3 minute read / Nov 1, 2012 /
The challenges facing startups serving K-12 education
Ariel Diaz wrote an insightful post in PandoDaily yesterday outlining the state of affairs in online education. Ariel touched on the history of education, catalogued the problems of the status quo and pointed to a few innovative initiatives.
Most Edu Innovation is Post-Secondary
Reading the post and reflecting on the startups I’ve seen, I concluded most of the innovation in education has occurred in post-secondary education instead of K-12, despite the fact that the K-12 market is about 50% larger in dollar terms than the post-secondary market.
For example, massively open online courses (MOOCs) like EdX and CourseEra target university students. The major for-profit education companies, Capella and Phoenix, serve university students. 2Tor/2U brings online education to offline colleges. And so on. But the same innovations aren’t present in K-12.
The Two Limiting Factors for the K-12 Market
Why is this? I think there are two limiting factors for serving the K-12 market. First, there is a perception challenge. Any business that is too successful serving this market will be lashed by the public. “You’re making 30% EBIDTA margins on the backs of sixth-graders?!” It just doesn’t sit well with parents or tax-payers. Ultimately, this reaction becomes a public policy issue - but again it’s just a perception issue.
Second is a more tangible and addressable problem: it’s hard to sell to K-12 Small purchasing decisions for software are delegated to each of 14,000 school districts. Depending on the regulations of the state, every principal has the authority to authorize purchases under $25k unilaterally, so I’m told. This discretionary market totals $350M, but imposes significant costs of direct sales to principals.
Anything greater requires budget approval, RFP processes and immensely long sales cycles driven by committee approval - aka government sales. And startups can’t afford to compete and wait for these decisions to be made.
K-12 Distribution Hacks
As a result, startups serving the K-12 market hope to reach teachers and students through consumer marketing channels like the web and mobile applications, circumventing the traditional sales process. This is called the consumerization of education - a parallel to the consumerization of the enterprise. EdModo has demonstrated great success aggregating 10M users or thereabouts in this fashion. Perhaps they will serve as a conduit for other startups.
Recently, another channel has been created in NYC through a program called InnovateNYC. Steven Hodas formerly of the Princeton Review and Contnu a continuing learning company is helping edtech startups navigate the the NYC Department of Education. It’s an encouraging sign that large school districts are looking for innovation, enabling startups to reach their target customers, establish fit, all while skirting the monolithic RFP processes.
Won’t somebody please think of the children?
I hope programs like InnovateNYC spread and I wish distribution channels like EdModo enable startups to reach, empower and educate students in K-12. They could make a world of difference.