Why Education Startups Do Not Succeed (2011)

I&#x27;ve told this story before: Back when I was in college, I had a summer internship at a place that was a service center for the K-12 schools in a large county. Microcomputers were the big new thing. We had a facility with one of each kind of computer (Commodore, Apple, Radio Shack, etc.) and all the software we could lay their hands on. Teachers could come in and try things out.<p>My impression was that the &quot;educational&quot; software was extremely crude and one-dimensional, basically glorified flash cards. Today, the &quot;educational&quot; software is Web based, and more flashy, but still retains that lack of breadth. It&#x27;s hard and expensive to write interactive software, so a lot of the apps are basically one or two templates, with different sets of data &#x2F; parameters for different lessons.<p><i>Here&#x27;s a picture. Move your mouse around. When something lights up, click on it, and a little box of text will pop up for you to read.</i> I kid you not. This is real. Today.<p>Now I have two kids who are in high school. We have acquired (can&#x27;t say bought in most cases) piles of educational technology, yet little or none of it was &quot;EdTech.&quot; The most glaring example was Microsoft Office. The kids used it to create reports, presentations, drawings, etc. It has been supplanted by Google Docs, which they now use heavily, including for collaborative assignments.<p>We&#x27;ve played with Jupyter&#x2F;Python. My son is learning solid modeling using some free app. One of them uses DuoLingo daily, as does my spouse.<p>Some of their educational technology is still in the analog domain: Musical instruments. ;-)<p>I think the take-away for me is that we are providing our kids with technology that supports their education, but it isn&#x27;t written for kids. It&#x27;s the same stuff that grown-ups use. Jupyter&#x2F;Python is an example -- it&#x27;s my primary computing tool for my job. Another common feature is that these are <i>creativity</i> tools, not <i>consumption</i> tools.

Ah yes, the annual resurfacing of this blog post :) unfortunately I think most of it is still true. I should do a follow up...<p>Edit: I&#x27;ll address the comments&#x2F;thoughts here in a follow up blog post. Glad to see so many people thinking about this space. It&#x27;s a great thing for the world to have entrepreneurs building here.

&gt; The average, middle class person thinks about education as an expenditure, not an investment.<p>The way I remember it, middle class folks in Kansas City suburbs really, really care about the quality of their schools and levy property and sales taxes to fund it. Rural Ohio townships where dual earners are making 17k less than the national median for such households may not have a lot of middle class to speak of.<p>Cost and outcomes have always been a tradeoff. 1:1 tutoring is the gold standard for educational outcomes. We know that from there, outcomes fall as teacher:student ratios rise. This fundamentally puts a cap on returns to improved quality -- if your improved school outcome is comparable to adding one additional teacher per grade level, well, you better be cheaper than those teacher&#x27;s salaries. And good luck finding that data in the first place. It&#x27;s not easy to convince folks to run the experimental treatment on their children to get that data.

I worked for an Education startup a couple of years ago. They had a really good math learning product which blew away the competition in terms of software quality but they didn&#x27;t achieve exponential growth. It was linear growth but at a very good rate. The trick was to sell directly to schools and educational institutions.<p>There are new challenges there but it&#x27;s also very high-reward. You can sell 1000 licenses from a single deal with a school. If you get a government public school contract you could be looking at 100k licenses from a single deal.<p>I think that companies which do big b2b deals have become greatly undervalued. VCs are so obsessed chasing exponential growth curves that they seem to have forgotten that the earth only has limited population and that buying power has become much more centralized and is becoming increasingly centralized.

I&#x27;m currently working for an education startup right now. We are struggling. Have been for the past few years. The biggest problems I&#x27;ve noticed:<p>1. Cost. When you deal with school districts, you usually sell for X number of devices. So for example, all devices for 5th-7th grade, something like that. When you sell alot, schools will usually ask for volume licensing. Schools don&#x27;t want to see prices above $5. This goes for devices for the quality of the devices they purchase. Often, the student device is cheap, low-powered, and in the case of Windows devices, packed to the brim with all sorts of software running in the background: web filters, virus-scanners, and some educational apps. Top that off with apps that students install like Spotify and games, it slows the machine down to a crawl or causes problems that might interfere with your software solution.<p>2. Different school districts have different needs. Although our software solution was initially meant to be for general use by all schools, we kept running into school district that needed very specific needs to that school or district. That lead to developing new features that only a small handful of school district would use, sometimes confusing users who did not need such features, or didn&#x27;t even know we had the feature.<p>3. If your software solution works with student information systems data, it can often be a nightmare getting school districts to create that data.<p>4. School IT teams are...pretty terrible. Or rather, they&#x27;re swamped with so many issues from so many products and devices, that they care very little as to learn how to deploy your product properly. Have documentation? Trust me, they probably won&#x27;t read it. You will most likely get an e-mail asking how to deploy.<p>5. Trials, trials, trials. Schools aren&#x27;t going to pay up just because they see a video demo of your product. They&#x27;re going to want a trial at minimum for half the school year, maybe more. Then...<p>6. ...Politics. Decision to purchase needs to be approved by some board.

