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SaaS Ventures takes the investment road less traveled

Published September 18, 2020

Most venture capital firms are based in hubs like Silicon Valley, New York City and Boston. These firms nurture those ecosystems and they’ve done well, but SaaS Ventures decided to go a different route: it went to cities like Chicago, Green Bay, Wisconsin and Lincoln, Nebraska.

The firm looks for enterprise-focused entrepreneurs who are trying to solve a different set of problems than you might find in these other centers of capital, issues that require digital solutions but might fall outside a typical computer science graduate’s experience.

Saas Ventures looks at four main investment areas: trucking and logistics, manufacturing, e-commerce enablement for industries that have not typically gone online and cybersecurity, the latter being the most mainstream of the areas SaaS Ventures covers.

The company’s first fund, which launched in 2017, was worth $20 million, but SaaS Ventures launched a second fund of equal amount earlier this month. It tends to stick to small-dollar-amount investments, while partnering with larger firms when it contributes funds to a deal.

We talked to Collin Gutman, founder and managing partner at SaaS Ventures, to learn about his investment philosophy, and why he decided to take the road less traveled for his investment thesis.

A different investment approach

Gutman’s journey to find enterprise startups in out of the way places began in 2012 when he worked at an early enterprise startup accelerator called Acceleprise. “We were really the first ones who said enterprise tech companies are wired differently, and need a different set of early-stage resources,” Gutman told TechCrunch.

Through that experience, he decided to launch SaaS Ventures in 2017, with several key ideas underpinning the firm’s investment thesis: after his experience at Acceleprise, he decided to concentrate on the enterprise from a slightly different angle than most early-stage VC establishments.

Collin Gutman from SaaS Ventures

Collin Gutman, founder and managing partner at SaaS Ventures (Image Credits: SaaS Ventures)

The second part of his thesis was to concentrate on secondary markets, which meant looking beyond the popular startup ecosystem centers and investing in areas that didn’t typically get much attention. To date, SaaS Ventures has made investments in 23 states and Toronto, seeking startups that others might have overlooked.

“We have really phenomenal coverage in terms of not just geography, but in terms of what’s happening with the underlying businesses, as well as their customers,” Gutman said. He believes that broad second-tier market data gives his firm an upper hand when selecting startups to invest in. More on that later.

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Salesforce announces 12,000 new jobs in the next year just weeks after laying off 1,000

Published September 18, 2020

In a case of bizarre timing, Salesforce announced it was laying off 1,000 employees at the end of last month just a day after announcing a monster quarter with over $5 billion in revenue, putting the company on a $20 billion revenue run rate for the first time. The juxtaposition was hard to miss.

Earlier today, Salesforce CEO and co-founder Marc Benioff announced in a tweet that the company would be hiring 4,000 new employees in the next six months, and 12,000 in the next year. While it seems like a mixed message, it’s probably more about reallocating resources to areas where they are needed more.

Salesforce will add 4K jobs over the next 6 mos & 12K over the next year. Join our 54K employee strong Ohana defining the future of software. Salesforce is the worlds fastest growing Top 5 enterprise software company. jobs@salesforce.com @salesforcejobs https://t.co/ffzlmeHhCz

— Marc Benioff (@Benioff) September 18, 2020

While Salesforce wouldn’t comment further on the hirings, the company has obviously been doing well in spite of the pandemic, which has had an impact on customers. In the prior quarter, the company forecasted that it would have slower revenue growth due to giving some customers facing hard times with economic downturn time to pay their bills.

That’s why it was surprising when the CRM giant announced its earnings in August and that it had done so well in spite of all that. While the company was laying off those 1,000 people, it did indicate it would give those employees 60 days to find other positions in the company. With these new jobs, assuming they are positions the laid-off employees are qualified for, they could have a variety of positions from which to choose.

The company had 54,000 employees when it announced the layoffs, which accounted for 1.9% of the workforce. If it ends up adding the 12,000 news jobs in the next year, that would put the company at approximately 65,000 employees by this time next year.

