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Early stage venture fund investing behind massive trends transforming how people learn, earn, and own.

Avalanche VC: Q1 2023 Review

ASU-GSV, Our Investment Criteria, Portfolio News, Reading & Writing

May 4, 2023

Dear Friends of Avalanche,

With the SVB crisis and the breakneck speed of developments in AI, this quarter has had weeks that have felt like months. Nevertheless, we remain optimistic and upbeat during these dynamic times.

In times of economic uncertainty and constraint, people invest in their learning, companies bolster earnings through productivity growth, and opportunities for ownership increase as assets come on the market at potentially lower entry-costs.

While the volume of deals and deployed capital in venture capital is down overall, the pullback has been most acute in later-stage markets.

The early-stage segment where we play is still active but deals are taking more time to complete.

As economic conditions tighten, it’s never been more important to be equipped with the tools we’ll need to build the future.

We are excited to continue building and investing with you.

What we look for in founders and teams:

Pre-seeds are our sweet spot. Anything over $10M post would be an exception.
We invest $300K for ideally 3-6% ownership.
We are happy to lead the pre-seed round if we have conviction.
We look for avalanches that fit within our learn, earn, and own themes
If it is a no, we like to get there fast. Sometimes it’s a “not yet” or “not now.” This can happen with strong teams who are still going through ‘the idea maze’ of what they are looking to build.
We invest in stellar founders with a clear path to a massive market and additional capital (more on that below)

All pre-seed deals are founder bets, and founders need to be stellar.

We look for founders who are smart, thoughtful, and structured. Founders who take every element of their work seriously. We favor founders whose prior work experience demonstrates excellence and high performance. Some specifics we look for include: aptitude for capital management, evidence of technical ability to build products, ability to sell and distribute, and an understanding of their distinctive edge.

We invest in founders and CEOs who view their companies as their ‘life’s work,’ and who’re solving a problem they care deeply about. Our founders are dedicated to driving outcomes for customers because they view their success and that of their customers as one and the same.. Naturally, this means they’ve identified an ideal customer profile and defined a clear value proposition.

We believe that founders are the captains of their ship. They bring to the table a clear path to massive TAM, cash flow breakeven and/or high confidence of access to capital. Our job is to do whatever it takes to help founders be successful post-investment. We support them by being responsive, good listeners, and strong connectors.

Thoughts from a great ASU-GSV - the largest EdTech conference in the world

Katelyn and Eric were at the ASU+GSV Summit in San Diego a few weeks back. Katelyn’s talk is now available to watch!

On the heels of the pandemic, parents are clamoring for greater ownership over their children’s K-12 voyage: more than 50% prefer to direct and tailor their child’s experiences and 80% believe learning can and should happen everywhere.

A few of our take aways form the summit:

AI in education was the topic of the day, and it was clear that it needs to be considered separately from a B2B (schools as customer) and a B2C (learner or parent as customer) paradigm.
- B2B companies will be incremental from where they start: B2B companies are expected to integrate AI in the form of avataristic tutors / coaches and differentiated activities built on top of existing curriculum. Gates has signaled a strong focus on reading and math for the next decade, which bears out in what we’re seeing among what founders are building.
- New B2C companies will build from first principles and have the potential for disruptive innovation: We anticipate education apps that compete with social media and games, as well as vertically-integrated “new schools” rethinking outcomes and jobs from first principles. Many will fail, but we might see a breakout success on the scale of Duolingo.
Corporate M&A is on the prowl. Newer big education companies have M&A teams staffed from alumni of mainstream venture and technology companies. Many are looking for features or point solutions to cross-sell with their existing platform.

