SM: How do you specifically provide value for schools, teachers, parents and students?
EF: Teachers are an extraordinary leverage point in the system because there are on average more than 100 students per secondary school teacher. While we’re focusing on serving all of the different constituencies, out of the gate for HotChalk it’s about teachers. When teachers work together with students and parents, academic achievement follows. One of the things we’re most excited about at HotChalk is this dynamic and the role that an online learning management system like ours can play in this communication process.
SM: Venture capitalists tend to avoid education startups. How did you fund HotChalk? Did you bootstrap again?
EF: There was not a lot of venture funding of education technology in 2004. Sales cycles in school districts can be unpredictable due to funding instability, school board changes and politics. This has made traditional investors wary of our market.
Our Series A was a friends and family round, and was $150,000. As we continued to make progress, we began to attract more traditional forms of venture capital from players like Berg and Berg and the Meriwether Group. That led to a Series B of $3.5M, of which 50% came from VCs and 50% came from existing investors. Our Series C was for $10.5M of which 95% was institutional and 5% was from existing investors.
We have always had a strong foundation of people who are experts in Web-based technology and investors who believed in us. We are quite fortunate that investors are business partners and long-time colleagues who are well respected in their fields.
SM: Who were your initial institutional investors?
EF: They include members of the team that bought ProductFactory, Jay Fulcher and Bryan Stolle. These partners provided more than just capital. Bryan Stolle, a partner at Mohr Davidow Ventures, gave valuable coaching and support instrumental to the development of HotChalk.
SM: Who were the Series C institutional investors?
EF: Last summer we inked the term sheet on our Series C financing with NBC News, McGraw-Hill, Peacock Equity Fund, Mohr Davidow Ventures and existing investors participating. This financing provides a platform for continuing our dramatic growth and we’re pleased that these influential partners have stepped up to help us make an impact on the lives of teachers
SM: Will you be raising more money? What is your time frame and who is your ideal investor?
EF: We now have the resources to achieve our domestic growth goals. HotChalk is poised to begin fundraising in the next 18-24 months for our international expansion phase. Our ideal investor is one who knows the education marketplace and can support mutual growth objectives.