Over the past decade, Michael Moe and his business partner, Deborah Quazzo, have been central players in building the education technology economy. Together they have run the ASU GSV Summit, the annual must-go-to event for business leaders and investors in edtech.
A decade ago, Moe had two galvanizing ideas—one focused on investment opportunities and one on education. Now he’s pivoting to just one. In an interview with EdSurge, Moe reflects on his path that took him on a “25-year passion” in the education industry, and what lies ahead. The conversation has been lightly edited for clarity.
EdSurge: What started you thinking about education as a place to invest?
Michael Moe: When I was a research analyst identifying trends and themes in the growth economy, initially at Lehman Brothers then later at Montgomery Securities in San Francisco, I kept on hearing the same thing from the fastest growing, most dynamic companies: Their biggest impediment to succeeding or growing as fast as they wanted was their ability to attract and retain knowledge workers. This was 25 years ago.
So I started thinking, ‘Okay, well, why is this? What’s the solution?’ And of course, I realized how complex it is. There’s not a silver bullet. It’s made up of many things. But that grew into the 25-year passion for me, both professionally and personally, around re-imagining the education system and how you provided people equal access to the education they need to thrive.
In 1996, I wrote a white paper called “The Dawn of the Age of Knowledge,” which was really a thesis about what I felt was going on in the growth economy. The reality is only getting more true every day. In the global marketplace and growth economy, your education and your knowledge makes the difference, not only for an individual but for a company and, for that matter, a country. And so that whole thesis has been core to our research, advising and investing in every part of the ecosystem.
What were early signs, from an investing point of view, that suggested you were on the right track?
Initially it was changes in the postsecondary education sector. I was one of the first analysts to cover the Apollo Group; it went from $100 million dollar in market value to $15 billion. DeVry University was another very successful company, delivering important skills for the untypical college student, as was Education Management Corp. We took [what became] Bright Horizons public and Renaissance Learning.
What you saw was this incredible hunger: People intuitively saw the classic investment opportunities. You know—the greater the problem, the greater the opportunity. This was a gigantic problem, therefore, it represented a huge opportunity.
So the bigger the problem, the bigger the opportunity. But the bigger the sandtraps, too, right?
Everybody talks about all the challenges involved in investing in the education market. And that reputation is well-earned.
That’s saying it politely.
An analogy that I made early on was comparing the education system to the healthcare system. When you’re navigating something new, having an analogy to point to is helpful. There were a lot of things about that analogy that are wrong. But there were a lot of things that were helpful, just to put a framework around it.
What’s an example where the analogy was helpful—and where it was not?
Healthcare really became an invest-able category back in the 1970s. At the time, healthcare was a large industry—like 8 percent of GDP—but it was a cottage industry and wildly fragmented. People asked: Could you make money in it? Should you make money? From a technology standpoint, it was still kind of backwards compared to where society was heading. Investments weren’t professionally managed. It was a cottage industry.
Then what you saw over time was a dramatic amount of capital that came in. And by the way, from an investment category, while large in terms of spend, it was teeny tiny in the capital market, representing something like less than 1 percent of U.S. public market cap companies. It was not a smooth ride up for healthcare. There were lots of dry holes and periods when it was tough—but overall healthcare became an even larger industry, as much as 18 percent of GDP and roughly 15 percent of overall market cap.
In the late 1990s, education looked analogous. It’s the second largest industry in the U.S. next to health care. It’s almost 10 percent of GDP. It wasn’t a perfect match. But there were similarities. There were regulatory issues. People asked can you, should you make money?
Now, I’d argue that one of the greatest indicators that something important going on here is that you’re seeing deep talent come into this industry. We’re starting to see companies emerge that are becoming large. Of course, “large” is a relative term. So you can look at Chegg, which we’re an investor in, which has a $5.5 billion market cap, and people are celebrating that. I am, too. But remember that Facebook has a half-trillion dollar market cap.
You still haven’t seen these kinds of mega cap companies in education, but they’re coming. One of the trends we see is what I call “weapons of mass instruction,” these rapidly scaling companies that have network effects and other types of exponential growth where you can see that value created at a speed that heretofore wasn’t possible in this space.
