Building Equity: The Entrepreneurship of Venture Capitalists, with Leeds Illuminate’s Susan Kates

For entrepreneurs, seeking funding from a venture capital firm can seem intimidating. But, it’s important to remember that those investors are entrepreneurs, too. In this episode, learn about what it took to start Leeds Illuminate, a venture fund founded by Susan Cates in 2020.


Trevor: Today’s guest is Susan Cates, managing partner at Leeds Illuminte, a growth equity fund that invests in education, workforce development, and workforce access companies. Growth equity meaning $10 million plus in revenue all the way up to hundreds of millions in revenue. Essentially Leeds invests in a sector serving learners and workers from the first day of school to the last day of work and everything in between.

Leeds formed in 2020 after its sister company Leeds Equity Partners started passing on opportunities they liked because they weren’t a perfect fit to its fund thesis.

Susan: They were seeing opportunities that fell outside of the, the stage and the scope of their mandate, but that they found really attractive from an industry standpoint. My partner Elizabeth Jo was at an earlier stage, um, firm that was focused on the sector and seeing this real gap in the market for sector expertise, um, at that growth stage. Um, and having spent, uh, having spent more than 20 years in the sector as both an investor and an operator, um, really thinking about what companies need as they’re going from 10 to a hundred million plus and how different that is from what they need, when they’re going from idea to 1 million or one. It’s up to 10 million and the value that operating experience can really have from that standpoint. 

Trevor: Starting a company in 2020 could have been disastrous, but what Susan found was that sectors like education that were typically slow to adapt, they were actually forced to make progress…

Susan: Some of the resistance to trying new things in different aspects of the, of the market, have evaporated over the last two years, I sometimes say we’ve had, you know, 20 years.

Of progress collapsed into 20 months because people had to. In a prior life, when I was working with fortune 500, learning and development folks thinking about, about leadership development for their mid-level talent and up, I was talking to folks a decade ago about using hybrid or online, programs to deliver and do that in, those cohorts.

And there was huge resistance to the idea that middle-aged folks would be willing to use technology or that you could create relationships or create community, or really get any sort of experiential learning done in a virtual environment. And I knew that we could, because I was seeing it in the online degree program that I was co-leading the MBA at UNC program.

But getting people to change their preconceived notions, was a real challenge when. Everything’s shut down in spring of 2020, I think that for a lot of folks, particularly on, on the workforce development side I think there was a, a moment where folks just froze and thought, well, we’ll just wait it out.

When it was clear that this wasn’t going away, in two weeks or six weeks or three months the question became, well, are you going to try something new or you going to try something different or are you just going to not do anything around developing your people? Universities had been moving towards online and blended learning over the last several decades, but it was still a minority of faculty, a minority of programs that were being delivered in a fully online manner.

Higher education had to make the shift immediately and once the genie’s out of the bottle and they see the once they’ve gone through the pain of trying and learning and, and figuring it out, the flexibility and the opportunity from a pedagogical standpoint, from a, from a reach and a mission standpoint to do different things because of, embracing a technology and online learning again is something that, you know, I don’t see us going back from in most cases. 

Now there are certainly areas of change that happened during the pandemic that were temporary, and blessedly so. Nobody thinks six-year old’s ought to be learning and zoom., least of all the parents who were at home with their children on zoom, trying to do that. But even there, you see changes and shifts in terms of the window that parents had their younger kid’s education and that, and the engagement that that led to, and we see that playing out in trends around consumer spending and consumer engagement and early childhood education, in a more meaningful way than we’ve had in the US historically.

Trevor: It raises a good question though, cause I think there there’s some out there or there’s, there’s some skeptics that say, you know, when we talk about technology and education, are we really doing something that, to your other point moves the needle, or we’re just moving onto more screens in doing something that used to be done in person kind of together and moving on to an iPad or to a zoom meeting or to something else that that kind of is electronic. I wonder if you could speak to that just a little.

Susan: Sure. Yeah, to the extent that people are just moving, what was being done in person and trying to just, you know, airlift it to a screen like that’s bad. Taking a camera and videotaping a play is not the same thing as creating a movie, you create a movie, you using the technology to be able to take in different perspectives then the audience member sitting in a play would have, to be able to tap into a different sort of experience that the person who is experiencing that story could have than if they were sitting in front of a live group of actors and actresses, delivering that at real time.

 If we’re not using the technology effectively and thinking about how you really drive the pedagogy in a different way, leveraging that technology effectively, then we are doing everyone a disservice. That said, you know, the idea that in-person education has been great is just not true either. The idea that the best way for a college student to learn is to sit in a lecture hall of 300 and listen to someone lecture at them for an hour, and then, you know, test them periodically on that.

That’s not actually a great model. What we know about the way that adults and children learn is give them new frameworks, new concepts, which I think of as sort of scaffolding to build on. And then you have them practice. You, you engage with that learning, you work through a problem, you work through a project, you engage in a debate to really push your understanding of that idea.

And then you reflect on that and you do it again. The only way you build muscle strength is to actually work the muscle and have some recovery time and do it again. Do it again and do it again. So to the extent that we are using technology effectively to really engage the learner in a different way, then it can be not only as good but better.

But you have to be thinking about it from a thoughtful design perspective and not just using a video camera to videotape a play or to videotape a lecture, which is not great either. 

Trevor: Well I think it’s a fantastic analogy and kind of really highlights, like you said, you’re really trying to get to a different perspective or something that you couldn’t accomplish through an in-person classroom. And I also think too, access to education, you know, I grew up in rural Western Nebraska, and, you know, there were issues with country schools and them closing down and people having to drive miles and miles to get to another place to do it.

And once you have technology that can kind of distribute that learning, you have opportunities for kids that you might not otherwise have. So I think there’s a lot of, even if you were just doing the same thing, you still have new opportunities, but if you can do better things and get it to more people…

Susan: Absolutely. I grew up in rural North Carolina, which probably not that different from rural Nebraska and, and thinking about the opportunities in terms of the classes that, and the community of students that you. could have access to from Bushy Fork today, versus when I was growing up there, is pretty exciting. 

Trevor: Yeah, for sure. So let me take a step back and ask you kind of how you got involved in investing and kind of got to this point where you’re with Leeds Illuminate?

Full Episode Transcript

Hosted by Trevor Schmidt, Founder Shares is brought to you by Hutchison PLLC, and is edited and produced by Earfluence.

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