Forging the Future: EdTech, Investment, and Education Equality with Ash Kaluarachchi (Part One)

Forbes Books presents the Startup Science Podcast with Gregory Shepard, brought to you by startupscience.io. Greg is an entrepreneur who has built and sold 12 businesses. He's a recipient of 4 private equity awards and is a featured TEDx speaker and Forbes author. Here's Gregory Shepard.

My guest is Ash Gulati, the CEO of StartEd and the producer of EdTech Week. As a leader in the edtech space, he has overseen multiple successful startup accelerators. Ash invests in and supports innovation companies solving problems across the education spectrum. Ash, it's a real pleasure to have you on the show. Thank you for joining.

Greg, I assure you it is my pleasure and privilege. So good to see you.

Very kind of you to say that. So let's dive into the first question here. What inspired you to focus on the intersection of education technology That is a long story that has a short reason. Okay.

It was my mom. No kidding.

Your mom?

Yeah. I grew up inside a school. My mom ran a school for hundreds of Sri Lankan students out of our home for 18 years. That was my life. So, kids would actually come to my house to learn. And I thought that was normal. That really was what I thought was the best thing one could do. Education is really the— or lack thereof is really the root cause of most evils. And I saw that happen in person.

You know, I couldn't agree more. My parents were teachers. My aunts and uncles are teachers. And my family pretty much only respects you if you're a teacher.

I'm from the subcontinent. So you also get a little bit of a pass with being a doctor or engineer, but yes, teacher, Yeah.

And I mean, you know, people forget all the time that the doctors, the lawyers, the engineers, the entrepreneurs, all these people were taught by teachers. You know, there should be a fundamental amount of respect for teachers. I want to talk a little bit about Startant. So can you share the pivotal moment that led to the creation of Startant?

With most things that I think have some legs, which I think 10 years in, I think we do, it filled a need. It was pretty organic how we were born. I had the luck and also the privilege of being part of a great company called Techstars when the company was very young. So, I was a single-digit hire and I ran there. Education investments and their program back in the day still is one of Texas's most successful, financially successful programs. But I think its effects over the last 10, 15 years in ecosystem have been even more profound because the growth of education companies tends to be a bit slower, right? They're a little slow to grow, but when they do, their staying power is pretty immense and they tend to be great financial and social outcomes. This, the nature of how an education company grows and the way that these organizations need to navigate the regulatory environment, they need to navigate that the user is often not the customer, just means that if you're in it, you're not in it just to make money. You're in it, sure, to make a little bit of money. One of my most favorite sayings is, The best way to make a small fortune in education is to start with the big one, right? But, the large fortune comes from the impact that you make and the lives that you change. And, whether you're a classroom educator in the Midwest spending that extra hour with a student who's bad at calculus at the moment, or whether it's supporting millions of learners through some of the companies we've invested in. It's all really the same at the individual level. You're just changing lives.

I agree. I really connect with you on that. Coming from the background that I came from, it's— I mean, we lived in tents for a while. We were foster and adopted. It was rough, right? And I have to say that I think that helping other people Help the world that we all share this little thing. A lot of people forget we all share this little world together is the most beautiful thing anybody can do. And I think the best way to do it is through entrepreneurship. And so I honor what you're doing. I think that you deserve an incredible amount of respect and appreciation. So how has the edtech landscape evolved since you entered the field? Like you just started to get into it and said things changed, right? So what's changed? And, you know, in that, were there any new opportunities that came up, any old opportunities that went away? What do you see there?

Yeah, so it's been an interesting story over the last 20 years, right? And I've had the privilege of seeing the tech ecosystem grow, and then in the context of that, seeing the edtech ecosystem grow. So the story has 2 facets to it. Tech became more and more accessible in the last 20 years. It has allowed everyone from the founder who has great experience and access to resources to a student from anywhere in the world to create a solution that if they see a problem that they really want to go after. Education has had that same evolution and accordingly has received a certain amount of investment. So that number steadily ticked up from the early 2010s to just a couple of years ago and then crashed. So I see the cycle that we saw in tech a couple of times occur at least once in education technology. That's not to say it's a good or a bad thing. I think cycles occur and people become enamored with this particular area for their own reasons, but also because the world tells them it's about to become bigger. And then, when it doesn't meet expectations, it all falls down. So, on that second step in education, we're building back up, but the needle's pointing north. At the moment. To be more specific and answer your question about what's changed, how we learn and work has changed. I mean, obviously, I'm going to mention the obvious gorilla in the room, which is the last 2 or 3 years when people realized you could learn and work from most places and technology was the great enabler. That created a lot of access for people. It created a lot of affordability. People were able to achieve things that they didn't think they could. Learn the violin by watching someone do that online on your laptop, no one would've taken that seriously just a year ago. But now people seriously do. But at the same time, it's become far more complex, right? We've had 2 shocks to the ecosystem, not just the pandemic, but also AI, tell us that technology is a great thing, but it needs to be pointed in the right directions and thought so and done so with some understanding of how things work in the space, because it is a little bit different than the other industries.

