Education: A Market for Investment?

As venture capitalists look for the next growth sector in which to invest, there has been much talk of the mobile and education, or ed-tech, spaces being the ones to watch. The mobile market will continue to grow and is an obvious choice, but the education space is not one that has traditionally attracted much attention from venture capitalists or angel investors. In fact, the National Venture Capital Association does not as yet list education as one of the sixteen main categories in which its members invest.

Education, internationally, is a multi-billion dollar industry, so why does it attract such little investment and why, if at all, is this set to change?

Rafael Corrales is the co-founder and C.E.O. of LearnBoost, a San Francisco-based start up which aims to provide administrative software to schools and save them “an order of magnitude on their costs” in the process. The company was voted one of the top-ten start ups of 2010 by ReadWriteWeb.

LearnBoost has garnered funding from some of the investors who previously backed companies like Skype, Twitter and Linkedin, but Rafael insists that getting the funding was “not easy,” and investors are by no means rushing out to back ed-tech start ups.

“These guys see a thousand plans, a thousand teams and a thousand companies all the time. One of the hesitations about education in general is that it’s a lot slower moving than other spaces. Basically you still have to sell into schools. The hesitation is that it takes schools a long time to adopt innovative software, and so it isn’t easy by any means.”

Despite this, he admits that LearnBoost “received funding before we had the product, so I think that maybe people are getting a little more excited and they’re warming up to education. You know, everybody says they’re looking at education or that a lot of investors are.”

Bernard Goldbach is the senior creative multimedia lecturer at Tipperary Institute. He believes that the predicted growth can be accredited to “the rise of Personal Learning Networks (PLN’s) on the heels of vibrant social networks.”

“There’s a serious evolution towards personal learning networks over an imposed virtual learning environment. Over the past two years, students and parents and professionals have decided to use all these new technologies, some of which are apps, to develop their own potential and skill base through personal learning networks. Those PLN’s have changed the face of what it means to be effective in the virtual learning environment.”

“Facebook and Twitter and every other social networking have increased the expectations of what the student would want to see in their own education network. So if they develop an interest in learning online, most of the time they spin it over to making sure that whatever they’re learning, trickles into their own personal networks and then it becomes a PLN.”

These heightened expectations of what students want from educational technology has led to a dearth of start ups in this field, according to Rafael Corrales. This lack of enterprise in this field could prevent the predicted growth from becoming a reality.

“One of the problems I hear from investors is they say that there aren’t enough people trying to tackle education, there’s a supply and demand problem, and so a lot of folks say they’re interested in education and then they see the few companies that are working in this space and it’s just not to the level that they’re expecting.”

“If investors keep signalling their interest in education then maybe more people will start education companies, and then this problem will fix itself. Until then, it’s one thing to say you’re interested in education, it’s another to actually invest in education companies, which very few investors have done consistently.”

LearnBoost aims to tackle the difficult education market through a bottom-up approach, offering the software free to teachers and students and then offering a “freemium” price to the schools.

“We’ve started with our first product which is a teacher-focused product. It’s a grade book, lesson-planner and a whole bunch more, integrated with Google Apps.”

“This bottom-up approach is very new, and there’s no guarantee it’s going to work for any business let alone my own, but in theory it makes a lot of sense. For us specifically, we give a free product to teachers, teachers start using it, they invite students and parents; a bunch of people start using it and effectively, schools convert.”

“It’s certainly a change from the past where people were trying to sell top-down and they just couldn’t make it work. So, in theory it makes a lot of sense but there aren’t a lot of winners that have gone bottom-up in education yet, so it’s kind of a new frontier, if you will. It’s one of those ‘we’ll see what happens’ approaches.”

If Rafael Corrales’ and LearnBoost’s approach is successful, then the educational technology market could indeed be one to watch in the near future.

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