BMO’s Back to School Conference is always an interesting departure from other education events. At Back to School, the perspective is financial; which education products, services, and companies will provide a return to investors?
Education business is unlike any other business. Everything you do has to be a multi-constituent solution; you have to provide outcomes, value, and efficiencies for a wide variety of stakeholders, with long decision processes. This makes for long selling cycles and longer gestational periods for companies. While Facebook started in 2004 and went public in 2012 with a $100B valuation, education investors need more patience for significantly smaller returns, if they make any money at all.
Even so, the last few years have seen an unprecedented level of interest from investors. A few years ago, there was under $100 million dollars invested in education. Two years ago, there was $334M. Last year, $1.2B was invested, and this year looks like more of the same.
Here were some of the most interesting observations from pundits and investors.
We are unlikely to see a real revolution in Higher Education, because the government (state and federal combined) is putting up too much money to keep things the way they are. Every year, the government puts up $100B in student loans and an additional $130B in grants to institutions per year. How is a new mode of education, without access to those subsidies, going to overcome that headwind?
Not only is there unprecedented investment in education, there are an incredibly large number of startups. When Jonathon Harbor opened applications for 10 spots in his Edge Edtech Accelerator (to receive $100-150K investment plus 3 month bootcamp) he received 560 applicants.
One of the things fueling investment is the myriad of opportunities for company exits. While there has always been the possibility of a few companies growing large enough to be being acquired, there are over 100 examples each of the last two years of companies between $10M to over $200M of annual revenues selling out for substantial profits for their investors.
Of course, a lot of edtech valuations haven’t proven themselves out, but in the short term, edupreneurs are doing well.
One of the critical obstacles for new products and companies is the ability to pilot their products in schools. Can’t you hear a principal saying to an entrepreneur, “I’m really not interested in you trying out your minimum viable product on our kids.”
While there has been an emphasis on data, it’s hard to find data that accurately measure student skills and that is actionable. In fact, when you consider the things that we say we really value in education, like planning, communicating, problem solving, and persistence, there is virtually no usable data.
Sounds to me that if you're considering expanding your business in edtech, maybe you should contact Academic Business Advisors.
Thank you to BMO, Jeff Silber, and the team for another great conference!