Tory Patterson is a co-founder and Managing Director of Owl Ventures, the largest venture capital firm in the world focused on the education technology market with over $2 billion in assets under management. He currently serves on the board of directors for over a dozen leading edtech companies. As one of the early pioneers in the next generation of leading EdTech companies, Tory has led investments in some of the most successful companies in the sector. Tory is a Pahara-Aspen Education Fellow and an Edmund Hilary Global Impact Fellow. He holds a B.A. in Economics from Williams College and an M.B.A. from the Stanford Graduate School of Business.
Recently, in an exclusive interview with Higher Education Digest, Tory shared the inspiration behind establishing Owl Ventures, the three key things that he looks for when evaluating new opportunities, his predictions for Edtech in the next decade, future plans, and much more. The following excerpts are taken from the interview.
Tory, can you please tell us about your areas of interest and what is driving you today?
As a father of four school-aged children, I have a keen awareness of the challenges and opportunities today’s students are facing in (and out of) the classroom. Students are growing up in a world that has evolved dramatically since their parents were in school. The technology landscape alone has revolutionized our planet in the last forty years perhaps more than any forty-year period in recorded human history. Remember – the internet was merely a theoretical test space when parents today were in school, now it defines every industry on earth. The dramatic arrival of consumer facing artificial intelligence has the potential to further accelerate the pace of change that today’s students are going to need to adapt to as they enter the workforce and life after school. All this evolution shines a bright spotlight on the question of “for what” and “how” should we be preparing today’s youth for their future.
What was the inspiration behind establishing Owl Ventures and why did you choose the EdTech industry?
My early career prepared me extremely well for launching and scaling Owl Ventures as the largest and preeminent global venture capital fund focused on education technology. I graduated from Williams College with a major in economics and began my career as technology-focused investment banker in San Francisco. I then attended the Graduate School of Business at Stanford University where I spent my studies focused on the venture capital industry and joined a fast-growing VC fund upon graduation.
The early 2000s was a fascinating time in the technology VC landscape with the industry recovering from the big crash of 2000 and the march of technological innovation steadily continuing. There were obvious new frontiers where the power of web-based content solutions could bring massive efficiency and gains to industries that had been slow to adopt technology-based solutions. The capability of the internet to massively improve the experience of students was obvious, but there were significant roadblocks to adoption which had left the education space behind – perhaps decades behind other global industries. By 2008 the dam was beginning to break, and broadband adoption rates were climbing at schools (helped by US government subsidies) and the opportunity to deliver the value proposition to students was accelerating – the time for the education sector to integrate with the power of the internet had finally come.
My first investment was into a company called Presence which had been launched by two unbelievably ambitious and brilliant co-founders. I subsequently invested in a series of education technology companies that all made a big splash in terms of adoption rates and student achievement gains at a time when broadband penetration rates in US schools was still nascent. This was the beginning of an edtech boom that grew steadily and has never looked back.
My partners and I launched Owl Ventures to create an organization that would serve as an institution of excellence for scaling the world’s most promising and elite education technology companies. The sector was growing rapidly and there were no firms that were designed from inception to professionally support the sector. We were fortunate to partner with the world’s elite institutions that were working in the trenches to support students globally including the Bill & Melinda Gates Foundation as founding limited partners. Fast forward ten years, and today Owl Ventures manages approximately $2.5 billion and is working with about 100 companies around the world that are accelerating student outcomes and delivering upon the promise of technology’s ability to improve education. Our work is in the early innings in terms of where this movement will go over the coming decades.
As an investor, what are the three key things that you look for while investing in a company?
I am looking for three major elements when evaluating new opportunities.
- People first. I am particularly focused on the individual I will be partnering with when we embark on a new investment and partnership. We are looking for leaders that have a burning passion for the problem they are solving. In the same way we are coaching students to adopt a growth mindset, I am looking for CEOs that have the same approach to their own development. A company journey is long and will evolve tremendously – we need leaders that are committed to their own evolution as their organizations scale.
- Markets second. We love large markets that are dominated by stale incumbent providers. As companies dominate their categories there is a tendency towards complacency and subsequently an under-investment in innovation and R&D. We love young companies that have a different mindset about innovation and want to over-deliver a new experience to customers in these categories.
- Innovation third. When we say yes to a new investment it is almost always a byproduct of an innovation “Aha moment” or efficiency unlock that no other competitor can achieve. We are leaning into these innovation moments and looking to leverage that advantage as an entry point to begin scaling a new powerhouse company.
How important do you think it is to make an impact as an entrepreneur and investor, especially in the EdTech industry?
I’m often asked about making an impact and how I approach that concept as an investor and professional. My short answer is that I can’t imagine living an inspired life without a clear focus on improving the state of humanity’s lived experience. I believe that improving the efficiency, relevance, reach and enjoyment of education is one of the most important levers we can pull to improve humanity. I believe deeply that all the problems we wrestle with globally map back to inequity in education quality and access and that these are very solvable problems – especially if we leverage the superpowers of technology. Our firm invests heavily in the measurement and reporting of the impact our portfolio companies deliver – notably in terms of access and acceleration of learning outcomes. Please check out our latest report at: https://www.owlvc.com/outcomes.php
What are your predictions for Edtech in the next 5-10 years?
Edtech is earlier in its lifecycle as a sector, as compared to other software industry verticals, but is catching up quickly. In the coming decade there will be well over a dozen high growth and very profitable public companies that dominate the next chapter of education content and product. These companies will subsequently have a public currency that will allow them to aggressively acquire emerging competitors that will create a class of powerful scaled businesses.
Today the universe of public companies with an “acquisition currency” to grow inorganically is limited which leads to stagnation in the market and longer hold times for private company investors. As the IPO window opens again, we will see several edtech companies go public and sprint to establish themselves, and subsequently lean into this acquisition flywheel that will cement their leadership and forward prospects. This dynamic exists in virtually all other software verticals and is an inevitable medium-term reality for edtech as well. There are several scaled private companies ready to bust through this IPO wall when the markets open and we will see the rise of a class of public edtech companies that energizes the entire category. This will unlock even more capital for the sector that will fund more innovation which accrues even more value to students and institutions driving education. This high functioning flywheel is almost upon us.
What is your favorite non-academic book and why?
I am a voracious reader, so this is a hard question… I read a book when I was 13 years old that molded my mindset in powerful ways. “Ben & Jerry’s: The Inside Scoop” made a massive impression on me. These founders built their business with a mindset on impact far beyond the realm of their product – ice cream. They created customer dynamics around their product that only their values could inspire. I highly recommend this book to anyone interested in business and finding new ways to appeal to customers and change the world!
Where do you see yourself in the next 5 years?
I am 44 years old today and as I turn 50, I expect to be doing exactly what I am doing today only with the wisdom of more experience! I believe my life’s purpose is to do everything in my power to accelerate the market for learning technology. If Owl Ventures can move the needle on the timeline and scale of great innovation in the education sector, I believe I will have achieved something profound. We have a long way to go, and I am in love with this journey and the universe of people who are on this mission with us.