Monday, June 3, 2013

How to Make It In the EdTech Startup Sector

"Don't pitch anything related to Education."

It wasn't that long ago when I read an article about the art of startup pitching and exploding sectors. That was exactly the advice. Don't pitch anything related to education. Really? Anybody that's ever worked in the field of Academics understands that there is definitely room for innovation and fresh ideas. 

EdTech is an arena where individuals have an opportunity to address some real pain points across classroom delivery, access to academic resources, learning management, global collaboration, and administrative procedures. For example, here's an idea: How about removing the classroom walls all together allowing students to focus on breakthrough results? It's already happening! Thanks in large part to growing technology and startup activity.

Following is some excellent advice from on how to make it in the edtech startup sector. is a leading online education resource. It is owned and privately funded by contributors and researchers who have volunteered their time to create this resource and other resources within the site. Its mission is to build a free web resource rich with highly relevant educational materials for those interested.

How to Make It In the EdTech Startup Sector by
If you’re in business school, wondering which industry is ripe for innovation and rife with investment and consumer dollars, just take a look around and you’ll have your answer. Education, that bastion of methods, materials, and mediums from yesteryear, is finally being rebooted. The educational technology, or edtech, market could be looking down on the trillion-dollar mark by 2015, and now is the time to jump in with a new business idea.

Of course, every market has its own foibles and idiosyncrasies that can become roadblocks to the entrepreneur who is unprepared, and edtech is no different. More than a few pundits are already prognosticating a pop of the edtech bubble before too long. So before you join the fray with your own startup, check out where innovators are making their stands and what their advice is for joining their ranks for the long-term.

(Check out a second article in the How to Make It in the X Startup Sector on environmental startups.)

Hot Areas
Even people with the vaguest awareness of edtech developments have heard the names of the edtech companies offering digital alternatives to brick-and-mortar institutions, thanks to the funding they’ve obtained, the users they’ve attracted, or both. Cases in point: Udacity and its $15 million in funding, Coursera and its 2.8 million users, and the Minerva Project and its mission to create the world’s first Ivy League-caliber online school, armed with $25 million in venture capital.

A burgeoning area of the industry is the service market. Into this category would go learning management systems (LMS), classroom management systems, badge providers, online tutors, and much more. For years, Blackboard has been a dominant name in the LMS space, but since 2011, edtech startup Instructure has been cutting into its customer base, winning over 350 colleges and K-12 school districts and counting with its Canvas LMS, which Cisco picked to power the World’s Largest Classroom. Since 2007, lecture video capture company Panopto has grown from a research project at Carnegie Mellon University into a powerhouse service provider with 3.5 million users in 60 countries.

Finally there’s the closely-related product market, all those gadgets, tools, software, games, and even eyewear that will revolutionize the way kids and adults experience education. TechStars Boston graduate Testive recently announced a $500,000 round of funding that will help put its adaptive testing products in front of thousands of students this year. Top Hat Monocle, the maker of a platform that turns students’ mobile devices into educational gear, recently brought its funding level to over $9 million.

Know Your Audience
Every edtech startup founder and exec we talked to made one point abundantly clear: you have to know exactly who your customer is and what they want.

Instructure co-founder Brian Whitmer told us, “A lot of traditional systems in education were built for the administrator, because if the school buys, that means you have the administrators who are going to make the decisions for purchases. But what we’ve discovered and what a lot of other people are starting to see is that what really matters is that end user experience. And if you can build something that can solves peoples’ problems and saves them time and helps them be more successful, then the administrators will love it even more than if it’s easy for (just) them to use.”

Before they wrote a single line of code, Whitmer and his co-founder hit the road for a “product validation tour,” presenting PowerPoint mockups of what their platform might look like and asking educators at 17 institutions what their ideal LMS looked like. By the end of the tour, they felt confident enough that Blackboard could be unseated from its throne. “We didn’t pretend to know all the right answers,” he said. “We had to work with those guys to make a good solution.”

Miro Kazakoff took a similar approach to Whitmer. The Testive CEO and his cofounder Tom Rose took the MIT break known as “January term” to interview 40 people in two weeks. Based on those interviews, Kazakoff says, “we came up with this idea that there’s a lot of technology out there that can help people learn faster and more effectively, that isn’t being commercialized and isn’t being deployed effectively.”

Simeon Schnapper is the CEO and cofounder of classroom management platform Youtopia. The software uses gamification through badges, points, and “level-ups” to encourage students to engage in their communities. He said it is crucial to his company to always be aware of its audience. “We might not introduce leaderboards and harsh competition with incredibly introverted, developmentally-disabled second-graders, but it might be great in college for hardcore MBAs.”

Go Bottom-Up
The factors that have kept education behind the times for so long — bureaucracy, miles of red tape, strained budgets — are the very things that make edtech difficult to get into. The “top-down” approach of targeting principals, school boards, and superintendents is a sensible if time-consuming way of getting your product into classrooms. But several entrepreneurs told us using a more grassroots style can be a powerful method of attack.

Jeet Banerjee said his company, StatFuse, has had its hands full figuring out how to get its Web application that helps high school seniors calculate their odds of getting into specific colleges and find information on schools in front of the target audience. One tack they’ve settled on is pitching the product to high school guidance counselors and banking on them to get on board and endorse the program to the principal. The other group they’re focusing on is parents of high school seniors, making their presence known at college nights and workshops.

