Why Does “Ed Tech” Lag?

The PEF's  newest success story focuses on the Page School K-3 teachers subscribing to BrainPOP Jr., an online service providing interactive lessons for early elementary education.  When one reads how valuable this type of service can be to teachers, it raises the question: why aren’t there more Internet services like this available to schools? The answer lies within how technology companies are created and funded.

Most successful technology ventures rely on funding from venture capitalists to hire people, procure infrastructure, and so on.  This funding enables them to grow far faster than if they relied on their own revenue. Venture capitalists, in turn, aim to make a nice return on their investments by taking their portfolio companies public, or getting them acquired by larger companies or private equity firms.

Historically, education technology (Ed Tech) has not been terribly interesting to venture capitalists. The tight budgets and lengthy procurement processes typical in public school systems create barriers to revenue that can slow or destroy a company’s ability to grow, and thus its ability to deliver a suitable return to investors. According to a recent story in The New York Times, however, this is starting to change. The crème de la crème Silicon Valley venture firms are starting to pay attention to Ed Tech. In fact, there was a 55% increase in venture investment in Ed Tech last year, amounting to $1.87 billion. (Although to put this in context with other tech sectors, Dropbox alone has raised $1.1 billion. Still, the uptick is promising.)

Interestingly, organizations like the PEF are helping to create a more favorable market for Ed Tech companies.  As we saw with BrainPOP Jr., teachers were able to shorten the procurement cycle by applying for a PEF grant, rather than going through the traditional procurement process.  And, BrainPOP Jr. is delivering fantastic benefits to both the students and their teachers. But what is not mentioned is that on a national scale, this type of foundation-driven investment is creating a more attractive market for entrepreneurs, which is driving increased investment into Ed Tech – and that’s good for everyone.

Andy Murphy

Random Observer of Education