With a $500 million fund to be invested over 36 months, Sylvan Ventures (Baltimore, MD) appears to be building not just a portfolio but collections of compatible, enterprise-style offerings.
The company's largest initial investment is a $30 million commitment to MindSurf, a provider of wireless computing solutions for the K-12 market. The company has also committed $20 million to eSylvan. Funds for MindSurf and eSylvan have not yet been invested. The fund has invested $17 million in Chancery Software Ltd. and $7 million in ClubMom. To date, Sylvan Ventures has also invested approximately $11 million in Caliber LearningNetwork and $5.4 million in OnlineLearning.net. An investment for an undisclosed amount in LeapIt will likely close soon, and another $15 million is committed to a company that cannot yet be announced.
R. Christopher Hoehn-Saric, ceo of Sylvan Ventures--and previously chairman and ceo of Sylvan Learning Systems--says that in comparison to many funds, Sylvan Ventures is taking larger investment stakes in a smaller number of non-competitive companies. With the Chancery investment, for example, the fund would not consider another SIS system unless it was in some way complementary. He is seeking to invest in technology education businesses addressing K-12, higher education and corporate markets.
Hoehn-Saric identifies a sweet spot for investments of $5 to $10 million, though current investments confirm that they will invest even more. He emphasizes that unlike a traditional VC which provides capital and board representation, Sylvan provides an incubator environment which includes not just affiliate marketing but recruiting services, technology services such as hosting and software development, large scale sales forces into K-12 districts and Global 2000 companies and even office facilities.
Sylvan Ventures is looking for products that have an existing market with a track record of success, not "eyeball plays" which a company plans to monetize down the road. The management team is the most important consideration. Hoehn-Saric says that in looking at over 600 business plans, he has not seen many new concepts; the management and the unique relationships that people bring to the table distinguish a company.
As Hoehn-Saric looks at the K-12 environment, he thinks it is important to address the market where it is. Content is secondary to a need for access, thus their attraction to a solution like MindSurf. He does think enterprise-wide solutions will be coming into play in the K-12 market and that disparate systems will be replaced over the next few years. He sees the corporate market further along in use of enterprise systems. One issue of interest to him here is whether training departments will serve as the content warehouses for the entire enterprise. Higher education, says Hoehn-Saric, does not fit as neatly into an enterprise, end-to-end package. This market, he says, is experimenting with online curriculum but not embracing it on a large scale. But as institutional market leaders emerge, they will need partners to move forward.
Sylvan Ventures has ten people reviewing business plans, but those individuals are also responsible for companies in the portfolio. Companies wishing to join the 200 business plans waiting for review should submit a concise business plan, either by mail or the form on the web site. It should include an executive summary, a description of the management team, financial projections, a description of the business and business model and anything that makes the offering unique, such as a patent. Hoehn-Saric anticipates announcing a new deal monthly.
COPYRIGHT 2000 Nelson B. Heller & Associates
COPYRIGHT 2000 Gale Group