The article correctly identifies consumer-facing education businesses as being incredibly difficult. I used to work in education and Chegg is the only consumer-facing company I can think of in the industry. Most other education companies have either sold or partnered with schools (Neverware, Clever, Jamf, etc). One of the interesting things with the market is that it&#x27;s difficult to start penetrating districts since school budgets can vary year to year AND because many purchases have to be approved by school boards. But as soon as you&#x27;re in, you essentially have a monopoly for a number of years. It&#x27;s enterprise sales without the immediate huge money payoff. That said, there&#x27;s a lot of money out there in education

This article was written in 2011, and I think since then with the &quot;learn to code&quot; movement becoming so popular and coding bootcamps promising to help people get software development jobs, things have changed a bit--at least for edtech companies teaching programming skills.<p>There are a ton of popular websites that teach people coding&#x2F;software development&#x2F;design skills online now that have grown incredibly over the last few years, but still not really getting to mainstream status. Treehouse, Code School, DataCamp, Udemy, Frontend Masters, Udacity, Thinkful, Codecademy are just a few popular websites where people can learn to code today and all of them have a subscription plan. I don&#x27;t think any of these have reached &quot;mainstream&quot; status, but there are definitely a lot more websites and applications today teaching people to code via subscription plans than there were 6 years ago.<p>Whatever your thoughts are on the whole &quot;learn to code&quot; movement, it&#x27;s clear that the landscape for edtech companies teaching programming&#x2F;software development has changed since 2011. Will any of these companies teaching people to code ever reach &quot;mainstream&quot; status, I don&#x27;t know.

I built Textfyre in 2007 and closed in 2011. Gates Foundation put our ideas in their grant program and put all their resources into existing publishers. Later, Pearson was on NPR spouting many of Textfyre’s pitch points. None of these companies have figured out Interactive education or reduced cost or improved quality.<p>I still believe we could have, but we couldn’t convince others. Mostly because a real MVP would have cost millions to create.<p>But we could have saved states billions by replacing textbooks with online, interactive, cross-discipline content.<p>The market is closed to startups. The industry is fighting disruption in every way they can.

Lots of solution-focused dialogue here but from my experience, I&#x27;ve come to believe that education startups fail because the education marketplace is actually a loose confederation of communities and consumer preferences are more akin to individual values and beliefs. This makes it really difficult to market evidence-based solutions or scale your sales strategy.

Couple of other causes:<p>- It&#x27;s very hard to measure to value add of education; people have spent lives working on this<p>- Only half the value of educational institutions comes from educating people; the other half comes from the credentialing where they pick out the &#x27;brighter&#x27; individuals, but measuring how much a credential is worth is almost impossible for most individuals

Might have some good points, but:<p>- As it says in the post, there is a lot of generalization. And usually generalized advice for something as specific as building a startup is not good<p>- This is 6 years old - not sure if it still applies. A lot has changed in the tech possibilities since then

There is another facet to this equation. Think about an investment banker. The skills an investment banker learns in college are largely irrelevant to his job.<p>One could say that his degree was entirely a waste of time, yet in order to qualify for a job in investment banking you need to go to a prestigious school and excel.<p>I see many spaces where education is largely irrelevant and functions only as a filter to reduce the supply of people who are qualified for a job.

Unfortunately I’m on my phone and I don’t have access to my laptop that has my research on this. Sadly, ed tech doesn’t work. The UK realized this. The US is starting to, state by state. This is not to say it can’t work. So far the startups have issues with not being able to provide an innovative product that works reliably.

What about companies like The Great Courses (formerly teaching company) that takes out full page spreads in the WSJ on a regular basis? Are they still niche?

