Winter Is Coming?

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Funding to education-technology companies is booming from $259M in 2010 to over $1563M in 2014. Overall, there is more than a 503% growth rate in educational investment during the period from 2010 to 2014. In first quarter of 2015, there is a new high record with a total of $641M investment. However, the amount of deal has fallen from 194 in 2014 to 158 in 2015, which probably indicates that investors has reconsider the investment decisions in the field of education, they are more inclined to invest in the later stage instead of investing in early stage.

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CB Insights: Investment in education technology, 2015

Why investors become more cautious on educational technology investment?

The venture capital and private equity investment industry is experiencing a cold winter right now, probably as a result of the barrier of the economy development. “Investors seem to be taking a step back from the education industry in 2015.” There are fewer high-quality educational technology projects for investment. Since a lot of startups are still at the early stage, it is hard for these startups to obtain profits at the present, which means it will take a long period to get investment payback for venture capital and private equity firms. In addition, education entrepreneurs have encountered difficulties as well:

  • What kind of role do teachers play in educational technology firms?

Outflow of high-quality teachers: Education technology programs mainly appeal teachers by providing attractive salary, however, this subsidy is not sustainable, when traditional education institutions offer more competitive salary, then teachers will gradually leave.

  • Conflict between customization and standardization

Most delivery services of education technology firms are standardized process. In order to expand marketing share and achieve large-scale development, a lot of education technology companies have to provide standardized teaching service. Therefore, teachers can not give insight into what kind of learning needs with individuals. The problem is that education is a field that requires competency-based instruction, students need individualized teaching processes.

  • Product similarity

There are a lot of education technology platforms provide similar products and services. Branding and product distinction should have lead consumers to distinguish and choose the right products for them. But the increasing similar products will lead to a loss of brand loyalty as well as the amount of users.

After all, learning is a process full of pain and requires effort from students and teachers. The utilization of technology cannot solve all the problems. Some people doubt that whether technology produces new educational value. Generally speaking, the biggest advantage of technology is to expand access to education resources, providing new service models, which also reduce consumer’s time and money expense. Therefore, if education technology firms can build a close relationship with teachers as well as assure quality and availability of these teachers, then the brand loyalty will gradually be fostered among students and their parents, market share and profit will obtain increase as well. There are too many uncertainties in capital market and no one can predict what will happen to it in the future, educational entrepreneurs should figure out how to stand out among business competition and survive from risks of market.

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CB Insights: Funding To VC-Backed Education Technology Startups Grows 503% over 5 Years.

EdSurge: Education Technology Deals Reach $1.6 Billion in First Half of 2015.


Bill Gurley to Unicorns: Winter Is Coming. You Ready?

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