Startup to Watch: Knewton Raises $6 Million from Bessemer Venture Partners and Accel Partners

Yesterday, New York-based online education startup Knewton announced a big fundraising win with a $6 million B round.

Bessemer Ventures led the round and original investors Accel Partners, First Round Capital and angel investor Reid Hoffman put in some more money.

Knewton currently offers LSAT and GMAT prep courses online but the company is pursuing a much more ambitious vision. Its larger goal is to use its adaptive learning technology as a platform for online education that could be used by textbook publishers, schools, companies and other third parties. If the company pulls off this trick, it could be one hell of a business. After all, education is a multi-trillion industry.

“Education is the last of the information industries to move online,” says Knewton CEO Jose Ferreira, a former venture capitalist and derivatives trader at Goldman Sachs. “When it breaks, it breaks fast. And that’s going to happen in the next five years. All the education content will go online in the next 10 years. And textbooks will go away. The question is who is going to power that platform. It’s probably going to be one or two companies.”

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Why Now is the Best Time to Poach Talent

If imitation is the best form of flattery, I feel pretty good this morning.

The lead story on the New York Times Business section, “Secrets of the Talent Scouts,” picks up one big theme I highlighted three weeks ago in my online feature, “Startups in a Downturn,” which revealed the lessons of success from entrepreneurs and financiers who created great companies during past economic downturns.

Heck, the TImes even opened the story with the same guy I led with: venture capitalist Mike Moritz.

I want to return to this theme though because I still think a lot of people in business don’t realize the opportunity that exists now to poach world-class talent.

I’ll give you three examples I heard of just this week. I visited the offices of a Knewton, an online education startup in downtown NY. The CEO Jose Ferreira told me that the talent market is so rich right now that he is actually turning down Harvard grads who scored 1600 on their SATs. Peter Miron, the current chief technology officer of the company, was the former vp of product development of the troubled startup Vonage. He joined the company in May 2008 because he got sick of doing depositions for all of the company’s messy court battles.

Poaching opportunities also exist in big companies. Ferreira is in the market to hire an executive assistant. He said he is going to be able to hire the former EA of one of the top five executives at Morgan Stanley for less than half of what she was making at the bank. When Ferreira first heard people tell him that downturns were a great time to build your business, he sort of laughed. “Now I believe it,” he says.

Think of all the thousands of great people that have been laid off from Wall Street, various media giants such as Time Inc. and Conde Nast, and many other top companies. Even Goldman Sachs, the company that only hires A team players, laid off thousands of people. Where are all those genuises now? If you’re smart and opportunistic, you’ve already hired one of these folks in marketing, engineering, research, whatever.

If you have any open positions in your company, you should be digging through these resumes to find your next great stars. Or even if you don’t have any openings, you might want to make room for that special person who you’re going to need when the economy eventually picks up.