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Are high churn rates depressing earnings for app developers?

Published September 18, 2020
Jacob Eiting
Contributor

Jacob Eiting is CEO of RevenueCat, a platform for managing cross-platform in-app purchases, products and subscribers and analyzing in-app-purchase data.

Ever since Apple opened up subscription monetization to more apps in 2016 — and enticed developers with an 85/15 split on revenue from customers that remain subscribed for more than a year — subscription monetization and retention has felt like the Holy Grail for app developers. So much so that Google quickly followed suit in what appeared to be an example of healthy competition for developers in the mobile OS duopoly.

But how does that split actually work out for most apps? Turns out, the 85/15 split — which Apple is keen to mention anytime developers complain about the App Store rev share — doesn’t have a meaningful impact for most developers. Because churn.

No matter how great an app is, subscribers are going to churn. Sometimes it’s because of a credit card expiring or some other billing issue. And sometimes it’s more of a pause, and the user comes back after a few months. But the majority of churn comes from subscribers who, for whatever reason, decide that the app just isn’t worth paying for anymore. If a subscriber churns before the one-year mark, the developer never sees that 85% split. And even if the user resubscribes, Apple and Google reset the clock if a subscription has lapsed for more than 60 days. Rather convenient… for Apple and Google.

Top mobile apps like Netflix and Spotify report churn rates in the low single digits, but they are the outliers. According to our data, the median churn rate for subscription apps is around 13% for monthly subscriptions and around 50% for annual. Monthly subscription churn is generally a bit higher in the first few months, then it tapers off. But an average churn of 13% leaves just 20% of subscribers crossing that magical 85/15 threshold.

In practice, what this means is that, for all the hype around the 85/15 split, very few developers are going to see a meaningful increase in revenue:

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Benchmark’s Peter Fenton: ’10 to 20 years of innovation just got pulled forward’

Published September 17, 2020

Earlier today at TechCrunch Disrupt, venture capitalist Peter Fenton joined us to talk about a variety of issues. Among them, we discussed how he’s putting his stamp on Benchmark now that, 15 years after joining the storied firm, he’s its most senior member.

Fenton said that he’s mostly focused on ensuring that the firm doesn’t change. It wants to remain small, with no more than six general partners at a time. It wants to keep investing funds that are half a billion dollars or less because its small team can only work closely with so many founders. He also made a point of noting that Benchmark’s partners still divide their investment profits equally, unlike at other, more hierarchical venture firms, where senior investors reap the biggest financial benefits.

We also talked about diversity because (hint hint) Benchmark — which is currently run by Fenton, Sarah Tavel, Eric Vishria and Chetan Puttagunta — is hiring one to two more general partners.

We talked about why Benchmark, a Series A investor in both Uber and WeWork, seemingly took so long to address cultural issues within both companies.

And we talked about the opportunities that has Benchmark, and Fenton specifically, most excited right now. Read on for more, or check out our full conversation below.

On whether Benchmark, which historically had all white male partners and now counts Fenton as its only white male partner, might hire a Black partner on his watch, given the dearth of Black investors in the industry (along with the changing demographics of the U.S.):

“That’s a personal issue for me, which is going to be measured in the outcomes, just like we have companies that take on initiatives that matter and then measure them and hold themselves accountable. I won’t feel good about our failure if we don’t continue to tilt towards diversity. It’s not enough that I’m the only white male partner. The industry is so systematically skewed in the wrong direction, and we’ve gotten so good at rationalizing how it ended up here, that I don’t think we can tolerate it anymore.”

Benchmark is looking to reinvent itself through “three interfaces,” he continued. “It’s who are we talking with and spending time with in terms of [who we might invest in] — that has to change; who are the people making investment decisions, [meaning] the partnership; and then what’s the composition of the companies we’ve invested in, meaning the executives and the boards.

“Before I’m done with the venture business, I want to be able to point to empirical outcomes . . .”

