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Investment Opportunity in EdTech
Technology is finally disrupting education
- Schools are adopting digital products en masse.
- Digital transformation in schools is accelerating. 2,000 districts are now 1:1 computing.
- There is a massive open market share for the taking.
Technology has created enormous industry fragmentation
- After decades of an industry dominated by a few large publishers, we are seeing an explosion of new digital products for schools.
- The titans of educational publishing are falling, and early stage companies are quickly eroding their market share.
- There is huge opportunity for growth in EdTech similar to digital advertising 15 years ago.
- Teachers are fed up with school purchasing bureaucracy and are driving transformation from the bottom up.
- Education reform is driving adoption of technology nationwide – e.g. Connect Ed.
- Adoption of the Common Core Standards will require 100% online testing as well as require new ways of differentiating instruction.• Digital transformation in schools is accelerating nationwide.
Seed Stage Opportunity in EdTech
Series A stage and later is very crowded.
- $1.1B invested in EdTech in 2012.
- 70% of funds went to 10 companies (of 246 total investments).
- Valuations are inflated at these later stages –> lower investment returns.
Seed stage investing is dominated by angel investors who don’t understand the education industry.
- Education is a very complicated and nuanced Market.
- Everyone thinks they understand education because they went to school themselves or have a child in school.
- They don’t understand basic teacher and school problems.
- They can’t help EdTech entrepreneurs. In fact, sage advice for a consumer-focused start-up can prove disastrous for an EdTech start-up (e.g. freemium model).
The EdTech Fund can better choose investments and also help start-ups become successful.
- Proving out and testing the business model with feedback from schools, teachers, and our network of experts => reduced investment risk, higher returns.
- Hands-on investment approach. e.g. leveraging personal networks within schools to walk entrepreneurs into a school to get a sale => reduced investment risk, higher returns.
What are our investment criteria? We invest in products that:
- Create greater student engagement,
- Give teachers greater insight into what students know or are learning, on a real-time basis, so that teachers can better plan their lessons, break their classes into appropriate groups, and deliver differentiated instruction,
- Make teachers and administrators more efficient so they can focus on teaching (not so that we can reduce the number of teachers).