So what are the most pressing challenges you see in education today and how can technology address them? Because you brought up AI and it made me think about that question, you know, like how— and let's just add AI in there, right? It's one of the enablers. So how do you see AI and the education system changing? What are the challenges and what do you think we can do to help those challenges. I want to add one little note in there. You know, University World News did a report and they found that a third of students that were going after advanced degrees are leaving advanced degrees and going into entrepreneurship. So it shows that education system needs to be fixed, right? That there's a problem there. Some of it has to do obviously with the cost, But also the fact that, you know, it's like in the, in the report, it's like something like 87% of the people that get MBAs never use them. And so, you know, they've— their parents paid $250,000 for them to go to school and then they don't use the degree. So I just wanted to add that in there. I know it's a big question. There's a lot of pieces in there, but you're so genius, I figured I'd just load you up with stuff.

Thank you for the question. Maybe I'll reference back my mom for a second here. When she was planning for my education and influenced me in making the decisions I did, her decisions were relatively simple to those that we have as parents today. The world was probably going to be the same in 10 to 20 years when her son entered the workforce, right? So I'm this rambunctious 20-year-old entering the space and starting a job in education and business research. It was one of the realistic options. It may not have been what she really wanted. She wanted me to become an engineer, but I chose differently. I wanted to explore and get into the business side of things. But that was a choice I made. The options were relatively recognizable. The options that our children will have to enter into the workforce 10, 20 years from now are gonna be unrecognizable to us. And that problem is also felt by recruiters, hiring managers, people who are accepting admissions into universities. Goodness, people who are accepting admissions into K-12. That unsureness in what the world looks and will look and feel like because of the rapid changing of technology and how the world's working, is the biggest factor to us not being able to predict clearly what problems we need to solve as parents and recruiters and admissions counselors, right? So, the people who are the stage gates don't know who to pick or where to point us. That's a big problem. Now, you asked me about AI, and the reason I went into explaining about how things are moving fast is not because AI is the thing. AI is an example of the rapid pace of technology evolution. It's going to do great things. Right now, it does amazing things for productivity. It does amazing things for people's ability to create content. It's not as good as what it will get. I want to reference Amara's Law, right? I mean, the law states that if we expect something to happen, it's probably going to take longer to actually occur, but the impact when it does occur will be much more significant than what we expect. And that's what's happening with technology in general and with AI. So, I think I would counsel patience and also the idea that your old-held beliefs about where you wanted to point your children and the people you hired and recruited is probably going to be changing quickly and rapidly.

It reminds me, you know, in the '80s, if somebody said a social media manager, you know, or a paid search manager, you wouldn't even have any idea what they're talking about, even the internet. Oh yeah, you're gonna have an iPhone and it does all this stuff. People think you were absolutely out of your mind. You know, it's crazy. So let me ask you this. Can you walk us through the process of how StartEd identifies and nurtures promising, you know, edtech startups? I want to dig into your organization a little bit. I mean, I think it's just so cool, and I want to like just give you an opportunity to talk to the audience about it.

Thank you. And here's the theory of change, right? So, I grew up professionally in accelerator world. So, I was amazed by this concept. It seemed so simple and so effective. I still believe it does. It serves a purpose. An organization that teaches and funds and provides resources for Smart individuals to create what they want and connecting them with the investors and educators, entrepreneurs, whoever it is that they need, and providing mentorship and guidance on their journey. Amazing concept. I just love the ethos behind this space. The concept was created about 20 years ago, and when it was, It unfortunately recreated some of the same mistakes we made when we actually created schools in the first place. We created schools to solve a problem for creating factory workers, right? People who could solve a particular problem or a widget or a spot in the process. And so we batch processed individuals through groups of 30 to 50 through an educational experience. Through life. We recreated the same problem when we invented the accelerator concept. We are batch processing startups at certain stages in large groups, still receiving the funding and mentorship they need, but still doing that in a batch manner. I think that is what we need to break as a tech ecosystem and an innovator-supported ecosystem. And StartEd's been trying to do that and doing that, I think, for about 10 years. The way we do that is by taking into account something that is very human, and that is that we all learn and move forward and accelerate ourselves differently. So at its very basic concept, StartEd recognizes that each individual startup, as well as the founders and individuals who operate it, All start out at different levels relative to each other and also to other organizations. And in performing an assessment of their ability to execute, grow, their mindsets gives us a good profile of what gaps they have. Why solve all the problems for them as a batch when I can go in and say, hey, this particular company and this particular individual just needs this connection, this set of knowledge in order for the rest of the company to be successful, right? So it allows us to be far more targeted and efficacious and also saves people time rather than putting them through a 3-month process of acceleration. We go in and provide them with a single conversation, an hour of guidance and mentorship that can move the dial much quicker than that 3 months.