As for why Benchmark waited for the public to rally against its portfolio companies Uber and WeWork before taking action to address cultural issues (in Uber’s case, in reaction to former engineer Susan Fowler’s famous blog post and, in the case if WeWork, in reaction to its S-1 filing):

“I can’t give you a crisp answer because ultimately, what happens in the public eye isn’t the whole story of what was going on between Benchmark and those CEOs.” It’s “far more complicated, far more nuanced, far more engaged.”

Said Fenton: “What you start with in any partnership is this idea that we’re all flawed and providing what feels like unconditional support to a founder to nurture them and help them to understand in ways they might be able to from their direct reports where they are going to get in trouble, where they’re going to fall short, and then buttress them.

“I can say, having watched both [Benchmark investors] Bruce [Dunlevie] and Bill [Gurley] in those roles that they give their heart and soul to enable the full potential of those entrepreneurs, and in each case, it wasn’t enough.

“I don’t know what to say other than, I don’t envision another individual in that [board] role being able to do a better job because what they gave was everything, and those companies built enormous organizations, great success, delight and joy for customers, and they had, in each of their cases, pathologies in their culture. A number of companies that I’m involved with have pathologies in their culture. Every organization can build them. What motivated both Bill and Bruce was the constituencies that go beyond the CEO, the employees, the customers, and in the case of Uber, the drivers . . .

“You could say Susan Fowler was the reason it all happened; I can assure you that the work that was being done far preceded [the publication of her blog post]. Could we have done more, more quickly? You always look back and say, ‘Yeah.’ I think you learn as an organization. We’re not perfect.”

As for the trends that Fenton is watching most closely right now, he suggested a world of opportunities have opened up in the last six months, and he thinks they’ll only gain momentum from here:

“What I’m most excited about is, we’re not going back to normal. What’s so amazing is this shock to the system is really a big opportunity for entrepreneurs to come and say, ‘What do we need to build to recreate and unlock all these things we lost when we stopped going into workplaces?’

“So I think this opportunity to build the tools for a world that’s ‘post place’ has just opened up and is as exciting as anything I’ve seen in my venture career. You walk around right now and you see these ghosts towns, with gyms, classes you might take [and so forth] and now maybe you go online and do Peloton, or that class you maybe do online. So I think a whole field of opportunities will move into this post-place delivery mechanism that are really exciting. [It] could be 10 to 20 years of innovation that just got pulled forward into today.”

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Meet the five startup Battlefield finalists at Disrupt 2020

Published September 17, 2020

TechCrunch hosted an unusual Startup Battlefield this week — the founders, judges, audience and moderator (me) were all in different locations, doing our best to interact over WebEx.

But the 20 startups still demonstrated their products and explained their visions, then were grilled by expert judges. And those judges helped the TechCrunch team select our five finalists.

Those finalists will be presenting tomorrow at 10:40 a.m. Pacific for a whole new set of judges, and you can watch the live stream by logging into TechCrunch. (Also: It’s not too late to sign up for the full Disrupt experience.) Those judges will choose a runner-up and a winner, and the winner will take home $100,000, equity-free.

Here are the finalists:

Canix

Canix has built a robust enterprise resource planning platform designed to reduce the time it takes cannabis growers to input data. It integrates nicely with common bookkeeping software, as well as Metrc, an industry-wide regulatory platform. You can read more about Canix here.

Firehawk Aerospace

Hybrid rockets aren’t new, but they have always faced significant limitations in terms of their performance metrics and maximum thrust power. Firehawk Aerospace is building a stable, cost-effective hybrid rocket fuel engine that employs industrial-scale 3D printing to overcome the hurdles and limitations of previous designs. You can read more about Firehawk Aerospace here.

HacWare

Tiffany Ricks founded HacWare in Dallas, Texas, in 2017 to help bring better email security awareness to small businesses. The technology sits on a company’s email server and uses machine learning to categorize and analyze each message for risk. You can read more about HacWare here.

Jefa

Jefa is building a challenger bank specifically designed for women in Latin America. It focuses on solving the problems that women face when opening a bank account and managing it. You can read more about Jefa here.

