses that sell into K12. There’s been a rolling, slow developing crisis in higher ed for some time connected to costs exceeding revenues by more every year, and that is exacerbated significantly this year by the debacle with the federal student aid application system, which has discouraged a lot of people from going to college at all.

[00:17:01] Debbie Goodman: Yes.

[00:17:02] Matt Greenfield: There was one newspaper article that quoted one woman as saying, you know, the system kept rejecting my application and I couldn’t tell whether it had been submitted. That’s it. I’m becoming a flight attendant.

[00:17:13] Debbie Goodman: Right.

[00:17:15] Matt Greenfield: I can make money. I can travel. I don’t need this. So that puts extra pressure on colleges right now, for students in the United States, at least to go around. And workforce training and higher education for working adults have always been economically counter cyclical to some extent. When work is slower or people are out of work, they are more likely to get education. It’s not clear that that will continue. There’s just some unknown. And then of course, you know, I’m, sort of proud of myself for having gotten this far into the interview without mentioning artificial intelligence.

[00:17:58] Debbie Goodman: Ah, that’s it. We’re at 20 minutes. Keep going. Keep going.

[00:18:02] Matt Greenfield: I do have to mention it now and say there’s a lot of uncertainty about what kind of jobs we are preparing people for, what skills will continue to be valuable, and which will not, which professions will not. Even exist, which new ones will come into being. I think it’s a great opportunity to rethink education from the ground up, because I think that education has not served students well for quite a long time and students do need to memorize certain things like the spelling of words and multiplication tables and certain basic facts about history and governments. But there’s way too much emphasis on application of processes and wrote memorization of facts in the current education system and way too little thinking about the skills that people actually need. And if I may, I will tell you about one particular excellent educator and a vision of what education actually should look like and what would prepare people for the future.

[00:19:14] Debbie Goodman: Okay, I’m excited. Tell me and all the listeners.

[00:19:17] Matt Greenfield: A man named Carl Wendt worked as an engineer and industrial designer and then went to teach at high tech high where he taught robotics course. At the beginning of every semester, he would ask them to dream up a cool robot. So it might be a helicopter robot that would rescue a plastic mountaineer figurine that was stranded on a plastic mountaintop. Or it might be a swimming fish robot that would ingest glowing food pellets. Or it might be a tank robot that could crawl over obstacles. And then he would gently guide them into scoping out the challenge of building this robot. And by the end of the semester, they would have learned how to program an Arduino controller in C. They would have learned how to use a jigsaw to cut plastic. They would have learned how to solder, possibly to weld. And they would have learned how to debug something and re scope a plan. And what was so incredibly moving, listening to Carl talking about these students, who were not STEM prodigies. They were just randomly selected by lottery for high tech high was that they were never going to look at a problem the same way again in their lives. Right. And asking, do I know how to do this problem? No. Oh, well. They will ask, huh. Is this problem defined in the right way? Is there a way to reduce its scope? What skills would I need in order to solve this problem? Those are the skills that employers actually want.

[00:20:57] Debbie Goodman: 100%.

[00:20:59] Matt Greenfield: You can easily go through a high prestige, ultra expensive private education, K12 and college, and not have those skills.

[00:21:10] Debbie Goodman: Absolutely.

[00:21:12] Matt Greenfield: People get those skills. That’s what we need to be teaching. And so, the question is, how does the system need to be modified to get students collaborating in groups on problems that they care about, that are meaningful to them. It doesn’t have to be a STEM project, it could be a city project, but it has to matter to them in some way, enough for them to work really hard and creatively.

[00:21:39] Debbie Goodman: Do you think that, just to go back to your point around AI, do you think that there’s a way for AI to enable that, or is it completely not related? Because we know that there are these unique examples these special examples of unbelievably creative teachers who work outside of the system and do these remarkable things with students in pockets of you know, schools here, there all over the world in fact, we hear about in India, we hear about it in Africa, we hear about it in the U S and then the stories arise and everybody gets excited. How can we scale this? How can we replicate this? How, because this is actually what we want our kids to learn because then they’ll be ready for any kind of problem or workforce of the future. And is AI going to be there to personalize education and make it more creative and more engaging? Is that the hope or is it just going to replicate more of the same? Right.

[00:22:38] Matt Greenfield: Well first of all, I don’t want to see a world in which people from low income families are taught by machines, while people from higher income families continue to be taught by humans and tutored by humans. I think there’s something missing with generative AI, and I would be interested in responses from your listeners on this point. But generative AI, which is what everyone is focused on in education right now, is not very attentive to the person asking the questions. It’s so busy looking out over the universe of things that have been previously created and trying to find the median or normative answer that it forgets very rapidly the questions you have asked in the past and it certainly doesn’t have the uncanny knowledge of you that say TikTok or YouTube do, right? Those algorithms, that species of AI is demonically perceptive about you. In a way it’s probing for your weaknesses. What will continue to keep you scrolling? And what is it that will cause you to lose interest? That may be, you know, lust, fear, paranoia, curiosity. It will understand multiple things about you. Right now, generative AI does not have that kind of deep intelligence about the person delivering the prompts or asking the questions. And so that is one reason why it’s not going to be anything like a good human tutor anytime soon, I think.

It’s possible that I’m wrong, the field is evolving so quickly. But it’s very clear that we have an opportunity, an excuse, to change everything about K12 education and university education. There are things that are no longer all that easy to justify that we’ve been doing for a century or so. And also there are things that education used to centre on that have somehow weirdly been lost. So the core of humanities education for two millennia was debate. And now the only people who really mastered debate skills are those who joined the debate team, which is weird when you think about it. I mean, think about how important it is to be able to create an argument or to stress test someone else’s argument. So we need to do some rethinking about what the goals of education are and AI at least provides us an excuse to do that.

