The edtech breakdown from a team that has been there and built that.
Last year was a big one for edtech investment. Internationally, the market shattered its own funding record, with 813 different companies landing a total of $9.52 billion in investment. In the U.S. alone, educational technology companies raised $1.2 billion.
Those numbers verify something we’ve known for a long time: Edtech has serious potential — both for entrepreneurs who know the pain points and investors looking to tap into a growing market.
We know this because our team has been on the ground and in the weeds of edtech for years. Between us, we’ve founded an edtech company, built edtech platforms from the ground up and taken existing edtech software from dysfunctional to fully, and highly, functional.
Put simply, we’ve been there, and we’ve built that.
With that insider knowledge comes insight into not just the opportunities inherent in the edtech space, but also the challenges. Here, we’ve distilled that insight into some core pros and cons of the market as a whole.
Pro: Edtech is a proven market.
We tend to think of schools and universities as hubs of innovation. In reality, education has been slow to embrace the full potential of technology. There’s an irony to that, but more importantly, there’s incredible opportunity.
Think of it as uncharted territory. There are major problems yet to be solved, and even those companies who have found success capture only a fragment of the market.
Now you may be wondering how this jives with the standard storyline in education around budget cuts, meager salaries and lost extracurriculars. While it’s true that not all schools have money to burn, consider this: Schools and other institutions are starting to require more documentation and data reporting. This means they will have to shift their spending away from traditional processes and systems to more tech-forward options.
On top of that, the edtech market is not limited to educational institutions. Consumers and corporations play a huge role in this space. In fact, consumer-focused edtech companies raised $3.85 billion in 2017, and company-driven ones raised about $3.79 billion, according to Forbes.
Pro: The edtech market has capital
We mentioned at the start of this article that international edtech investment hit a record high last year of $9.52 billion.
What we didn't mention is that's a 30 percent increase over the previous year.
Compare that to fintech investment, which increased just 18 percent in 2017, according to Accenture.
There are other indicators that edtech is hitting its stride, too. Since 1997, edtech has brought in more than $37.8 billion. But the lion’s share of that capital — $23.4 billion or 62 percent — has come in the past three years.
Pro: Edtech scales
Think about how you decided where to go to college. You may have chosen your particular school based on its specialization, its sports or its location. But at their core, each school offered pretty much the same thing: a college degree.
Education is pretty much the same across the board. Yes, there are schools with different approaches, companies with different needs and problems unique to one target customer or another. But overall, if you encounter a problem, it’s almost guaranteed you will find an entire pool of customers looking for a solution to that same problem.
If you can develop a solid solution, word will get around. And the possibilities for the growth and scale of your business can be huge.
Pro: Education does not want to be left behind
Tech startups value speed — to develop, to market, to iterate. That pace has begun to filter into other industries, and even the largest and most bureaucratic organizations are starting to embrace phrases like “MVP” and “pivot.”
Education is no different. The industry may be coming from behind when it comes to tech savvy, but it does accept that technology and innovation are critical moving forward.
We like the particularly eloquent way Brian Voss, a consultant who specializes in leadership and information technology, put it an interview with EdTech Magazine: “In the 2020s, those universities that don’t find ways to adapt, improvise and overcome the challenges will, like the snows of yesteryear, be gone from this earth.”
Con: While the market is proven, it still lags
We’ve hinted at it a few times in this article, but let’s just come right out and say it: The major stakeholders in education are slow to act.
How slow is slow? In our experience, sales cycles can take years — especially if you miss budgeting season.
That is changing. More institutions are adding CIOs to their leadership — a sign they recognize the vital role technology now plays. And as we mentioned earlier, the demands around reporting and documentation are creating a demand for process innovation.
But it will take time. So businesses and investors delving into the world of edtech should be prepared — and get the sales machine running early.
Con: The nature of education makes it tough to target
A great product doesn’t necessarily equate to a great business.
That’s as true in the world of edtech as it is anywhere else — in part because a great edtech product has to pull double duty. It’s got to be great for the learner, and it’s got to make life easier for the teacher or administrator.
Many products in this space fail because they focus solely on the learner, assuming that’s the end user. In reality, the person purchasing your product is an administrator, who looks at this as an investment in productivity. And they will ask, “What’s the ROI?”
Some companies try to work around that problem by going straight to the consumer, but the B2C model is tough in the edtech space. Customer acquisition costs can be high, compared to the low sales price the consumer will demand.
B2B is a much easier way to go — if you can master the art of pleasing everyone. No easy feat.
In edtech, as with anything, it’s good to go into it with your eyes wide open, to both the opportunities and the challenges. Years of experience — we’ve seen the good, the bad and the ugly — have shown us the potential in edtech is huge. And it’s only just begun.