At the end of summer 2016, Nordic Makers decided to invest in Copenhagen based Peergrade, which offers a SaaS platform to facilitate peer assessment sessions with students, ie. a solution where peer students will be partly or fully responsible for grading each other. The company is founded by CEO David Wind and his co-founders Malthe Jørgensen and Simon Lind.
So why did we at Nordic Makers invest in Peergrade and David & Co?
The macro argument: innovation in education and the welfare state
The way education worked was up until only a few years ago the same model as it had been for many-many decades. The educational framework was dominated by keywords such as books, teachers in a physical classroom, the teacher preaching, etc. Classic stuff. When computing arrived, it in general didn’t drive a lot of significant change in that model for a long time, but now it’s happening. In the beginning it was about having much improved ability to search information and communicate with peers in far away countries, but now it is also students all the way down to primary school that use computers/tablets in the class room, MOOC democratizing education, robots that learn kids to collaborate and be creative, etc. And everytime there is change due to innovation, then there is business to be made. The new buzz word here is edtech. It promises lower costs and better, life long learning focused on the individual and on the topics we need most as a society. Hurrah! Let’s do that. Peergrade by definition ticks the “macro trend” box.
Edtech is a real thing, it will deliver. At Nordic Makers we believe so, and we wish we had taken our youth education in the current edtech regime. Edtech is therefore at a macro level an interesting area for us to invest in, ie. we believe it in general is a force for good, and new, great companies will be build.
Furthermore, we believe like many other people, that in order to maintain the welfare society most people in Europe fundamentally are happy about – and many people throughout the world admire – then we need to reform our societies. It is very expensive to run a proper welfare society, and since our taxes in general already are a bit too high (personal view), then part of the solution has to be to work smarter. Digital solutions provide part of the answer, so startups that can help our partly or fully state funded education systems operate not only better, but also smarter are most welcome. We believe great companies will be build to help vastly improve the way services are delivered by the welfare society. Peergrade ticks the box, since peer grading when used frees up a lot of time for professors. On average 80-90% of the time a professor spend on evaluating course work is cut out. How that extra time is used productively is another matter, but as a starting point peer grading helps professors to do a lot more research and course work in the same amount of time.
The two above macro arguments mean that Peergrade is an interesting company, but it is of course not enough.
Why Peergrade is the right concept and company
Thinking back at my own time in university (and to some extent gymnasium/high school), I am pretty convinced, that a big part of my learning was not self studying and going to lectures, but sitting with my fellow students and discussing all kinds of topics related to what we were learning (economists have a tendency to get into nerdy discussions). It helped I had some pretty sharp friends that I was sparring with. I think most people can significantly improve their learning curve by not only looking in books and listening to professors, but also engaging with your peers. And this is conceptually what Peergrade does – in an anonymous format, but some of the mechanisms are the same. You look at, what a person at the same level as you has done, and then you reflect on that and provide feedback in the form of rating and associated comments.
At first it sounds crazy to let students rate other students, and there is some debate about that. However, there is now substantial fact based evidence, that in many situations, peer grading actually provides better and more accurate rating of students. Personally, I think I would have loved to use such a system – and that personal conviction always help a bit when deciding on an investment case.
Even if the product conceptually is good, that doesn’t mean that the product works in the market. When we did due diligence, we checked out the incumbents: among others the world leading online education platform Blackboard. – and that is, ahm, uhm, quite interesting. When I saw this presentation of their product, I was quite puzzled. To briefly summarize: the main ed-platform competitor has fallen in the classic feature-rich-UX-poor trap. There are other players out there, that are doing a better job, but everybody is still small, and after having had my medical professor brother testing Peergrade on one of his courses, then we knew it worked really well, even though it was early days. UX was nice and fairly slick, and the advanced statistical models that helps to make fair grades and eliminate peer bias is strong and being constantly improved. Furthermore, the teams ability to use natural language processing for inferring the quality of text feedback between students is crucial for creating the solutions credibility in the eyes of it’s users. Nice!
On top of this, Peergrade has shown, that they can get users engaged and start paying in a way that is promising. It is still early days, but there rare good indications that sales metrics and net unit economics will be attractive. It probably helps, that the academic community communicates a lot across borders and institutions, so good ideas can travel fast and obtain viral effects.
Some would argue, that a peer grading solution for universities is a niche product, that could never be build into a major company. And at first sight, I agree. But then we come back to some of the macro trends I mentioned in the beginning. First of all, then we believe that peer grading could and should be an element in education also in high school and even with a few tweaks in the normal school system. Why not also at part of the new paradigm of lifelong learning which is increasingly important as part of the switch to knowledge based societies, where we all continuously have to upgrade our skill set. Furthermore, maybe peer grading as a key feedback mechanism for constant learning could be a substantial platform for many-things-educational. So yes, at Nordic Makers we can dream of David & Co. building a very substantial company that has major and positive impact on our future society.
At the end of the day, all of the above could be aligned with the stars and the moon, and it wouldn’t matter at all if the team was not someone we could believe in. Such an early investment is also totally dependent on the CEO and his team. In truth, even if there were fewer macro and micro elements in this investment case, then a quality team would tip the case towards a yes. Well, let’s just say that in the case of Peergrade, then Nordic Makers are very happy to have invested in David. He gets very high grades in our grading system.