[00:25:20] Debbie Goodman: I agree that there is a ton of infrastructural change that is required. I think the deep thinkers about the industry like you and, others have the big, existential questions top of mind. What we see, and maybe the, the cynics. Maybe I’m one of those who, who look at it and go, but hold on a second, things change so slowly and we know that it’s all about where the buck stops and it’s a capitalist market. And yes, there’s social impact thrown in, but it’s a, almost a little bit on the side. But what really counts is where are we going to get profit margins and productivity and how are we going to churn these students out to feed this multi trillion-dollar education industry that, that currently exists. You know, change and rethinking and rebuilding from the ground up, it feels like an amazing opportunity. But there’s also the economic, the unit costs of what this is going to actually take and I do hope that with the incorporation of AI and rethinking about how this can help to, to really change things fundamentally that there could be different, outcomes. For founders, it feels like if they’re not incorporating some kind of AI technology in their idea in their product, they’re dead in the water. And so if we just go back to the question around what are the roadblocks? What are the obstacles? And why do some fail? It feels like There are so many challenges.

I mean, you just trotted them out. They were just, you know, aside from the product market fit, not being able to get close enough to their customer, the founders are in charge of that, they’re in charge of having good tech or bad tech. But the rest, the rest, the macroeconomic factors, the advances of AI, the funding cliff, the economics of this all, they’re not in charge of a lot of that. And so if we have to look ahead, let’s play this out the next 9 to 12 months. What are you feeling hopeful about and what could founders feel excited or at least feel like they have got agency over as they move into this next phase of either their funding or their product market fit.We need a little bit of your crystal ball here, Matt, to shine some light for founders who are struggling.

[00:27:46] Matt Greenfield: Well, I have a shocking number of companies in my portfolio right now that are really thriving.

[00:27:55] Debbie Goodman: Okay. How come?

[00:27:56] Matt Greenfield: North of 10 million in revenue growing quite rapidly and profitable at the same time. Well, it’s partly because they’ve done some really strong listening over the years and they understand whom they are serving.

It’s partly because they set out to solve a problem that was not being well solved by anyone, maybe not even addressed at all by anyone. I mean, the problem with a lot of AI startups is that they’re operating in this space of you know, obvious extensions of the state of the art, the zone of development, as some call it. And 70 companies doing the same thing. AI career advisor, right? That’s an obvious one. And that’s not a good recipe for making money. Sequoia does seem to have the ability to wade into a field with 50 or 100 competitors and find the one telecommunications equipment company that is Cisco or the one personal computer company that is Apple. But most of us don’t have that ability.

[00:29:03] Debbie Goodman: Yeah.

[00:29:05] Matt Greenfield: So addressing a company that is solving a hitherto unsolved problem is an excellent recipe for improved returns. It’s also a question of the motivations of the CEO. So people who set out to solve a particular problem, rather than saying, I want to start a company, what will I do? Are less likely to give up. They’re less likely to take advantage of their colleagues or their funders or their customers. They’re less likely to do something criminal.

[00:29:38] Debbie Goodman: Okay. It’s a good start.

[00:29:39] Matt Greenfield: Not as fun as one might like among venture backed company CEOs. They also have an edge in recruiting and the ability to first rate talent is ultimately a major determinant of success for venture backed startups. And if you have two companies that are otherwise financially equivalent, and one has a compelling social mission and the other one does not, where do you think the Gen Z ers or the millennials are going to go?

[00:30:08] Debbie Goodman: Oh, 100%. I’ve got the data to show that because we’ve mapped that out. We can see when we are doing executive search projects, either for senior and middle level people, actually the opportunities that have the same money same benefits, but it’s got a big problem that it’s solving or has a significant social impact. And it’s not just Gen Z actually. It’s people at all levels and people in, in big corporations who are just tired of the rat race and tired of doing work that doesn’t feels like it’s not actually adding any value who really are desperate to feel like their life has some purpose and meaning and really want to work for founders and companies that are making an impact in the world. So yeah, when it comes to that, that is hands down, we, we’ve definitely got enough data to show that that makes a real difference with being able to hire great people.

[00:31:05] Matt Greenfield: Yes, people of every age. I think that as they get older people tend to become more, more other oriented. They look beyond the circumference of their own family and friend group and they look into the future beyond their own lifespan.

[00:31:20] Debbie Goodman: If they have got their basic needs met, absolutely, then the opportunity, then, you know, they’re wanting to get up, they’re wanting to move up Maslow’s hierarchy of needs and get into the, the part of the pyramid where they can make an impact and have some level of self-determination and self-actualization. So, yeah, I think we’re going to have to end on that because it’s great to hear that, you know, I hear a lot of the a lot of the founders who are having a hard time. I hear at the moment, not quite as many who are saying, wow, we are really thriving, but it is great to hear from your perspective that within your portfolio, there are many of those and it’s partly your selection, but partly the criteria that you, that you’ve mentioned.

Founders that that listen carefully to their customers. They’re solving a problem that is not being solved likely in communities that are underserved to start off with. And so there’s less competition there perhaps. And then having founders and CEOs with the right motivation, both for that serves their, serves all the stakeholders, really, including being able to hire amazing talent.

So, those sound like the basics. But they ultimately end up being the North star of organizations that thrive and profit even in tough markets. So Matt, I would love to stay on longer, but we got to go. Thank you so much for being here. I really appreciate it.

[00:32:47] Matt Greenfield: Thank you for having me on.

[00:32:49] Debbie Goodman: Bye now.