Matidor

Matidor is building a project platform for consultants and engineers to keep track of projects and geospatial data in a single dashboard. It offers an all-in-one data visualization suite for customers in the energy and environmental services fields. You can read more about Matidor here.

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Schools are closing their doors, but Opendoor isn’t

Published September 17, 2020

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

This week Natasha Mascarenhas, Danny Crichton and myself hosted a live taping at Disrupt for a digital reception. It was good fun, though of course we’re looking forward to bringing the live show back to the conference next year, vaccine allowing.

Thankfully we had Chris Gates behind the scenes tweaking the dials, Alexandra Ames fitting us into the program and some folks to watch live.

What did we talk about? All of this (and some very, very bad jokes):

And then we tried to play a game that may or may not make it into the final cut. Either way, it was great to have Equity back at Disrupt. More to come. Hugs from us!

Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

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Ron Howard and Brian Grazer say that their accelerator can help diversify Hollywood

Published September 17, 2020

Impact Creative Systems (formerly Imagine Impact) is bringing a startup accelerator-style approach to finding fresh creative talent, and it announced this morning that, with funding from venture capital firm Benchmark,  it’s spinning out from Imagine Entertainment — the production company founded by director Ron Howard and producer Brian Grazer.

Right after the news broke, the accelerator’s founders — Howard, Grazer and CEO Tyler Mitchell — joined us at TechCrunch’s Disrupt conference to discuss their vision. Grazer (whose films with Howard include “Apollo 13,” “A Beautiful Mind” and the upcoming “Hillbilly Elegy” for Netflix) recalled the Hollywood of 25 years ago, which he described as an “opaque” system where original writers often struggled to break in, and he felt that Impact could “democratize access to Hollywood.”

“How can we create opportunity to have access to the epicenter of employment in the media business, which is Hollywood?” he said.

For starters, Mitchell described what he claimed is a scalable system for evaluating 2,000 script submissions every week.

“We were able to build a system that leverages both technology as well as expert systems evaluating not just the writers, but the readers — almost like financial analysts — and try to come up with metrics in a world where there aren’t stats,” he said.

Mitchell also noted that in Impact’s first cohort of 87 writers, 39% were BIPOC, 10% were LGBTQ and it was split 50-50 between men and women, with 11 different countries represented.

“If you try to find the most talented writers in the world, they’re going to look like the world,” he said.

Howard made a similar point, saying that this diversity results from an interest in “fresh new voices” with “no statistical goals or agendas in mind — it’s just happening in a really honest way.” (At the same time, interviewer Ingrid Lunden couldn’t help but observe that this was a panel of three white men discussing diversity.)

Asked whether they’re interested in finding new talent from social media, Howard pointed to Grazer as the one who’s always encouraging him to “know what’s going on up north” (a.k.a. in Silicon Valley).

“Right now we’re in a creative renaissance with podcasts and Instagrams … finding their way into the center of the narrative,” Howard said.

Grazer said he often looks at YouTube, in particular. At the same time, he cautioned that creating content for these online platforms requires a different skill set than writing movies or TV.

“It doesn’t reduce the likelihood of their success necessarily, but it’s a different art form,” he said. “Because writing a teleplay or a screenplay, even the greatest playwrights can’t do that particular thing — you have to be trained.”

Still, Imagine found at least one idea in an Instagram Story, developing a comedic show around an actor (Grazer didn’t want to say who it is, but it’s probably Arnold Schwarzenegger) with a donkey named Lulu and a miniature horse named Whiskey. Apparently the show has attracted multiple bidders, and as for where it will end up, Grazer said, “It sort of seems like Amazon. I’ll let you know tomorrow.”

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Fabletics’ Adam Goldenberg and Kevin Hart on what’s next for the activewear empire

Published September 17, 2020

Like plenty of other modern direct-to-consumer companies, influencer marketing has been an essential part of Fabletics’ journey. Actress Kate Hudson co-founded the company and co-CEO Adam Goldenberg believes that its network of spokespeople has been key to the company’s growth.