Yeah, I agree with you actually on your thesis there. I think it's genius. As we talked about before, it's like very unusual. I mean, you know, you see these, usually they're doing these cohorts and they slam together, you know, entrepreneurs that are like never done anything before and second-time entrepreneurs all in the same group and they're all at different levels and they spend all their time trying to bring Up the lower ones, which makes the ones that have experience not grow. Right. It's, it's weird, right? It doesn't really—

Which, by the way, if you ever taught in a classroom anywhere in the US, is what an educator does day in and day out.

Yeah. I mean, I was in special ed because I have autism and dyslexia, and I was in special ed. I grew up that way, and they put me with the lowest people, even though I'm actually tested as a savant. So it's like, you know what I mean? You're sitting there going, why am I with these people? You know, the teacher teaches to the lowest common denominator, you know? So how do you balance the need of profitability with your social impact goals? I mean, it seems like a rough— I know for me, 'cause I'm really into this social impact stuff like you are, social and environmental impact? And it's a tough— that's a tough question. Maybe you have a better answer than I've thought of.

Well, I don't have the answer to that yet, but here's where I think the answers lie. First of all, I think profitability and doing good aren't opposite ends of a balancing scale, right? I think they're actually more aligned than people imagine. For example, if an education solution gets sold into a school because of great positioning and market research and the sales process, ideally it only gets renewed if it actually works, right? So there's a remainder of that client-provider relationship that is rooted in, is there efficacy in this particular solution? And if it works, then that company gets to make more money and provide their solution for more and more organizations and individuals. So, there is a relationship there between profitability and doing good, which the fulcrum is actually efficacy. The second is problem space of education. If you layer it over the incentives that all capital has, right? Think of the layer of industry and the problems around it from K-12 to higher ed to workforce. Then you layer that over with all different kinds of capital, venture capital, angel, diluted funding, non-diluted funding, grants, loans, all of this, right? Education has always been at this balancing point between some of those problems being social impact problems. So only grants and foundations actually really care about specific learners and problem spaces. And then, oh, only for-profit motivation cares about this set of problems because the market's matured. And so it's coalesced into something that people can fund. That balance, that war between those 2 areas keeps going back and forth based on people's moods and how the industry is doing. And I think that recognizing where you are in that relationship of problem space and the capital to fund it is the biggest tripping point that founders have. If you love a particular problem, go find the people and the funding that care about the same problem. Don't conflate that with how you think the company needs to be built.

That actually was a question I was going to ask you is what advice would you give to a founder who's just starting out and what are the most common mistakes founders make in early stage? I consider early stage pre-A round.

Yeah, same here.

Yeah. So what, like, what would you, you know, what do you think the most common mistakes are that you've seen in your career? And then what would be your advice for those early-stage founders?

The most common mistake is mistaking product-market fit. I think that exists in education and elsewhere. And a lot of founders are so passionate about a particular problem that They skip some of the process steps involved in recognizing that there's actual market for the thing that they're doing. And product-market fit is relatively elusive, right? It's actually, I like to call it this invisible man that you only get to see once you remove the background, right? So it's a process of elimination in reaching product-market fit by running experiments and then The market reveals itself because everything else that you've tested comes out as not working.

Oh my God, that sounds so— I always think about like, I explained to an entrepreneur that product-market fit is like standing inside of a totally dark room and all you have is a flashlight and all you see is whatever the flashlight points at and you're just going around trying to, you know, and then all of a sudden you hit something and you're like, oh my God, I found product-market fit, you know?

Yeah, there you go. I mean, this, the way we are talking about PMF right now is because we haven't actually built that into a science yet. Your platform, by the way, which I've had the pleasure of taking a look at, goes a very long way in putting the scientific process around achieving product-market fit. So, such a big fan of the ecosystem thinking that you have there, by the way, Greg. But the biggest mistakes founders make are in misrecognizing product-market fit. And then also picking the wrong people to be behind and beside them. We've been told stories about who we think we need to get married to, to work alongside, to be funded by, to be friends with. And I think we misunderstand who we need to achieve a big problem and a solution combination. That we get misguided. And I think a lot of founders, when they actually see the people that they need and that clicks, it's a wonderful thing because everybody's on the same page. And regardless of how well the company's doing in that given moment in time, they're all pointing in the right direction.

