Unconventional And Risky: How Reach Capital Finds Winning Startups

Before James Kim began evaluating educational startups, he experienced their products firsthand inside his own classroom.

The Reach Capital partner started his professional journey as a high school math teacher with Teach For America after earning a degree in astrophysics from Yale. Later, he worked in college access and Yale admissions, and he secured graduate degrees in business and education from Stanford before arriving at Reach. As an educator, he was an early adopter of ClassDojo, an experience he characterizes as “game-changing.”

His investment firm has also transformed over time. Established in 2015 following a spinout from NewSchools Venture Fund, the San Francisco-based organization initially concentrated on technology built for K-12 schools and districts. Its scope has since broadened to encompass learning, health, and work, with a portfolio featuring companies like ClassDojo, Cartwheel, Stepful, and Replit.

In August, Reach unveiled its fifth fund, a $265 million vehicle that elevated its total assets under management to nearly $1 billion. Having already supported more than 180 companies, the firm intends to fund roughly 50 additional teams through this latest vehicle, focusing primarily on pre-seed, seed, and Series A rounds.

Crunchbase News sat down with Kim to discuss how Reach’s foundations in education shape its wider investment thesis, the rationale behind backing AI detection platform GPTZero, and the reasons why several of its most successful bets initially divided the internal team. The conversation also explored how ownership stakes and secondary transactions influence the firm’s strategy for returning capital.

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 the time, it was a very simple tool for classroom management, and it completely changed the game for me. It has since grown into an extensive suite of products, but that experience proved to me 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, and our original focus was exclusively on learning and education technology — more specifically, technology sold into schools and districts.

Our founding partners observed the proliferation of devices in schools, one-to-one device ratios, and expanding broadband penetration. The underlying thesis was that we would witness a surge of technology serving students, teachers, and administrators to improve learning outcomes. That prediction materialized. Some of our initial bets are now household names within edtech, including Newsela, Nearpod, and ClassDojo.

Reach spun out of NewSchools Venture Fund, where three of our four founding partners had already begun conducting for-profit seed investing prior to 2015. Over time, we expanded outward from K-12 into higher education and consumer learning.

We were also increasingly drawn toward healthcare and the workplace. Health and wellbeing directly impact a student’s readiness to learn, which pulled us toward mental health, behavioral health, and developmental health. On the workforce side, formal education typically concludes in college, but individuals still require a bridge to employment. Once employed, ongoing learning remains vital, particularly in today’s landscape.

A few years ago, we officially cemented our focus by declaring that we invest across learning, health, and work. The connecting thread is that these represent the fundamental systems underlying human development and flourishing.

Historically, the portfolio breakdown has hovered around 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 provide input, and decisions frequently demand board-level authorization. We were already accustomed to navigating regulated products and complex go-to-market strategies.

Selling to a university or a K-12 district shares a high degree of complexity with selling to a healthcare system, hospital network, or insurance provider, particularly regarding regulatory and policy alignment.

Cartwheel serves as a great example of where our background provided an edge. The company offers mental health teletherapy, but its customers are school districts, and care delivery takes place directly inside schools.

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

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

Kim: We search for products and services that expand access to high-quality education, quality care, quality earnings, or some mix of those factors. We must clearly recognize the specific mechanism driving that outcome.

It is not enough for founders to pitch a software-as-a-service or AI tool and claim it will boost workplace productivity, implying employees might eventually earn more or enjoy their jobs more. That sounds plausible, but it falls short of presenting a concrete theory on how the product genuinely broadens access to better earnings.

Several members of our team, including myself, are former educators. We genuinely care about generating meaningful, impactful results.

We tackle access from both the demand and supply perspectives. On the demand side, we back products that foster delightful, impactful consumer experiences, such as Brilliant, allied healthcare training provider Stepful, and Replit, designed for what its founder terms “citizen developers.”

On the supply side, we back solutions that help schools, health systems, and enterprises operate with greater efficiency and effectiveness. WorkWhile, for instance, assists logistics and hospitality companies in hiring hourly workers more effectively while treating them better. We approach these challenges from both sides of the marketplace.

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 driving thesis. In my view, they offer the finest AI detector available on the market. However, their core philosophy was that the integration of AI within education should not face an outright ban. It should not be punitive or devolve into a constant cat-and-mouse game between educators and learners.

Given that professionals across industries utilize AI in their daily work, students ought to learn how to engage with it responsibly and thoughtfully. It was the first AI detector company I encountered with that specific mindset, rather than simply helping schools, districts, and universities restrict AI usage entirely.