We were joined on our virtual TechCrunch Disrupt 2020 stage by Goldenberg and comedian Kevin Hart, who has been working as a brand partner for Fabletics.

“You can have the best product, which we believe we have, but if you can’t get it out there then you’re not going to be the leader that you want to be,” Goldenberg told us. “By having a very broad and diverse ambassador and influencer network, it allows us to become a very inclusive brand.”

Hart joined the company as an official brand partner earlier this year just as the pandemic took hold stateside and the company launched a menswear line. For Hart, the partnership is one of many relationships with brands and startups, but fits into his own lifestyle and thus made a lot of sense for him to work with, he says. 

“[A company I invest in] has to coincide with myself and my lifestyle. If I’m going to talk about it, I have to be true to it,” Hart told TechCrunch. “There’s a plethora of things that I’m involved with that people would be shocked to know I was a part of, but it’s because I have the eyesight for it and a love for it.”

The Fabletics menswear line that Hart has advertised, and served as a brand spokesman for, has seen major growth amid a broader spike in athleisure wear sales. Goldenberg is bullish on just how much growth Fabletics will see from its men’s line so early in its life cycle.

“It’s a big goal, but I think we could do $75-100 million in sales next year with Fabletics Men, which is our first full year with this line, which would be very, very fast growth,” Goldenberg says.

As the company firms up its offering in activewear, they’re also keeping an eye on what trends will help them grow. Fabletics has already been building out technology trying to connect online and offline user habits in its stores. On the heels of Lululemon’s major acquisition of Mirror, which it announced in late June, moderator Jordan Crook inquired whether Fabletics had its own interests in expanding its footprint beyond activewear.

“We really believe in the importance of living an active lifestyle, so we’re not ready to share it yet, but we’re going to be doing something very large incorporating fitness into Fabletics,” Goldenberg said.

Check out the interview with Hart and Goldenberg below.

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Here are the 19 companies presenting at Alchemist Accelerator Demo Day XXV today

Published September 17, 2020

When Alchemist Accelerator shifted its Demo Day to virtual earlier this year, Alchemist director and founder Ravi Belani told me it was a move he expected the team to stick with for some time. Nearly half a year later it’s time for another Demo Day — and sure enough, with the pandemic still ongoing, it’s another virtual one.

As an enterprise accelerator, Alchemist focuses primarily on seed-stage companies that make their money from other companies rather than those that sell to consumers. This latest cohort (the accelerator’s 25th) saw nearly 20 companies go through the program, with focuses ranging from physical therapy devices to an AI “coach” for sales reps to productivity tools for software developers.

This afternoon the accelerator is also announcing that Volvo (via the Volvo Cars Tech Fund) has joined Alchemist as an investor. While the two companies did not specify how much Volvo was investing, previous similar partnerships saw companies like GE and Juniper Networks invest around $2 million-$3 million.

Care to see the companies make their debut to the world? Alchemist will be streaming its Demo Day on YouTube, with programming set to begin at 2 p.m. pacific.

Don’t have time to watch the whole thing? Here’s an alphabetized list of all the companies scheduled to present, along with some notes about what each is working on:

Image Credits: Anda Technologies

Anda Technologies: A simplified smartwatch with built-in GPS, calling and a quick symbol-based messaging system, meant to help parents and caretakers stay in touch in situations where a full smartphone might be too much. They initially focused on Latin America, and are now expanding support to U.S. and Europe.

Botco.ai: A “conversational marketing platform” — in other words, marketing chatbots meant to increase sales and conversions. Potential customers can chat with these bots over SMS or messaging apps, and their AI will use its growing understanding of what it knows about your business to respond.

BreachRX: A platform meant to help streamline your company’s response when a security breach happens. They provide response playbooks, help assign tasks to the correct team members and help capture records of how and when your company took action.

