Are Education Startups The New Dot Com?
The growth of venture capital funding in the education market
By Dr. Rod Berger
The amount of education startups is now increasing at an exponential rate. At the same time, the amount of venture funding for education businesses is at an all-time high. In some ways, the rise of education startups resembles the dot-com boom of the late 1990s, however, the successive crash of the dot-com craze may not be inevitable for the EdCo boom.
Even though many investors and VC firms are lining up with wallets in hand, there are a substantial number who have real-world experience in the education biz. By putting skin in the game, they are offering business acumen and support services that fledgling enterprises need in order to stay afloat and succeed.
The Education Investor
Namit Bhatia is an education investor in Atlanta. He is a Georgia Institute of Technology grad with further degrees from Georgia State University. Bhatia started in the technology field as an analyst, but had the entrepreneurial bug and lead a succession of successful technology startups before entering EdTech in 2011.
“The first thing I ask is what is their vision for the company,” said Bhatia. “How will it help learners? What will their role be in the coming education landscape? Then I look at the passion of the individual. Why are they doing this? What lead them to make this decision? Next, I look at the team they have assembled. Does everyone share in their vision? If everything adds up on the personal side, we do a market analysis including the competitive landscape and what it will take to bring it to market. If the need is there, and they have a good grasp on the future of education, we can generally figure out the rest. Education is a very long-term business.
The buying cycle is extremely long, and you need to know the intricacies of the education buyer. Sometimes it takes five years just to gain traction. Return on investment can take even longer. The founder having sufficient grit and resilience to live and continue to learn through this period of limited success is what makes or breaks education technology companies. Sniffing out this grit in the founder through his or her passion is a paramount investment criteria all EdTech investors look for.”
From Startup To Success
Michael Toth is the founder and CEO of Learning Sciences International, iObservation, and the Learning Sciences Marzano Center for Teacher and Leader Evaluation. Learning Sciences International is one of the most influential publishers in the education space.
In addition, they work with school districts to create a culture of rigorous instruction focused on successful classroom learning, affirmed through human-centered research, metrics, and programs that revitalize classroom instruction and student learning. Toth is successful by anyone’s standards, but began as an Ed startup. He remembers the early days, and what he was thinking when he decided to launch his company.
“I was a grant director around research and development of technologies to enhance professional development and to transfer learning and practice,” Toth said.
“The university started a small business incubator encouraging faculty to start a business and we spun out a small group of our R and D team. We had a few contracts to help us do that and we were well positioned, the Pennsylvania Department of Education had a need for an online platform to deliver professional development for teacher certification to meet a new requirement. So we got our start as the statewide provider for that system using our core competencies of technology and professional development.”
You have to have a core competency and there has to be a market need. Identifying a market need is the hardest thing for an entrepreneur. You may have a great idea, but you need to get to know the education space, talking with educators, and attempting to figure out what their struggle is. Then you can bring your skill set to come up with a solution, and to gauge whether other people will want that solution.
K-12 public education is highly regulated, so it doesn’t function under normal market conditions. You need to understand the regulatory space; there’s a high threshold of domain knowledge to break into it. But it’s a place where you can really do good work. Any entrepreneur coming into this space must have a passion for helping kids. If you have only a passion for revenue, it probably won’t play out very well.
The situation at the university was changing. We were kind of working for ourselves anyway, but it was a lot more risk to be on the private sector side. We were very mission-oriented. I’m not sure there is a bigger gamble than launching a startup. But there is a point when you just have to do it. You’ll work harder than you ever thought possible. It is consuming. But you have to align what you are passionate about with your core competency, and find a solution for a market need. If you can make that alignment between passion, competency, and solutions, the time is right any time.”
EcoRise Youth Innovations is a newer EdCo startup that is now gaining significant traction. Gina LaMotte is their CEO and Founder. She is a social entrepreneur who is passionate about unlocking the power and potential of young people as leaders, innovators and visionaries. To say she started her company on a wing and a prayer is a slight exaggeration. It took her eight months to afford the wing.
Prior to EcoRise, LaMotte spent ten years working with innovative educational programs serving youth in Brazil, India, Nepal and Guatemala, as well as Harlem, New York, and Taos, New Mexico. In 2004, she moved to Austin, Texas and pioneered a robust summer and after-school program at a Title One middle school. She also built and led a youth cultural exchange program to Rio de Janeiro, Brazil, and served as a facilitator and counselor at the Global Youth Peace Summit.
While in graduate school at the University of Texas at Austin, LaMotte studied sustainable development and social entrepreneurship. She had the chops for the business, but taking off was a challenge. “I had spent months vetting the idea of EcoRise with hundreds of stakeholders, from students to school administrators, to business and sustainability leaders,” said LaMotte. “I would hold “venture launch meetings” with 20-30 community members in a public library. There was absolutely no security or assurance that the business was going to work, but there was a clear need and enthusiasm in the community – and my own drive to give it a shot.”
What Do The Buyers Think?
Ann Clark is superintendent of Charlotte-Mecklenburg Schools, a particularly large school district of more than 145,000 students. Clark brings a deep institutional knowledge to her role as superintendent of Charlotte-Mecklenburg Schools. As the district chief decision-maker, she is often faced with large purchasing decisions for technology or curriculum – many are from young, innovative companies that offer a seemingly better solution to the school system’s challenges. Clark views the question of doing business with technology companies with a careful lens. “It’s not just a question of having a better mousetrap. Buying new technology or curriculum on a district-wide basis is only a piece of the puzzle,” said Clark.
“Implementation is where the rubber meets the road. Is the company going to remain solvent for the next five to 10 years while we are using their product? What type of support do they offer? Is professional development needed? Do they understand our challenges? Does the new product replace an existing product, or is it something that will take additional time and resources from our educators? And most importantly, will the company be a true partnership with our district?
Companies don’t really compete on price, or at least not only on price. They compete on reputation and the ability to understand the value we place on a partnership. If they are introducing a totally new product, they may be competing for the limited time in our school day. There is a lot at stake for us when we make a district-wide decision.”
Boom Or Bust?
With thousands of new EdCo startups and tens of billions freely flowing into their coffers, it seems like the EdCo boom may have nowhere to go but bust. But education is on the cusp of some very profound changes. K-12 is in the midst of a technology revolution. True personalized learning, served up in a competency model with interactive features and virtual reality formats are offering our students learning opportunities that were unheard of five years ago.
Higher Education is experiencing its own disruption. With a reorganization of the way higher education is perceived, purchased and delivered, it will demand a fortune in new products and services as well. As is, education is a trillion-dollar industry. With all the changes, a few tens of billions in new swag may be just about right.
- The New York Times - After Belt Tightening, Venture Capitalists See More Promise in 2017
- Bloomberg - Who Gets Venture Capital Funding?
- The Boston Globe - MIT launches venture capital fund
This post includes mentions of a partner of MindRocket Media Group the parent company of edCircuit