Interesting article! If you&#x27;re thinking about targeting consumers in edtech, there&#x27;s a lot of good advice in here. My company mainly sells to medical students, which are a highly incentivized group of consumers, so we can avoid some of the pitfalls mentioned in the article. However, most of the action in edtech is focused on selling to institutions because that&#x27;s where the money is. The good news is institutions are more willing than ever to try out new technologies if you can convince them you can impact recruitment, retention, graduation rates, etc. Of course, that&#x27;s easier said than done. Not many startups can wait around for 5 years to do a comprehensive research study. And you get all the classic problems of selling to institutions (and magnified in education): slow sales cycles, multiple decision-makers, politics, etc.<p>I think an interesting problem in edtech today is there are a lot of &quot;startups&quot; that fit in that dangerous area between a small business and a high-growth startup. You&#x27;ll find dozens of companies that help improve mathematical skills, create STEM games, or build products for improving reading and writing comprehension. A lot of these companies might grow to be multi-million dollar companies over several years, but they won&#x27;t fit that &quot;classic&quot; startup growth curve. Since venture money is flowing relatively well (and a few VCs focus specifically on edtech), a lot of these companies get funded. But there&#x27;s a dilemma for these entrepreneurs: what do you do when you realize that your company is growing 2x each year (which is great!), but not at 10x where your investors want you.

What this post is lamenting is the loss of some actor like MECC. We had great software written for students (not adults) at one point. Many of us here have used it and fondly remember it. Titles like Oregon Trail, Reader Rabbit, etc...<p>Unfortunately, MECC got spun-off from the actual Minnesota education system, then purchased by a giant ed-tech company and left to wither. The endowment that MECC (in its purist form) left behind faded in time.<p>There is still a lot of great educational software out there. It&#x27;s just all locked away on a MacOS 9 box, tied to libraries and runtimes that never made the jump to Mac OS X and then iOS.<p>From the business side of it, we&#x27;d honestly need something of a PBS-like software company to reconstruct what we lost with MECC. I think that&#x27;s the only way it&#x27;d work. The software would have to be made, not because it was profitable, but because it needed to be made and was a good thing for our society to have.

I understand this article is a bit outdated, but companies like Duolingo or Clever seem to prove a few of the author&#x27;s arguments wrong.<p>One would think there would be a market for Duolingo style apps for other subjects, such as mathematics, where the user is simply charged on a subscription bases. Could such a business not survive?

There&#x27;s also the issue that single point tech solutions often don&#x27;t help schools, or districts, in a meaningful way.<p>This is because &quot;the tech&quot; is just the tip of the iceberg and there&#x27;s a disconnect between the districts that purchase software and the teachers who are left to try and figure it out on their own.<p>I wrote in more detail about this issue here:<p><a href="https:&#x2F;&#x2F;www.forbes.com&#x2F;sites&#x2F;forbestechcouncil&#x2F;2017&#x2F;11&#x2F;13&#x2F;want-a-modern-school-system-technology-is-not-enough&#x2F;#272169d343c6" rel="nofollow">https:&#x2F;&#x2F;www.forbes.com&#x2F;sites&#x2F;forbestechcouncil&#x2F;2017&#x2F;11&#x2F;13&#x2F;wa...</a>

I am trying to build an online coding school for kids ages 6-13. I mostly agree with what&#x27;s being stated because we already have customers in China, Korea, and Japan despite doing no marketing there. They are hard markets to ignore, especially when US parents are a harder sell. In order for us to be successful in the long-term, we must be a cross-border company.<p>Coding is one of the things that parents are increasingly willing to pay for, but it is still in the process of becoming a middle-class family demand.<p><a href="https:&#x2F;&#x2F;block.school" rel="nofollow">https:&#x2F;&#x2F;block.school</a>

I have a 4 year old, and I have found most of the educational things that work well at a young age are crafts and STEM based kits.<p>I was looking at the apple app store today as we were waiting for an appointment. It is quite flooded with all sorts of educational apps, but most that I tried were of low quality. Performing a search for the best reading or math app did not improve much.<p>I think there may be an opportunity here, but it would take a team with diverse talents and not just a team of developers to build something good.

I appreciated the point that VCs think about education differently than the masses.<p>Reminds me of the AirBnB guys pitching their original idea of people renting out their couch for strangers to sleep on and getting thrown out by virtually all of them. “Who would EVER want that??”

I joined an edtech company earlier this year: yellowdig.com. I think the thing I&#x27;d echo from this post is that time definitely needs to be on your side. Having connections also really helps. I&#x27;ll keep the points about cost in my back pocket.

If you are a startup marketing for the Asian market especially China, feel free to send your BP to me(tianshuo@galaxyinternet.com), we are a VC that helps foreign startups (and local startups) understand the very complicated Chinese education market.

In China(or South Korea, or Japan), it is totally a different story. Majority of the parents think education as an investment, thus one of the best places to do an education related startup would be in China.