ClearQuote: Computer vision-based vehicle inspections. The company says it can scan an entire vehicle for damage using a smartphone camera in around 60 seconds, calculating cost of repair on the fly. Focusing on end-of-lease inspections, used car inspections and rental car return inspections first.

Copilot: An AI-powered “coach” for sales reps. As reps make phone/video calls, Copilot analyzes the conversation and generates “cue cards” with relevant information.

Evolution Devices: A wearable electrical stimulation device meant to help in the rehabilitation process for those with lower limb weaknesses (including stroke survivors or individuals with multiple sclerosis). The device adapts to each user’s own walking pattern, and helps with remote care by reporting data (such as step counts) back to the patient’s therapist.

Faucetworks: An “artificial neurologist,” meant to help more quickly identify neurological emergencies while a patient is in an ambulance en route to a hospital, or at hospitals where no neurologist is on site. Their hardware system asks patients a series of questions, then walks them through a physical exam.

HR Messenger: An HR/onboarding chatbot built to work over WhatsApp/Facebook Messenger, helping to automate things like pre-screening questions, interview scheduling and referral requests. The company says it’s working with clients including KFC and H&M.

Hopthru: Data analysis platform for public transit agencies. Hooks into the data these agencies already collect, cleans it up, then pipes it into a dashboard to help these transit agencies find ways to improve their routes and ridership.

Image Credits: Hubly Surgical

Hubly Surgical: Building a smarter drill for neurosurgeons performing “skull puncture” operations. The company says that many surgeons still use basic, standard (hand-cranked!) drills, which can lead to high complication rates. Hubly’s drill helps to precisely angle the drill and is built to prevent the surgeon from drilling too deep. Expects to see FDA clearance in 2021, and launch in U.S. hospitals in 2022.

HyPoint: Working on high-power, high-density hydrogen fuel cell systems for aviation, meant to dramatically reduce CO2 emissions from air transportation.

Mobiz: A platform for sending personalized marketing messages to your established customer base via SMS, building “personalized micro-sites” for each user based on the brand’s existing data. The company says it’s already working with companies like Burger King and Woolworth, and is currently seeing $6 million in ARR.

Nano Diamond Battery: NDB is aiming to build a self-charging, sustainable battery. This one is perhaps a bit too complex to capture in a sentence or two, so see our previous coverage of NDB here.

Node App: A marketplace for connecting brands with influencers. Node helps to verify each influencer’s audience, then connects brands with these influencers with pre-negotiated deal terms.

Rectify: A tool meant to automatically detect and redact sensitive information when sharing documents outside of an organization. Focusing on the insurance market at first. Founder Melissa Unsell-Smith says the Rectify founding team previously worked together for 15 years in AT&T’s corporate legal department.

RubiLabs Inc: A platform focusing on making on-demand deliveries of medical products (vaccines, medications, etc.) to hospitals and pharmacies in Africa via drones, motorcycles and other dedicated vehicles. The company estimates that it has already saved 7,000+ lives.

Seventh.ai: Pitching itself as “Carta for intellectual property,” Seventh.ai helps founders identify which parts of their business can/should be patented, to better understand what the competition has patented, and to work through the patenting process. The company says it’s currently seeing around $250,000 in ARR. Founder Alex Polyansky says he spent 10 years as a patent examiner at the USPTO.

Tocca: A platform meant to help B2B companies throw branded virtual sales events, providing things like virtual lobbies, stages, breakout rooms and person-to-person networking tools. Integrates into tools like HubSpot and Salesforce to make post-event followups more efficient.

Image Credits: Veamly

Veamly: A “unified inbox” feed for developers that brings threads and messages from Slack, GitHub and Jira into one view, as well as a unified search that can dig in across these tools. Founder Emna Ghariani says the company’s “proprietary prioritization engine” helps to sort tasks and tickets by importance, and to analyze the time they’re spending in each tool throughout the week.

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Why hasn’t digital learning lived up to its promise?

Published September 17, 2020
Tom Adams
Contributor

Tom Adams is the president of Quantic School of Business & Technology.

