The SIIA’s 2011 Ed Tech Business Forum, on November 29, 2011 in New York City, reflected the conflicted nature of the education environment, primarily in the US, but also globally.
Michael Moe noted that we are preparing kids to solve problems we don’t even know about usingtechnology that hasn’t been invented while workig in jobs that don’t exist yet. While education is a significant portion of our economy, at almost 9% of GDP, it’s barely noticed by the financial markets, just less than 1% of total Venture Capital investments, and 0.2% of the capital markets.
But this seems to be changing. There were $9 billion of investment and M&A transactions last year in education. Investors are starting to recognize that education demand, coupled with innovation, are starting to create scalable opportunities. The scalable disruptors that are most appealing for ed-tech investors include:
- Schools that prepare students to participate in the new economy
Image by Gates Foundation via Flickr
- Tailored adaptive learning, that gets more useful with every student click
- Education platforms that provide engagement to students and are mediums for other educational offerings
- Edu analytics that provide assessment, the currency of the knowledge economy
- Partnerships, where companies partner with institutions so each can focus on its core competence
These have attracted private equity and venture capital firms, which, if they prove prescient, will eventually lead to an increased presence in the capital markets.
John Richards showed one reason why education has been less than a rounding error on the financial landscape. Reporting on the SIIA survey of ed-tech market trends, he divided ed-tech companies into four groups by annual revenue: under $5 million, $5 million to $20 million, $20 million to $100 million, and over $100 million. At investment conferences, micro cap companies generally start at $400 million of revenues.
Farimah Schuerman pointed out that a recent SIIA survey of educators found high agreement that educators’ most common concerns were around
- Aging equipment and funding to replace it; educators wanted access the right equipment and training on how to apply it
- Alignment of pedagogy and materials to the common core standards and forthcoming assessments
- Finding appropriate e-content and fitting it into learning activities, and the content needed to be accessible, editable and either cheap or free
She also highlighted the growing interest by educators in tablets, bring your own device, and online classes for students as areas where ed-tech firms could supply needed resources.
Richard Sims dashed water on the rosy investment picture painted by Moe. While federal funds for education may remain steady for the next few years (barring budget deals or changes in administration), state and local funding, which is about 90% of K12 funding, is under siege, and will not recover to pre-recession levels until 2017. With real estate taxes starting to nosedive, we can expect a 10% decrease in total education funding over the next two years. The good news is that there is some job growth, but a) it is slow job growth and not likely to reach the number of 2007 jobs until past 2017, b) half of the job growth is in the lowest paying jobs (while half is in the highest skilled highest paying jobs, and virtually no growth in the middle pay jobs), and c) states are focusing on cutting state income taxes, which is the revenue source quickest to rebound based on job growth.
Of course, not all boats will sink in the lowering tide; companies need to uncover market niches with good growth possibilities in states where employment and tax receipts are rebounding fastest.
Bob Wise pointed out that the issue is not so much the gross amount of education spending, it’s how you can demonstrate that technology can leverage the effectiveness of educators. In other markets, technology reduced costs. In education technology has always been an expense; if you kept the educator/student ratio constant, adding new technology just increased the cost of education. With demands to do more with less, with the role of teachers changing, with increases in blended learning, and with the goal of ensuring that every child has access to technology that allows him or her to progress at his or her own rate, we have a real potential to transform the education landscape. Wise reiterated Clay Christianson’s prediction that by 2020, 50% of courses will be online.
You can view many of the presentations here: http://hosted.mediasite.com/mediasite/Catalog/pages/catalog.aspx?catalogId=47878f99-468d-4989-9941-2977d011e425
Is this the worst time to be in education in recent memory? Are we on the brink of an education rebirth? Do we have an education crisis? Is it an exciting time for innovation in education?
Also, one more note. We've been featured in PhD in Education as one of the top 50 education blogs: http://www.phdineducation.org/50-incredible-sites-to-find-new-and-inventive-teaching-methods.html