Yeah. I just love talking to you. So I want to go back to this AI thing. I just, when I was talking to you and I was thinking, I was like, You know what, I want to go back to this a little bit. When you look at the future of work, because you brought this up, like, and it's evolving, right? So the future of work is evolving. How would the edtech startups prepare for these changes, or any startup for that matter, prepare for these changes when you can't see what they are? To your point earlier, like, what is— are there any, are there any things that you can think of That you could listen, go to a founder and say, look, keep your eye on this one or something like that?

It's not a fixed target is my quick response. It's not that there's this one capability or this point of leverage or this asset that the technology will allow you to do. It's actually having the systems that are flexible enough at your end To recognize and incorporate those abilities and resources as they come available. At the moment, AI is a great tool for productivity and content creation and customer management. And there are processes it enhances. It's a drop in the bucket of what's potentially possible. But the good companies, the ones that are taking advantage of the majority of those productivity gains, are the ones that are remaining open to integrating those capabilities into their existing processes, rather than considering those processes fixed and saying, hey, I'm going to take a snapshot of what's possible today and feed that into my system, and my system's going to recognize how to integrate that, versus remaining open to the potential changes in the future.

Yeah, I think about it like software, you know, instead of— you know, I tell people with software, when it comes to architecture, not the engineering component, but the architecture component, I always think of it like, you know, let's say you're building a house and you're like, well, I may want a window here, but I don't want a window right now. Frame it so that there's a place for the window.

Have a place for the window.

Yeah, because you never know. You know, you have to be so liquid, right? You have to have the ability to have like a core system and then everything on the outside needs to flex. Yes. Otherwise you just can't keep up. And if you think about like the role of AI and machine learning, you know, all these large language models and everything in education over the next decade, do you see the teachers and the educators starting to get affected by the, by the assistance that the AI will provide? Or do you think it's more going to be like a, you know, a tutor, like having your own tutor?

That's almost a philosophical question because both are relative, both are possible and effective. I've seen research on both sides showing that AI tutors are being far more effective at solving particular problems and being available for students than human educator was. I'm also seeing research that shows AI tutors removing a student's trust of actually going to a human being with particular problems, which has a negative effect, right? But with all things, there's a pro and a con. I think it's both, right? We need to actually solve both problems. We need a solution for individual learners. We need a better solution for allowing educators to be more effective with their time and for goodness sake, getting them a little bit more help.

Yeah.

Who wins in the end? I think the winner of that argument is the one who supports either party most efficaciously and then updates how they support based on the evolving needs.

Aha. Interesting. I was talking to a startup last week and they are essentially building a an AI tool that coaches students. So the student can take the curriculum, put it in there, and it learns how the kid learns. And then it starts teaching them in the way they learn. So it uses watch-listen-read experience as a way to allow them to shape the images in their brain and retain the information. It is fascinating. I was just— that's why I asked you that question. I was like, that would change things. You know, if a student could come in and take a class and the AI is like learning how they learn, and so every student is getting their own education based on how that student learns.

And by the way, we mistake the educator's job as teaching students to the content, but what educators are actually doing is are being social service workers. They're being pseudo-parents. They're Being coaches, they're being educators. And then all of that gets kind of bottled into one role, and then we call that an educator in the US. The AI does one of those things well right now, right? It can be better. It can do more of those things. For example, there is research that shows that suicidal ideation for students that are using AI tutors is actually less, significantly less than for those who without any support. Amazing thing. Does it prevent that student from harming themselves eventually? Maybe, maybe not. We want to make sure that humans are involved in that process because at some point the technology is necessary but not sufficient.

Absolutely. I completely agree. All right, Ash, I want to dive into this topic of investors next, but we have to pause here. In the second part of our conversation, Ash Kularachi, CEO of StartEd, We'll share some inspiring advice for edtech entrepreneurs.

Every industry has a time and a place to grow. I honestly think that the US and in this next decade is probably the place we're gonna see the most innovation in education from a technology perspective. I also think that even if you aren't based in the US, and you're trying to solve problems elsewhere, learning from what has been successful in the US from successful entrepreneurs, and then importing that knowledge and that innovation to wherever you are in the world to solve the problem that your market and that timing requires is probably gonna be the smartest thing you do.

The Startup Science Podcast with Gregory Shepard is brought to you by startupscience.org. Founders can log on to startupscience.io and use code Forbes to get free access. To connect and find out more about Greg, go to gregoryshepard.com. The Startup Science Podcast is a production of Forbes Books.