The fall semester is off to a rocky start. When schools were forced to close in the spring, students (and parents) struggled. As the new school year begins, affluent families are building pandemic pods and inequities abound, while surveys suggest that college students want tuition discounts for online classes.

To avoid a catastrophic loss in revenue, colleges are bringing students back to campus. At UNC-Chapel Hill, those plans were quickly reversed when 130 students tested positive for the virus just a week into the new semester. As cases skyrocket, UNC will not be the only educational institution or school district to move online again.

What is it about digital learning that has schools so keen on reopening despite the health and reputational risks? Why hasn’t digital learning lived up to its promise?

If I were asked 20 years ago, as the founding CEO of Rosetta Stone, what digital learning would look like today, I would have imagined a very different future. Online learning was exploding. Teachers and faculty were experimenting with now commonplace consumer technologies like speech recognition and virtual reality to create immersive learning experiences.

Sadly, most of these innovations never took hold in our schools and colleges, and remote learners today are left with edtech that feels like it is still trapped in the 90s.

Ironically, the business of edtech and digital learning has been booming. Billions of dollars have been invested in tools and platforms that promise to improve the learning outcomes and lives of students. But for all the investments, headlines and flashy IPOs, edtech has little to show in terms of transformative outcomes.

The United States continues to lag behind many other advanced industrialized nations in math, science and reading literacy. Schools at all levels grapple with pervasive equity gaps. And research shows that heavily investing in education technology has, so far, yielded virtually no appreciable improvement in student achievement in these core subjects.

The challenge stems from the fact that rather than making learning better, the education technology field has, for the most part, focused on reaching more students. In our rush to scale, we have largely ignored tremendous pedagogical innovation that has occurred over the last twenty years.

No matter how high-tech a digital learning solution might be, it means nothing if it doesn’t also reflect recent and emerging changes in pedagogy. In 2010, a study at the University of North Texas compared how students retain information literacy skills in a face-to-face class, an online class and a blended class. The researchers found that there was no difference in outcomes between the three kinds of classes. This is because all three used the same materials and pedagogical approach.

But in a digital environment, far more is possible. We can now create video-game quality simulations to evaluate complex skills like creativity or problem-solving. Shy students can take the form of learning avatars in online laboratories — or explore career paths first-hand, through virtual reality. We know more than ever about attention span and engagement, or the connection between socio-emotional development and academic outcomes.

Researchers have, likewise, gained a deeper understanding of the ways students’ minds work. We know more than ever about how students reason, process information and solve problems. We know what kinds of scaffolding is required to develop and master these skills. Learning is best when it is built around doing, and when the context is practical, allowing students to try their hand at solving problems even as they’re still learning. It’s best when it is individualized, with progress based on a student’s personal aptitude and proficiency as they move toward mastering the material. And it’s best when it is enriched with peer-based discussion, practice and collaboration.

Astonishingly, few mass-market digital learning tools are built or adopted with these pedagogical advancements in mind. While Zoom is a fine tool for live conversations in small groups, it has few tools to facilitate the kind of engagement necessary for real learning. Coursera has raised millions for simply replicating the old-fashioned experience of a teacher lecturing at the front of a classroom. Quizlet is but a virtual collection of flashcards; it can assess the learning of certain facts, but it is hardly useful for the acquisition of skills. These types of common digital learning tools are increasingly great at making educators’ jobs easier. They are great at expanding access, allowing teachers and schools to reach more students than ever before. But scale, ease and access are not sufficient to help students learn and build skills.

The frustrations of educators and learners alike reflect the fact that education technology functions as a digital proxy for our oldest methods of teaching. Simply listening to a lecture is not effective in the real world, and yet that largely remains the default mode of education online. The impact of COVID-19 has only exacerbated these long-standing shortcomings. To create the digital learning experience students deserve — to finally fulfill the untapped promise and potential of educational technology — we must create tools that reflect not only advancements in technology, but in what we now understand about how the mind works and how students learn.

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