That is what drew me to the company. I do not believe it is inherently problematic for students to use AI for specific tasks like brainstorming, organizing thoughts, or editing. GPTZero helps educators collaborate with students to teach responsible AI utilization.

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

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

Returning to heavily regulated industries, organizations must ensure AI systems do not irresponsibly handle personally identifiable information within education or healthcare settings. Those sectors operate under strict regulations, and infrastructure startups are emerging to help guarantee that AI products interact with sensitive data responsibly.

I certainly believe viable opportunities exist to build large, successful, and profitable businesses in direct response to 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 fits neatly into either category. They had been fielding acquisition proposals from a very early stage. This particular opportunity materialized earlier this year, driven by a compelling synergy with Superhuman, previously known as Grammarly.

The founders and board mutually agreed that merging the companies made strategic sense. However, they could have just as easily maintained their independence. Another AI detection startup called Pangram remains quite strong and continues to operate as an independent, venture-backed enterprise.

It remains unclear whether this entire category is incapable of standing alone. We must evaluate each situation on a case-by-case basis. Until we observe the long-term trajectory, financial viability, and market evolution, it is impossible to know when pursuing a strategic acquisition or remaining independent to eventually target a public listing is the right path.

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

Kim: The fundamental reality of venture capital is that a tiny fraction of investments produces the vast majority of returns. Because these successes are extreme outliers, it is difficult to identify uniform principles that consistently predict a winning exit. If we could easily spot them, we would exclusively fund those opportunities.

Nevertheless, a few common traits appear across our most successful ventures. First is an exceptionally smart, gritty, and genuinely mission-driven founder or founding team, frequently possessing a deep personal tie to the problem they are solving.

Second is a nonconsensus insight regarding the marketplace. This perspective often stems from experiencing the pain point firsthand as industry practitioners, such as a former educator.

Third is the presence of a defensible and scalable business model.

The presence of a nonconsensus insight is fascinating because it often makes these companies appear eccentric or even uninvestable at the start. Even internally among our team, these represent the most polarizing options. When reviewing the votes, many people vote no, but the deal manages to secure just enough affirmative votes to pass. Ten years later, it emerges as one of our top-performing investments.

People frequently lose sight of this dynamic in the current market climate: the strongest opportunities are frequently the most nonconsensus ones. Those bets often involve the most creative and interesting founders, allowing investors to enter at reasonable early valuations and help build consensus over time.

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 characteristic of venture capital. Our inaugural fund has generated a 2.2x return driven literally by just two investments. Our second fund has produced a 1.2x return based on a single investment. These figures represent actual cash distributions.

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

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

Kim: We have experienced major exits where observers might assume our share of the returns would be massive given the company’s prominence, yet our actual financial slice was relatively modest. That comes down entirely to ownership calculations.

From our first fund up to the present day, we have significantly raised our initial ownership targets. We currently aim to secure as close to 15% initial ownership as possible.

Achieving this requires writing slightly larger initial checks, reserving comparatively less capital for follow-on rounds, and dedicating more toward the initial investment. Managing this math is vital for ultimate exit returns and distribution payouts.

What role do secondary transactions play in getting liquidity?

We have grown highly proactive and deliberate regarding liquidity events. A substantial portion of the distributions returned to our investors originates from secondary sales—liquidating our shares during subsequent funding rounds prior to a formal corporate exit.

Whenever an opportunity arises, we evaluate it carefully. We weigh the duration of our holding, the potential cash yield, and the degree of future upside we anticipate.

As private companies choose to remain private for extended periods, early-stage investors are increasingly capturing liquidity through secondary market transactions. I like to think we recognized this trend early, but it has undoubtedly become mainstream practice today.

On occasion, when we perceive sufficient remaining upside, we actually purchase secondary shares. GPTZero serves as a prime example: following our Series A investment, we acquired additional secondary shares, and I am thrilled we did because the outcome was very positive. For us, selling happens more frequently, but we occasionally buy 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

?Frequently Asked Questions

01What sectors does Reach Capital primarily invest in?

Reach Capital focuses its investments across three core pillars: learning, health, and work, which the firm views as the essential systems underpinning human development and flourishing.

02How much capital does Reach Capital manage?

Following the announcement of its fifth fund—a $265 million vehicle—Reach Capital’s total assets under management have grown to nearly $1 billion.

03What is Reach Capital’s target ownership stake in startups?

The firm has increased its initial ownership targets over time and now aims to secure as close to 15% initial ownership as possible by writing larger initial checks.

04What role do secondary transactions play for Reach Capital?

Reach Capital utilizes secondary transactions proactively to secure early liquidity for its investors by selling shares in subsequent funding rounds prior to a final company exit.

---

Illustration: Dom Guzman