Unconventional And High-Risk: How Reach Capital Finds Winning Startups

Before evaluating educational technology startups, James Kim actually used their products inside his own classroom.

The Reach Capital partner began his professional journey as a high school math teacher with Teach For America following his studies in astrophysics at Yale. He subsequently worked in college access and Yale admissions, and obtained graduate degrees in business and education from Stanford prior to joining Reach. During his teaching tenure, he served as an early user of ClassDojo, an experience he characterizes as “game-changing.”

His investment firm, Reach Capital, has similarly evolved. Established in 2015 after spinning out of NewSchools Venture Fund, the San Francisco-based enterprise initially concentrated on technology destined for K-12 schools and districts. Its scope has since broadened to encompass learning, health, and work, supporting companies such as ClassDojo, Cartwheel, Stepful, and Replit.

In August, Reach rolled out its fifth fund—a $265 million vehicle that elevated its assets under management to nearly $1 billion. Having backed upwards of 180 companies, the firm intends to deploy capital into approximately 50 additional teams through this latest fund, focusing on pre-seed, seed, and Series A rounds.

Crunchbase News spoke with Kim regarding how Reach’s roots in education inform its broader strategy, what the team identified in AI detection startup GPTZero, and why certain top-performing investments initially divided the internal team. Discussions also covered how ownership stakes and secondary transactions have influenced the firm’s approach to delivering capital returns.

This interview has been edited for length and clarity.

Crunchbase News: You started your career as a high school math teacher. How did that shape your view of education technology?

Kim: I taught ninth through 12th grade, primarily Algebra I and geometry. I was an early adopter of ClassDojo. At that time, it functioned as a straightforward classroom management platform, and it completely transformed my teaching. Although it has since expanded into a comprehensive suite, I realized early on that technology could move the needle.

Reach began as an education investor. How did the firm’s focus evolve into learning, health and work?

Kim: Reach started in 2015, focusing purely on learning and education technology—specifically, solutions sold directly into schools and districts.

Our founding partners observed a surge in classroom devices, one-to-one device ratios, and broadband availability. The core assumption was that we would witness a proliferation of technologies aiding students, educators, and administrators while driving learning outcomes. That hypothesis ultimately materialized. Several of our early bets are now household edtech names, including Newsela, Nearpod, and ClassDojo.

Reach spun out of NewSchools Venture Fund, where three out of our four founding partners had already engaged in for-profit seed investing prior to 2015. Gradually, we expanded beyond K-12 into higher education, and subsequently into consumer learning.

We were also increasingly drawn toward healthcare and work. Because health and wellbeing directly influence a learner’s classroom readiness, we naturally moved toward mental health, behavioral health, and developmental health. On the workforce front, formal education typically concludes in college, yet individuals still require a bridge to employment. Once employed, continuous learning remains vital, particularly in today’s landscape.

A few years ago, we formalised our mandate across learning, health, and work. The common denominator is that these represent the most foundational systems governing human development and flourishing.

Thus far, the portfolio breakdown sits at roughly 50% learning, 25% health, and 25% work.

These sectors have different buyers, regulations and business models. What did investing in education teach you that translates to healthcare and work?

Kim: Education is heavily regulated, and institutional purchasing is intricate. Multiple stakeholders must weigh in, and decisions frequently demand board-level authorization. Consequently, we were already accustomed and comfortable dealing with heavily regulated products and complex go-to-market motions.

Selling to a university or a K-12 district—considering the complexity and the intersection with regulation and policy—bears a strong resemblance to selling to a health system, hospital, or insurance provider.

Cartwheel serves as an ideal illustration of where our background provided an edge. The company offers mental health teletherapy, but its customer base consists of school districts, with care delivered directly inside schools.

While behavioral health was relatively new to us when making that investment, our deep familiarity with selling to school districts and deploying interventions inside school environments gave us a distinct advantage both in securing the investment deal and supporting the company afterward.

Reach talks about “elevating human potential.” What makes an investment fit that mandate?

Kim: We look for products and services that amplify access to quality education, quality care, or quality earnings, or a combination thereof. We must clearly identify the mechanism making that happen.

It is insufficient for founders to pitch a SaaS or AI product claiming, “This will boost workplace productivity, so perhaps individuals will earn more or enjoy their jobs more.” While plausible, that fails to provide a sound theory on how the product genuinely expands access to quality earnings.

Several team members, including myself, are former educators. We prioritize meaningful, needle-moving impact.

We approach access from both the demand and supply sides. On the demand side, we champion products yielding delightful, impactful consumer experiences—such as Brilliant, allied healthcare training platform Stepful, and Replit for what its founder terms “citizen developers.”

On the supply side, we back solutions that help schools, health systems, and enterprises operate more efficiently and effectively. WorkWhile, for example, assists logistics and hospitality companies in hiring hourly workers more effectively while treating them better. We evaluate challenges from both sides of the market.

Reach backed GPTZero, which agreed to join Superhuman. Was that an investment in solving a problem created by AI?

Kim: That was not actually our investment thesis. In my view, they offer the finest AI detector on the market. However, their guiding philosophy was that AI integration in education should not face bans. It should neither be punitive nor devolve into a cat-and-mouse dynamic between educators and learners.

Given that professionals across industries utilize AI in their daily work, students should learn how to deploy it responsibly and thoughtfully. It was the first AI detector company I encountered with that perspective, diverging from tools aimed merely at helping schools, districts, and universities suppress AI usage.

