The inevitable problem for edtech products

Edtech Products VC Funding Problem

Edtech Products VC Funding Problem

It will probably come as no surprise to you that when you spend your time running a huge edtech site, you hear about more edtech products, software, apps, and tools than you could possibly imagine (or remember, or use). While running Edudemic, my (inbox) cup runneth over with such information, all unsolicited. Because everyone and their mother has edtech startups these days, or so it seems.

As of earlier this year, reports value the Pre-K-12 market at just under $8 billion dollars. Other reports have predicted it will reach nearly $60 billion by 2018. There were $1.25 billion invested in edtech in 2013. Year-over-year (2013 vs. 2012) funding for private edtech companies has increased 26%. And funding in the first quarter of 2014 represented almost 45% of funding for the entirety of 2013 in the same sector. According to Donald Cohen, the executive director of In the Public Interest, the education market is the last “honeypot for Wall Street”. The value of the education market (on the whole, not just edtech) is estimated around $788.7 billion (next year).

I think we can all agree: that’s a whole lot of money.

Based on a lot of the products I see and a lot of what I read, I often worry that with all the investment that’s happening and all the hubbub around the idea of the edtech market, most of what’s happening is people trying to grab their slice of the proverbial pie. There seem to be more pie-grabbers out there than people who actually have any experience in education (other than having one themselves), and an educational philosophy they can talk about. While some of them may come up with great products, if we adopt products and technologies just because they are out there, that doesn’t necessarily translate to improved education, learning, or teaching. That isn’t to say that there aren’t great edtech products out there that really fill a need that teachers have identified or make things a lot easier, and truly benefit students. There are. They just happen to be in the minority.

Making edtech products that people will use

edtech hand raiseSo what makes an edtech product take off? Regardless of what it is designed to do or what piece of the market it is targeted at, there are a few boxes that all products must tick to become widely used. Teachers are busy. They don’t have a ton of time to slog through figuring out something that is complicated to use. It needs to be easy to use and intuitive. Teachers also don’t always have the simple choice to use or not use a tool that interests them. Administrative oversight often means that tools that are given the thumbs-up must be widely applicable for many students and teachers. Tools need to align with standards, meet data privacy and security requirements, and more. There are so many products out there that sifting through them and trying them out isn’t feasible – especially if you need to pay for the product. Which is probably one of the biggest items – cost.

To make a tool that a lot of teachers are going to use, it not only has to be useful, it likely needs to be free. Schools don’t always have a ton of funding and teachers can’t always – and shouldn’t have to – shell out for this stuff themselves (even though there are many that do just that). The answer? Create awesome free products that teachers can use.

Money for free tools

vcWhich leads us to the overabundance of VC funding in the edtech market. VC funding seems to have become *the* answer to funding a great free tool for teachers. It goes something like this: Have great edtech idea, realize teachers aren’t going to be willing and/or able to pay to use it. Decide to make it free. Fund the development and ongoing maintenance, marketing and such with VC funding. Raise another round. Keep expanding the product’s user base and features. Keep raising more rounds.

There are many such products out there, many of which you probably know of, like Socrative. Remind. ClassDojo. Edmodo. Prezi. All well-known names in the industry. They’re great tools, and they’re free. But if they’re not charging for their services, the cycle of raise funds + expand will just keep going, until the funds and declining balance run out. And then what? Hope for a larger company to buy the product and continue to run it? Start to charge for the product and lose a huge chunk of the user base who can’t pay to use the tool? Hope that the users will be entrenched enough in the product that they’ll pay anyway?

Is there a happy ending with this somewhat necessary VC funded – free product model? How can products funded by people other than the users of the product set themselves up for long term survival without traditional revenues like advertising (a no-no for many edtech products) or payment for services? Share your thoughts with the Daily Genius community by leaving us a comment below, mention @DailyGenius on Twitter or head over to the Daily Genius Facebook page and share your thoughts!

Written by Katie Dunn

Explorer, eternal learner, animal lover. Perpetually drawn to the ocean. Adventure ready. Suffers from wanderlust. Likes chasing things down the sink with the little sprayer thingy.

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