News from AVC portfolio companies

Boundless Life welcomed its largest cohort of families ever in Sintra, Portugal. This is also the FIRST cohort with ALL 3 destinations (Portugal, Greece & Italy) fully booked!
Prem Kumar (CEO of Humanly (humanly.io) and Sarah J. Haggard (CEO of tribute) were named to Puget Sound Business Journal's 40 under 40 2023 class.
Our efficacious edutainment theme was covered in Forbes. Joshua Shapiro, CEO of Edgi Learning has a massive vision to replace tutoring with AI-power creator content. Edgi Learning has built a ChatGPT-like artificial intelligence platform called Edgibot that promises to “explain any concept faster than Google.”
Iowa adopts Education Savings Accounts and we are thrilled to see Odyssey powering the implementation of the program.
Lily has rebranded to Kepler Savings and embarked on a B2B Model as the most modern retirement savings product in the world. They offer payroll-deducted retirement benefits to frontline workforces for no extra fees and simple implementation.
Prisms of Reality and Odyssey were featured on the Insider Business’ annual list of startups to bet your career on.
Whalesync wants to simplify the process of syncing data between SaaS apps. Pre-seed announcement in TechCrunch.
Between had a major technical breakthrough and their APIs delivers the best hybrid meetings, events, and AR/MR gaming with echo-free audio and optimized microphone utilization.
The Social Institute celebrated their seven anniversary! Sign up to the weekly newsletter The Huddle with tens of thousands of other parents to get tips on the latest trends with teens and social media.
Upright announce its biggest college partner in the Mountain West Region - Front Range Community College. This partnership opens up opportunities for adult learners in the greater Denver metro area to lucrative coding careers. For a limited time, learners who enroll before June 30th can apply for a scholarship that covers 95% of the tuition costs.
EdTech Digest gave Pencil Spaces six recognitions of achievement. Pencil is on a mission to build The Ultimate Workspace for Education!
Level launched their comprehensive Financial OS that microbusinesses need to thrive. Their credit, savings, banking, early pay, and tax optimization products work seamlessly together and make the lives of their customers better.

AVC Online Thoughts

Obviously The Future is our blog where we publish analysis and insight on the massive trends we are excited about investing behind.

Return-on-Coaching for Venture-Backed Founders. Unleashing our secret weapon: a coach-in-residence.

Dalglish wrote two essays:

On Curiosity: Part One. Why we get stuck — and how curiosity can free us
On Curiosity: Part Two. Three provocations for greater coachability

What we’ve been reading:

Learn:

How Much Can Duolingo Teach Us? Outstanding profile in The New Yorker.
Key insights include how being in Pittsburgh shapes the company and how Duolingo follows some of the EdTech best practices, like rigorous R&D financed by NSF grants and building a product with a direct link between learning and earning potential.
How MrBeast Learns. In short: By doing. He is skeptical of extracted knowledge — knowledge that has been extracted from its context and turned into advice or frameworks or theory.
AI Tutors Will Be Held Back By Culture. We have been in endless discussions and pitches about AI tutors, Generative AI, and direct-to-consumer education. This piece nails the social preconditions for for technology to support learning Simply: culture design is the main bottleneck in education, now that tutoring has been commodified.

Earn:

Is Gig Work Changing the Labor Market? Key Lessons from Tax Data.
The Rise of the Silicon Valley Small Business: What you need to know about the next big startup archetype.

Own:

Millennial Homeowners Outnumber Renters for the First Time. As Michael Billings points out ‘If they overlaid the median home price in those cities, it tells the story.’

Venture Capital/Investing:

Meghan Reynolds on Twitter in her Heard from VC LPs This Week series.
Many LPs are awaiting inevitable markdowns.
Michael Seibel (YC Partner) Had a Great Tweet Thread on the importance of finding product-market fit and not rushing to scale until it is found. Recommend this lesson for everyone in startups and venture.
Doug Leone - Lessons from a Titian - Podcast on Colossus. Yes, it’s as good as everyone says. It makes a huge difference to listen to someone who shares wisdom from a 40-year career vs some of the young guns.

Thank you.

Please always be in touch.

As always,

Katelyn, Dalglish, Eric, & Arvind