nicheVC

In 1990, as part of my final year in extended undergraduate studies, I had the good fortune of attending the University of Cambridge’s Gonville & Caius College for a Summer Term. I was fully immersed in two courses – 19th C British Novel & Shakespeare in Performance – completely taught by Cambridge professors and was in residence at Caius (pronounced Keys).  It was a fabulous, life altering experience.  With a nearly 700 year history, I have always been struck by the prescient nature of the College’s founders, if not Medieval architects – how there is a correlation to the venture business, if not many other iterative pathways in life.

Copyright © 2001-2009 Gonville & Caius College, all rights reserved.

As a first year undergraduate student at Caius, you physically and metaphorically enter the College through the Gate of Humility.  Assuming all goes well, you then pass on through the Gate of Virtue, and, once the degree has been attained, exit through the Gate of Honour.

This earned, milestone-driven sequence is analogous to that of the venture investor, i.e. at point of first investment, through active service on a board, and, ultimately, by facilitating a successful exit and distributing capital to limited partners.

Unfortunately, over the last ten years, VCs have forgotten or suppressed this basic but critically important sequence.  A majority of VCs have forgotten about the humble, active service to the entrepreneur and the portfolio company.  We have been less than virtuous by raising too much money per investment vehicle, ending up on too many boards and creating dilution of service across the same.  And, we certainly have not honored our limited partners who have tied up precious capital in funds over multiple years, only to find that distributions have been delayed yet again, and with meek return on invested capital.

It is time for smaller funds, smaller teams, back-to-basics venture investing with a sense of humility, virtue – and, ultimately, honor.

The rationale for naming this blog nicheVC is best summed up with a quick survey of my career.  As several of my mentors have stated, you are what you do – as a VC, you are what you own. Over the last twenty-five years, I have passionately, persistently endeavored to learn from, serve, invest in and derive intellectual, social and financial returns from education. Albeit a broad one, education happens to be my niche.

As a VC, my thesis is that you ought to have something, anything that you know a great deal about, where you have a referenceable track record, a sector – or industry – or product typology where you have a pattern of success.  In the mid-1980s, I chose education as my niche, which today, in the U.S., represents a trillion dollar industry screaming for innovation. I look for entrepreneurs who are solving huge problems in the K-12 and post-secondary sectors, know respective markets well, and have the necessary fire-in-the-belly to survive the bootstrapping phase and derive profitable unit or customer level economics. In turn, education entrepreneurs seem to want an investor who has backed industry predecessors and who knows the education markets, end users, business models that have worked (and NOT worked) and the path to liquidity.

I have spent two and a half decades working with and looking for pedagogues, administrators, entrepreneurs, investors and even parents who have helped and continue to help move the needle in education. I have made over 15 education investments, in great, now public companies such as American Public Education, Blackboard and Capella Education, in growth companies such as Overture Technologies, Questar Assessment andSpectrum K12, and in innovative emerging companies such as Flat World Knowledge, Moodlerooms and Starfish Retention Solutions. My blended returns in education are better than 3X cash-on-cash. K-12 has proven more challenging than post-secondary, but I see that changing.

Though there are a plethora of VCs who have been singed or worse by education investing and those who have been fearful to tread thereon, I remain glass half full and believe that if enough smart, patient people get out of bed every day with the intent of improving K-20 education, the world will be a better place and many will be rewarded along the way. While I exist in a diversified investment platform within my firm, my focus is on the education industry.

One thing is clear, as a venture investor, perhaps as in any profession, you should do what you know, what you love, what you think about when you go to bed and what gets you up early in the morning. You become expert in a field over time, develop a track record and a network to leverage situationally. For me, this niche is education.

So, what’s in a niche? EVERYTHING.

I am Frank Bonsal III, a tech VC with a focus on education and capital efficient, milestone-driven investing, a Partner with Mid-Atlantic-based New Markets Venture Partners, a husband and father of three, a son of a highly regarded VC and Co-Founder of New Enterprise Associates (NEA).  I have spent the last 25 years engaged in all facets of education, the last decade discerning how private investment might enhance the same.

My success and happiness stem from Love, Luck, and Laughter. I love what I do for a living, am lucky to be surrounded by great people and opportunities, and try to find laughter in the least likely places.  My goal in life, if not this blog, is to share some of my passions and bring innovation and efficacy to education and learning, broadly wrought.

Why launch a blog in mid-2009?  You might posit . . .

• Who cares!
• Aren’t you a bit late to the digital party?
• Aren’t there enough VCs out there asking a variety of disparate questions and providing just as many subjective solutions to the same?
• Shouldn’t Limited Partners of blogging VCs be concerned that a VC’s time is better spent finding the best deals/companies and managing existing portfolio companies?

I provide little in the way of answers in this post. I only promise that I will continue to ask thought-provoking questions, and attempt to provide objective solutions and opinions to the same. It is my sincerest hope that you find some kernel of relevance in this post and those hereafter.

Thanks for reading.  Please return often.  Please comment liberally. I will endeavor to add content herein regularly and, as Sergeant Esterhaus of Hill Street Blues encouraged in the early ’80s, “Let’s Be Careful out There.”