London-based VC firm Emerge has raised £56m for its second fund to invest in 25 to 27 startups working on learning and the future of work.
The fund was oversubscribed, general partner Nic Newman tells Sifted (it had targeted £50m), and tops the 10-year-old firm’s first fund of £25m in 2019. Newman says about 70-80% of its existing LPs reupped for the second fund. LPs include new investors KfW Capital, Laerdal Invest, Jacobs Foundation and Southern New Hampshire University. The fund was raised between the end of 2022 and closed in July this year.
Emerge will invest pre-seed and seed cheques of between £500k-2m, taking a 15% stake in startups and reserving about 25% of the fund for follow-on investments.
‘Almost deeptech’ founders
AI has increasingly been working its way into education, with startups building everything from language learning apps to AI copilot helpers for workers. And though it isn’t a novel technology in the edtech space (companies like language learning app Duolingo have been using AI for many years), Newman sees a shift in the new set of startups: 10 years ago, founders were “probably an ex-teacher or an ex-head of [learning and development] with an ok technical cofounder,” Newman tells Sifted. “Now, with the role of AI and language learning models, you’ve got a completely different type of founder who’s really tech-savvy, almost deeptech. They’re machine learning graduates, they’re [physicists], they’re mathematicians, they have a completely different understanding of building products, building for scalability, building rapidly.”
Newman says Emerge has seen edtech and future of work companies with “growth rates that we’ve never seen” before — with some startups going from zero to £5m in annual recurring revenue in a year.
Emerge is eyeing startups in areas like talent assessment and selection, career navigation, language learning, educator tools and co-pilots, talent sourcing, self improvement and workforce development.
It employs a team of six, as well as 110 venture partners— to help source deals, do due diligence on companies and support startups. The venture partners include co-founders and CEOs of edtechs Udemy, Coursera, Kahoot and Springboard, as well chief learning officers and chief human resources officers from IBM and McDonalds, he says. Many of the venture partners are also invested as LPs in Emerge’s new fund, and they write angel cheques into investments they like, says Newman.
Some 70% of the fund is invested in Europe and the UK (30% is invested globally, with a particular interest in Latin America, Africa and South Africa), Newman says. “Within Europe there are three centres for the future of work and learning innovation: number one is London, number two is Berlin and number three is Amsterdam,” as well as the Nordics, he says. But “we’re most excited about the French and German ecosystem.”
The new fund has already written a cheque into Colossyan, an AI video platform for workplace learning that lets users create videos from text with AI avatars.
‘Edtech’ is out, ‘human potential’ is in
Last year, Newman says the team at Emerge was analysing about 700 companies using AI in education and future of work; this year, he says they’ve identified about 20k.
That massive jump is due to a couple of big trends, Newman says: “There’s a whole host of founders who would have been doing fintech or proptech two or three years ago, because they saw the huge upside there, and are now jumping into the category of future of work and learning, because they can see it becoming more deeptech, they can see much more scalability,” he says.
“People have also realised that, of all the categories out there, [educational publisher companies like the] Pearson’s, the McGraw Hill’s, the incumbent providers, are at risk of significant disruption through better innovation, and many of those larger companies are struggling to really move fast enough to use AI properly. I think entrepreneurs sense that.”
Emerge’s portfolio includes London-based AI recruitment tool Popp AI, German play-based children’s learning platform Edurino and British higher education recruitment startup Unibuddy.
Areas it won’t be investing, says Newman: K-12 B2B companies and AI copilot “wrappers” — those companies building around an existing AI model without much differentiation.
As for the future of AI in education and the workforce: It’ll be all about synchronicity, says Newman — learning and working at the same time. He takes workspace productivity app Notion as an example: “If Notion was produced today, it would be 50% education and 50% productivity. By that, what I mean is, as you were producing anything in Notion, it would be saying, ‘Oh, I see that you are producing a marketing plan […] I see you’re doing, you know, XYZ. Can I suggest this sort of information? Can I suggest these improvements?’”
Previously, “it was always a separate activity to what you did,” where people would then go to learn at colleges or during their lunch breaks. “Learning in the flow of work has been a thing for some time, but people haven’t really understood what that meant, because it was more like, ‘Oh, I’ll do 10 minutes a day in a flow of work,’ but that completely changes now with AI.”
“We’re heading, I guess, for a category which is less ‘edtech’ or future of work, and probably more human potential.”
Read the orginal article: https://sifted.eu/articles/emerge-vc-raise-edtech-news/
