Home Venture Capital How To Catch A Unicorn In The Ed Tech Industry

How To Catch A Unicorn In The Ed Tech Industry

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In the world of venture capital and business start-ups, the greatest measure of success is a company that is valued at more than $1 billion and earns over $100 million annually. These businesses are called “unicorns,” and according to the analytics firm CB Insights there are more than 1,200 such companies operating in the U.S. today, over 500 of which were created in the past decade. So why is it that despite significant financial backing over the same decade – via venture capital and government funding – very few educational technology companies have reached unicorn status? Let me count the ways.

Incremental vs. transformational change

First, too many dollars are being spent on EdTech initiatives that provide incremental change, not the transformational change students and the education markets seek. The EdTech world is awash in solutions that offer only minor enhancements to existing systems, rather than revolutionizing teaching and learning. In 2020 the market analysis firm, HolonIQ, found that the majority of global investments in EdTech prioritized “productivity” or “supportive” solutions, while only seven percent of those investments went to companies categorized as “transformative,” a severe imbalance favoring short-term gains over long-term, systemic change.

Maximizing data usage, for good

Massive amounts of data are generated every day offering a wealth of information about learners’ preferences, strengths, weaknesses, and personalized data around their interests and passions. However very few EdTech companies have struck upon innovative ways to harness this information to enhance the learning experience. Companies are missing major opportunities to leverage data-driven insights to empower educators and improve student outcomes, opportunities that would draw investment.

The challenge of selling to school districts

Over the last ten years, less than four percent – $80 billion – of the $2 trillion in capital invested across sales verticals has trickled into EdTech companies with investments now down 90%, limiting their ` spark massive change. Many venture capitalists believe the solution is to sell big to school districts, but school districts favor incumbents, not startups, leaving startups and innovators out in the cold. This, in turn, cools off venture capitalists who can’t justify the risk of investing in a company that has no repeatable, predictable sales cycle. Given that the friction and politics in educational procurement won’t soon change, it would help immensely if VCs were to become willing to take risks for a longer sales cycle.

Limited resources for those disadvantaged

Achieving success in EdTech is not simply a matter of how much capital is being invested in initiatives, it’s also a matter of where the capital is going. Investing in minority founders of EdTech solutions and in those pursuing non-traditional education pathways is crucial, especially given that in many public schools (where innovative learning solutions are most needed) the majority of students are minority, low-income learners. Directing more capital and resources to founders with diverse backgrounds – embracing the adage that “those closest to the problem are closest to the solution” – can drive investment-worthy transformative change and create a more equitable future for all.

The role of philanthropic funding

Philanthropic dollars could partly offset the lack of venture capital in EdTech, but this funding rarely goes to companies on the cutting edge of technology. Most corporate social responsibility programs focus on known entities that are oriented toward maintaining status quo approaches to teaching and learning. Some organizations are pioneering new approaches to funding diverse education innovators. The Gates Foundation, for example, is investing in initiatives to improve motivation, engagement, and persistence in middle school math for black and brown learners. If other organizations were to channel philanthropic dollars towards innovative startups and diverse education innovators, it would amplify and accelerate the pace of progress in the education sector.

Intentional and inclusive product design

For years, the voices of students and teachers, especially those of black and brown learners and those plagued by poverty, have not been at the center of EdTech product design and development. That is changing and helping deliver products that hold the kind of promise and attract capital investment.

The way forward

There are several keys to unlocking the doors that will ultimately transform our ideas of what it means to teach and learn. But the most important one is adequate and effective funding: capital investment for ideas, initiatives, and programs; and financial support for the visionary founders who can catalyze transformative change, redefine education, and finally capture that elusive unicorn.

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