Good points. I think the blog post would have benefited from a definition of the &quot;education product&quot; the author has in mind, because otherwise it remains a little vague.<p>I can think of at least a dozen educational services and products and it&#x27;s possible&#x2F;likely the optimal growth strategy would be different for each of these. For example, tutoring service (in person or remote), learning web application, learning mobile app, classic content products (print textbook, digital textbook, recorded video lessons), new-media content products (e.g. new apps or learning modality), etc. Then there is the whole &quot;credentialing&quot; aspect, which we all hope will go away but currently it&#x27;s still a very important: people are easily impressed by big-name universities, and three-letter degree acronyms.<p>The &quot;edtech space&quot; is very interesting. The OP is totally right that it&#x27;s not obvious how to make money given that neither schools nor students have money... (Sure there are rich kids and motivated parents who can pay and they will enjoy the value, but it&#x27;s a very ugly thing to deny access to knowledge to someone behind a paywall&#x2F;subscription just because they can&#x27;t pull out a credit card and follow the funnel.)<p>In addition to the traditional for-profit startup model, there are big developments in the ed-tech sector by non-profits like Khan Academy. Some of the best learning UX&#x2F;UI and content to come out in last decade is from KA. More generally, the open educational resources (OERs) are starting to be a thing now... there lots of good open content and there is potential for companies to be &quot;service providers&quot; on top of the vast sea of &quot;commons.&quot; Open source gave us an interesting last two decades. Now imagine what will happen when open content becomes mainstream too?<p>On the other hand being too open with the content and starting with a &quot;yes take it all for free&quot; strategy is a sure way to end up out of runway. How many non-profit projects shut down because of lack of funding. Aren&#x27;t there always strings attached when receiving funding from governments, NGOs, and philanthropists. What if they change their mind next year? Or two years form now? There is something beautiful and robust about a self-sustaining project like a for-profit startup. I know teacherspayteachers and other for-profit projects that are doing very well. Definitely something to learn there.<p>It all depends on what you want to optimize for, but the fundamental algorithm in the edtech space remains the same as in all other spaces: deliver more value than you capture and be in the right place to ride the wave up.

I must say, I really like how this blog does thorough use cases with deep information about the why things don&#x27;t succeed. 2 thumbs up!

This really is a great read. Reading the first bullet alone is worth its weight in gold.

I think what smart.ly is doing is pretty unique. Disclosure: I work there.

Thanks for this. Working on an educational cost reduction thing... :)

Top Hat — a Toronto based post-startup — has successfully gone against just about every point in this article. This article is full of whatever the inverse of survivorship bias is.

So education != tech education, correct?

Because academic-style and bootcamp-style education is largely a bullshit. As opposed to apprenticeship which happens in real business conditions.

Mods, please add (2011) to the title.

Meanwhile, Udacity...

Figure out a way to franchise high schools to make them into coworking spaces. All teachers are remote and all teaching happens over skype. The employees on site are there only to make sure the kids dont kill each other. Offer an insane amount of subjects (this is possible since there might be only 30 kids worldwide interested in xyz, now they can take a class on it).<p>The future of education is something along these lines I think. One could really make a lot of money with this because the costs will be fractional compared with real high school. Also no &quot;athletic departments&quot; fuck that shit.

This is well written, and frankly off the mark.<p>If online education got people cushy jobs the way university degrees get people cushy jobs - online education would be massively profitable.<p>That&#x27;s not the case. There&#x27;s nothing else to it.<p>Regarding online education in general:<p>Universities&#x2F;colleges should have to post their full curriculum, lecture notes and all textbooks and chapters used for each class - that&#x27;s enough.<p>There&#x27;s no need for businesses here - just tell us what you&#x27;re teaching your class, and anyone interested can go read the textbook. Make video lectures available as a bonus for a little bit of money, that&#x27;s it! A lot of students already don&#x27;t attend classes and just read the lecture notes and chapters needed.<p>These online education start-ups remind me of companies that take Craigslist and start adding unnecessary bells and whistles to justify their existence. We already have craigslist and it works folks. Stop trying to make a buck by being so incredibly boring.

This is interesting but not well structured.<p>Basically consumer facing spending is about delivering cheap services, whether that be babysitting style tutoring, textbooks or slinging a minimally viable educational experience that aligns with government programs.<p>Targeting schools is an enterprise play. You either have the ability to survive the public school sales cycle, or the connections to get the money people behind charter schools to buy your crap.<p>Personally, I think this is a shitty startup market. It’s an insular industry, most non-content plays have entrenched competition or a bunch of players (Microsoft, google, apple) doing a half ass job for free&#x2F;cheap. It’s easier to do enterpsie style business with normal government entities.<p>Targeting poor people is dumb because poor folk give zero shits about education. If you have the political juice, targeting a government agency with money to burn on helping poor people makes more sense.