Although Youtopia employs a top-down approach also, Schnapper said his company uses its free version to market to teachers directly. “Two or three teachers start to use it, they see the power of it, and it becomes very easy to then go to the principal or the superintendent because then they have data and they see the results,” he said. “And with their teachers telling them how great it is, it becomes easier to break in.”

Work the Network
Although several of them found partners and even investors without having to leave their own campuses, the edtech entrepreneurs emphasized the importance of not simply putting the product out there and hoping someone likes it, but actively building a base of contacts. As Schnapper put it, “I wish it was just sitting back and writing code and watching the money roll in, but there’s still a lot of human networking.”

Kazakoff took Testive to the Boston branch of the incubatorTechStars, a move he called “life-changing and course-altering.” “The chance to have three months with access to and feedback from lots of different people who built lots of different kinds of businesses really forced us to think deeply about the assumptions that we had,” he said. “We (built on) the ones we really felt were correct and threw out some of the ones that we weren’t sure about and made a much stronger business.” He added that not only did they meet most of their investors through the accelerator, just being a TechStars graduate gave the company a kind of “seal of approval” that greased the tracks for attractive additional investors.

Schnapper said he and the other executives of Youtopia are constantly going to tech conferences, like the Digital Media Learning conference in Chicago and the “Beyond the Textbook” forum hosted by Discover HQ. Having just returned from South by Southwest in Austin, Schnapper mentioned how ironic it was that he’d had to go to Texas to get in front of venture capitalists from Chicago, where he lives, but that until Youtopia becomes more well-known, such appearances are vital. He also said has been great for networking with other entrepreneurs.

Set Them Free
Because the edtech market is already becoming so crowded, and because it involves competing for the limited time and money students and parents have, making your product or service free (at least temporarily) is one of the tricks of the trade seemingly no edtech company can stand to forego.

Whitmer said he’d witnessed other startup founders try to charge teachers directly, only to find that the approach was not sustainable. To him, building a customer base via a freemium model presents a much better option. “Then (entrepreneurs can) go to the district or the institution and say, ‘Look, your guys are using this. If you pay for it you get these additional features and functionalities.’ That makes a lot more sense to me in the education space; teachers are already so strapped for cash.”

Schnapper said he also had not seen a single edtech company not employing a freemium model, because it’s a way to test the product and market it and prove to investors that you have something of value. Other ways companies use freemium is to simply “get traction in sheer numbers” and find advertising revenue, sponsorship opportunities or affiliates, or other revenue streams.

Catch the Fever
The one thing all startup founders have in common is a passion for their product and their market, and this is perhaps even truer in the edtech world. All our founders expressed how they came into the industry with a commitment to changing education for the better, and the belief that they could do so.

Schnapper said, “Find that niche that really makes you happy and you’re really passionate about, because whether it’s cognitive assessment or testing or anything under the sun in education, it’s an industry that’s changing and being disrupted very quickly. And if you want to get into it, find the thing that you love because there’s just no lack of areas that are going to be innovated overnight like in the world of education.”
As it is one of the older companies we spoke with, Panopto had to power through the economic downturn. Bixhorn told us that during the recession, the company required all of its employees to take a pay cut while “working around the clock” to build up the product and pump up its sales. “The engineers were living off what they call the ‘college student diet’ of Ramen noodles,” he said.

Both Banerjee’s and Panopto cofounder Eric Burns’ journeys into edtech began from within academia. StatFuse was the result of Banerjee and cofounder Supan Shah’s debate in gym class one day over Shah’s chances of getting into certain colleges. When they couldn’t find a program to give them the odds, they decided to make one themselves. Burns was approached by one of his professors at Carnegie Mellon University to create a platform for recording lectures for a disabled student to watch at home or in the hospital.

Closing Remarks
Instead of taking the words out of their mouths, we’ll leave you with some pearls of wisdom straight from the professionals.

Bixhorn: “Start off with a rock-solid architecture. There’s often a tendency with startup companies to want to build as many new features into their product as quickly as possible, and sometimes that comes at the cost of having a solid foundation that will allow them to scale up their product over time.”

Kazakoff: “I think the big mistake that I see a lot of edtech entrepreneurs make is not thinking about how they’re going to get their product into the hands of their user. And the best software that isn’t used by users has very little chance of succeeding. I would push almost all edtech entrepreneurs to think a lot about how they are going to get people using their software.”

Banerjee: “Being young was a challenge in the beginning, but now I’ve gotten accustomed to it and it’s gone from being a liability to a great asset.”

Whitmer: “We’ve gone from 0 to 350 schools in basically two years because we found a pent-up need and we addressed it. And there are plenty more opportunities out there for disruption and innovation. There are so many I wish I had time to go address.”

Even with such a hot market, tech startups fail at a rate as high as 90%. Some are killed by a lack of innovation, some by moving too slow or too fast, and some by plain old bad luck. But by following the advice of those who are making it to know your customer inside and out, to get the product in front of them, and to be passionate about helping them, you will be well on your way to edtech success.

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