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Venture capitalists learn to love education

Education isn’t what you’d typically think of as sexy. It’s practical. It’s serious.

But add a little tech and vavoom! Venture capitalists are very, very into it.

Michael Moe is CEO of GSV Capital, which has invested $100 million in education technology companies like Coursera and 2U. He said there’s a lot to like about education these days. 

Education as a whole is a big market—$2 trillion in the U.S. and $4.5 trillion globally—said Moe. “And it’s characterized by very few large players.”

Today, technology grabs only a slice of that spending. Moe estimates the e-learning market is around $80 million and growing.

There are big names angling for dominance, like Pearson, Google and News Corp. But Moe said that leaves plenty of room for small companies to hit big and grow fast. “I think the forces at work could compress that time from idea to mega-business into a much shorter period,” he said.

To see an interactive of 2013 venture capital deals in the educational technology industry, click here.

One of the companies trying to make the jump to mega-business is Remind101.

Basically, Remind101 gives teachers the ability to mass text kids and parents, things like homework assignments, test reminders, notes of encouragement. Like these:

 

Company CEO Brett Kopf says the idea originated back in fifth grade. “I have a bunch of learning disabilities,” he said, “I have ADD and dyslexia. I was diagnosed in fifth grade, and school was always really hard for me.”

In college, he realized reminders, like texts, could help him get stuff done. They could help him stay on track. 

So he and his brother set about building a company that provided that service. “I would drool at the thought of going to Silicon Valley,” said Kopf, “I thought it was some golden place where money just fell of trees. And it doesn’t.”

Okay. Money might not fall off trees.

But, since 2011, when Kopf and his brother got to Silicon Valley, they’ve raised more than $19 million from investors.

Remind101 is free for teachers. The company says teachers use it to send more than 80 million texts a month.

And, the teacher focus is part of the reason it’s so attractive to venture capitalists. There’s a shift in the education market. The customer is changing.

“In the past, the way that innovation came to schools was in a car,” said Jennifer Carolan, managing director of NewSchools Seed Fund, part of the NewSchools Venture Fund, a non-profit, philanthropic investment group. “A salesman would set up a meeting with a District IT administrator and in a few weeks time, the salesman would bring his computer and demo the product to the district decision maker.”

Today, she said, it’s all different. “We have teachers discovering apps and tools on their tablets and bringing them into the classroom.”

And with millions of teachers out there, those apps and tools can spread fast. “When this period of education history is written,” said Carolan, “it will be the story of the teacher who is driving technology growth in our schools and starting the edtech companies.” 

The question now is how much of the money chasing what’s next in the classroom, is going to pay-off. For investors. And for students.

Educational technology has already had some high-profile bankruptcies; investors and foundations have taken some hits.

And, on the education side of things, researchers like Justin Reich, at HarvardX think many of the companies getting money aren’t providing services that are changing the equation. 

Take, for example, online games with multiple choice answers. They are easy to identify said Reich, “Oh I know what this is, this is a worksheet. It’s randomized and it’s on a computer, but I had worksheet problems. I know what these things are.”

Or apps that hand out digital badges. “Oh, those are stickers. Mrs. Trusdale in the third grade gave me stickers, I recognize these things.”

A lot of online classes are teachers, teaching in front of a board. Not that transformative, he said. “If what we’re hoping to have happen is to have there be really profound changes in the way we prepare people for an extraordinarily complicated society, then paving old cow paths is not going to be the way to accomplish that.”

He thinks venture capital needs to look beyond what’s sexy, and focus a little more on substance.

About the author

Adriene Hill is the senior multimedia reporter for LearningCurve.

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