So what turned out to be the fundamental differences between healthcare and education?
Some of the impediments to change, I think, are greater in education than was the case in healthcare. Doctors didn’t necessarily love HMOs. But there wasn’t a Plan B. The entrenched status quo in education is a greater impediment than it was healthcare.
Let’s talk about GSV. You started GSV with the idea that it would focus on building talent. What were you creating when you began to put together the collection of businesses that GSV became—and how is that changing?
Deborah Quazzo and I had been business partners back to the days of Merrill Lynch, for more than 20 years. The idea of GSV was to create a modern platform that not only invested in the most dynamic growth companies in the world—what I call the “stars of tomorrow”—but also created other businesses designed to support those kinds of companies.
GSV Labs is one example. It’s our innovation center based in San Mateo in California, with offices in Boston and soon in Pittsburgh and India. The ASU GSV Summit was also designed as a way to bring different members of the education and talent ecosystem together—people who shared a passion about change and creating equal opportunity for everybody to participate in the future, but who typically wouldn’t be in the same room together.
While the education and talent franchise is questionably what we’re best known for, GSV Capital, as an investment platform, invested in broad technology. We invested in Facebook when it was private. We invested in Twitter when it was private; in Dropbox, Spotify, Lyft, you know, all-important companies that are in the education-talent space. (Editor’s note: GSV Capital was also an early investor in EdSurge.)
GSV Capital—which you’re not running right now.
Correct.
Why? And what parts of the ecosystem are you running now?
GSV Capital was an idea I came up with eight years ago. I was looking at the structural changes taking place in the capital markets: fewer companies were going public and access to dynamic growth companies was being limited. So we created this idea of a publicly traded vehicle that invested in the best private companies in the world.
The fact that we were a public company created issues and pressures for the broader GSV platform in terms of what we could do. In the last couple of years it became clear that for me to develop the GSV platform to the full extent that I wanted to, there was a tension having me as CEO of a publicly traded company. So I became chairman of GSV Capital two years ago. Then this spring, I resigned from the management of the publicly traded fund as it became clear that there were conflicts with what I and GSV needed to do. It wasn’t the preferred path, but it became the clear, right path.
Was that hard?
Yeah, sure, it’s disappointing. When you create something that you think is innovative and can add value—when you’re basically parenting something—you don’t jump up and down when something happens that means you’re no longer involved. That was both disappointing and hard.
So at this point, then, that publicly traded fund that invests in other fast-growing companies is totally independent. As of July 31, it’s also got a new name—Sutter Rock Capital—and other people running it.
Yes.
So what’s GSV for you now? What are the pieces? What do you see going forward?
It’s a great question. The positive piece of this change is that it certainly frees up more time to focus on what really matters. So what I’ve been doing over the last three months is determining what really matters. It comes full circle: I will continue to have a deep interest in the growth economy and innovation and tech trends. But I’m going to be spending significantly more time building out the education-talent franchise. That includes the GSV AcceleraTE Fund—that’s the fund run by Deborah Quazzo and her partners, Michael Cohn and Julia Stiglitz. I’ll remain an advisor but be more active.
GSV stands for “Global Silicon Valley.” And while we’re based here in Silicon Valley, the mindset of entrepreneurship and innovation that has made Silicon Valley such a remarkable place is spreading throughout the world. We had this as a thesis 10 years ago but it still amazes me: In 2007, 92 percent of all venture capital was in the United States, mostly in Silicon Valley. Last year, 45 percent of venture capital was in the United States; 55 percent was outside the United States.
I’ve been to China 15 times in the last two and a half years. What we’re trying to do—and it’s hard to do—is to create a truly global education-talent franchise, and connect great ideas to opportunities in an increasingly interconnected world. So that’s an important piece of how I’ll be spending time.
I also believe strongly in developing the ecosystem. Next year, the ASU GSV Summit will be in its 11th year. How do we continue to evolve in a way that brings the most value to the people that are trying to transform the world through education? Whether they’re educators, entrepreneurs, policymakers, investors. It’s an open platform. We welcome everybody.
