At the LearnLaunch Conference this weekend, one of the prevailing questions around EdTech investment is how to make investors “comfortable” with EdTech startups. We’re starting to see investors become more emotionally invested in the transformative nature of what it means to “invest in education,” and we’re seeing more transparency with entrepreneurs’ business models, whereas a few years ago, there was much more risk involved. Groups like Educated Ventures (Chicago), Socratic Labs (NYC), LearnLaunch (Boston), and EdSurge are building a bridge from the investors to the innovators in the education field.
How do we continue to make investors feel confident in education?
Chris Nyren, Educated Ventures:
Venture investment in education totaled a billion dollars in both ’99 and 2000… the following decade saw just a couple of hundred million dollars invested each year, but we are back above a billion dollars now, so the velocity of money is certainly there… especially from the successful Web 2.0 entrepreneurs and investors from the Coasts looking to “hack education”. However, it’s a different beast than disseminating some B to C social network… In the traditional education hubs of Baltimore/DC and Chicago, however, we are also seeing some education experienced talent spinning out and raising capital in a regional version of the “Paypal Mafia” trope.
Heather Gilchrist, Socratic Labs:
Number one, we need more dialogue, and I think that’s the first step, we need more transparency. I also think that these ecosystems are encouraging because most of these ecosystems focus around connecting technologists with teachers and investors and the other stakeholders in the space as well. One thing that has prohibited us… is that for a long time nobody was really talking about teachers about stuff, and that is definitely changing.
Eileen Rudden, LearnLaunch
I think that the new flow of entrepreneurs have to demonstrate that they can build businesses. The capital will flow, if they build their business, so it takes some time….Do they have adoption? Do they have paid adoption? Do they have a sales model, as well as a product?…Now the question may be: “how big can the company get?” Maybe there should be some inventiveness in structuring deals so that investors can get their capital back within a certain period of time, if the company is successful.
Tony Wan, EdSurge
It seems like a lot of startups on the West Coast scene are working on a more consumer-based model. There’s this hype about the freemium model (on the West Coast). That’s a signal that you care more about getting as many users as possible, so you’re putting your revenue model on hold. So the investors who are putting money into these startups, what I think that you’re essentially betting on is that the [power] is going to decentralize into the hands of the teachers in the classrooms that they’re eventually going to sell them to. Eventually, you have to turn the switch on…I think that is a very important question that I think we’ll start seeing some answers to- this year.
One of the most exciting themes at the Learnlaunch Conference, was the “mission driven” concept. Who wouldn’t want to invest in a company where the founders not only have a good business model, but they also want to “change the world?”