That is what appealed to me. I do not consider student use of AI for specific tasks like brainstorming, organizing thoughts, and editing to be problematic. GPTZero assists educators in collaborating with students to teach responsible AI application.

Do you see other opportunities to build companies around the problems AI creates?

Kim: Yes, most notably within AI governance and evaluations.

Returning to regulated sectors, one must ensure that AI avoids irresponsible handling of personally identifiable information within education or healthcare. Those sectors feature strict regulatory frameworks, prompting the emergence of infrastructure enterprises designed to ensure AI products handle such data responsibly.

I firmly believe opportunities exist to build large, successful, and profitable enterprises addressing the complications introduced by AI.

What does GPTZero’s sale tell you about which AI products can become durable standalone companies and which belong within larger platforms?

Kim: I cannot definitively say whether GPTZero represents either scenario. They had encountered acquisition interest from very early on. This particular opportunity emerged earlier this year, presenting a compelling synergy narrative alongside Superhuman, formerly Grammarly.

The founders and board concurred that combining the entities made sense. Nevertheless, they could just as easily have maintained independence. Another AI detection firm named Pangram performs well and remains an independent, venture-backed enterprise.

It remains unclear whether this category is entirely unsuited for standalone survival. We evaluate each instance on a case-by-case basis. True visibility into market trajectories, financial sustainability, and industry evolution is required before deciding whether to pursue strategic acquisition or independent growth toward a potential public listing.

Reach has backed more than 180 companies. What patterns have you noticed among those that exceeded expectations?

Kim: The reality of venture capital is that a minuscule fraction of investments generates the vast majority of returns. Given the outlier status of those successes, pinpointing universal principles predicting an infallible exit is difficult. If we could do that consistently, we would exclusively execute those deals.

Still, certain commonalities emerge across our winners. First is an exceptionally smart, gritty, genuinely mission-driven founder or founding team, frequently possessing a profound personal connection to the issue.

Second is a nonconsensus market insight. This frequently stems from firsthand experience with the problem—such as a former educator encountering the issue directly.

Third is a defensible and scalable business model.

The presence of a nonconsensus insight is intriguing because it makes these companies appear unusual and potentially uninvestable at the start. Even internally, they frequently represent our most polarizing opportunities. Voting tallies often reveal several opposing voices alongside just enough affirmative votes to clear the threshold. Ten years down the line, those turn out to be our top investments.

People lose sight of this dynamic in the current climate, yet the premier opportunities are frequently the most nonconsensus ones. Those attract the most creative and interesting founders, allowing entry at reasonable early valuations to help transform them into consensus bets.

Reach says its first two funds have returned investors’ capital. What produced those returns?

Kim: We are certainly not immune to the power-law distribution inherent in venture capital. Our inaugural fund has achieved a 2.2x return driven literally by two investments. Our second fund has delivered a 1.2x return stemming from a single investment. These figures reflect cash distributions.

Particularly within the second fund, considerable residual value remains, so we will monitor how high that multiple climbs. Securing one fund-returning exit is fantastic; achieving two or three is extraordinary. That remains our ultimate aspiration.

How has that experience changed your approach to ownership and follow-on investing?

Kim: We have experienced prominent exits where, given the enterprise’s high profile, observers might be surprised to learn our share of the returns was relatively modest. That is purely a function of ownership calculations.

From our initial fund onward, we have meaningfully scaled our target initial ownership. We now strive to secure as close to 15% upfront ownership as possible.

Achieving this requires writing slightly larger checks while reserving a slightly smaller proportion for follow-on investments, placing greater emphasis on the initial check size. That balance is crucial for exit math and distribution calculations.

What role do secondary transactions play in getting liquidity?

We have grown highly proactive and deliberate regarding liquidity avenues. A significant share of distributions returned to our investors stems from secondary sales—liquidating our shares during subsequent funding rounds prior to a formal corporate exit.

We evaluate any such opportunity as it arises, weighing our duration as shareholders, the liquidity yield, and our estimation of remaining upside.

As private companies remain private for extended periods, early-stage investors are increasingly securing liquidity via secondary transactions. I would like to think we identified that trend early, though it has firmly entered the mainstream today.

Occasionally, when we perceive substantial remaining upside, we actually acquire secondary shares. GPTZero serves as an example: following our Series A investment, we purchased secondary shares, an outcome I am thrilled with given how successfully it transpired. For us, selling happens frequently, though occasional buying occurs as well.

Related Crunchbase query:

• Global Venture Investment In Edtech And Education-Related Startups In 2026

Related reading:

• ‘Nobody Wanted to Give A Former Principal Money’: How An Educator Built An Edtech AI Startup With $63M From VCs

Illustration: Dom Guzman

Frequently Asked Questions

• What is Reach Capital? Reach Capital is a San Francisco-based investment firm founded in 2015 that focuses on sectors including learning, health, and work.
• How much capital does Reach Capital manage? In August, Reach announced its fifth fund of $265 million, bringing its total assets under management to nearly $1 billion.
• What type of investments does Reach target? The firm targets pre-seed, seed, and Series A rounds, having backed more than 180 companies to date.
• What investment breakdown does Reach focus on? Its investments are roughly split as 50% learning, 25% health, and 25% work.
• How does Reach approach initial ownership stakes? The firm aims for close to 15% ownership upfront by writing larger initial checks and reserving less for follow-on rounds.

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