How do we evolve that in an impactful way? How do we bring more technology to it so you don’t necessarily have to physically be at the Summit to participate? And how can we bring physical experiences to other markets in the world? We’ve had a partnership with TAL Education, New Oriental, Tencent and Tsinghua University in an event for the last couple of years. How do we expand that geographically?
Building the ecosystem is a big goal. But it’s not the same as making money.
Moe: Yeah.
Have your goals changed? Is this focus different than it was in the past? When you think of people who start their career in finance, they’re kind of focused on making money. Has that changed for you?
Anybody who knows me well knows—and in fact, some say this is a criticism of me—that as much as I came from Wall Street and have been in that world my whole adult life, making money has never been my focus. The money will take care of itself. My focus has always been on: What can you do to make a difference? How can you spend your time to have the greatest impact?
Certainly, there have been a lot of things I could have done that would have been smarter for me financially. Given the recent [change with GSV Capital], that wasn’t positive for my retirement plan. But I’m a big believer that the more people you can impact, the greater the impact you have and the other stuff takes care of itself.
So I’m trying to create leverage for my time and focus where I think I have the greatest impact. That’s probably a little bit of a shift —only because I’m really trying to prioritize my time for impact.
When you think about the past 10 years in education—even given as you say, there are a lot of impediments to change—what surprises you the most?
If you take a step back, the changes that have taken place in 10 years are pretty remarkable. Ten years ago, you didn’t see companies that would reach millions of people at the speed you see it today. Ten years ago, education was a linear, incremental business. People would say, yeah, go experiment on somebody else. People’s urgency for change has risen.
You also have this digital infrastructure that’s been laid over the last 25 years with 3.8 billion people on the internet and 3 billion smartphones. You have digital natives now teaching others. So you’re able to go from idea to reaching millions of people at breathtaking speeds. Coursera’s six years old and has 40 million students on its platform. It’s mind-blowing that 600,000 new students enroll on Coursera every month—which is larger than any university in the world.
So you just didn’t see that type of change or growth. Ten years ago, we thought that the fact that $700 million came into this industry was incredible because before that it had been much much smaller. Last year it was $7 billion worldwide. The capital coming into this market is really significant.
Over the last two and a half years, we’ve seen the dark side of technology emerge too. Do you worry about what the dark side can do to education?
Absolutely. Look, it’s a double-edged sword. All the positive things that can be done in terms of communication and flattened organizations can also be used by people who don’t have great intentions. The idea that sunlight is the best disinfectant is really good.
So I do think there are a lot of positives about being able to provide more transparency to what’s really happening. Facts and data are good things. There are no places where there is more personal data than education and healthcare. And so whose data is it? Protecting privacy is a big deal. That’s going to evolve rapidly.
What do you hope will happen over the next five years?
Well, I’m an optimist. I’m a person who doesn’t believe anything’s impossible. And I really hope that in the next five years and we’ll be working furiously toward helping people really, truly start to see the democratization of education.
And what does that term, ‘the democratization of education,’ mean to you?
Maybe that’s not the right term—but the idea that anybody, anywhere should have the same access to knowledge, education, skills. Not based on your family’s income, not based on where you live, not based on the color of your skin, not based on your gender.
That sounds altruistic. But we just can’t survive as a society without it. People worry about climate change. But climate change doesn’t scare me nearly as much as this growing inequality.
The root of it is access to education. You look at this Varsity Blues scandal. It’s just the most sick representation of privilege. That somehow people with money and influence think they can do reprehensible things. I mean, what in the world?
There’s no easy recipe, no quick cure. It starts with giving kids a way to learn, beginning in early childhood. But it’s not just content, it’s not just teaching, it’s not just technology. It’s a very complex thing.
But the more we provide success stories, the better. Even though there’s so much information out there, it’s really difficult to get at the right stuff. It’s a world of what I call “info-besity.” So how do you filter on it? It takes research, information, leadership, capital, examples of success. It takes putting all that together. And it’s not getting discouraged because it’s hard.