What If You Built an EdTech Company and Not Enough People Came?

In January, Ambient Insight reported that global investments in learning technology reached $2.34 billion worldwide. In the U.S. market, with the industry reporting as much as $1.61 billion in funding halfway through this year, many would think we don’t need to worry too much about the future of edtech. After all, this already surpasses 2014 totals of $1.36B. The EdSurge Edtech Index lists nearly 1,600 different products in categories that include curriculum products, teacher needs, school operations, post-secondary and the all-purpose, everything else. There’s a lot of activity, right?

But if you look closely, as Frank Catalano did earlier this year in Geek Wire, although the numbers are rising yearly in terms of seed money, the percentages of investments decline significantly after that, with very little capital being invested for edtech in later stages. The bigger dollars go to more established companies, says Catalano, like the $186 M that went to Lynda.com before its purchase by LinkedIn. Most others fall far behind, with only 25 buyers spending more than $100M on U.S. edtech companies, reports EdSurge.

So, with all that activity out there, why is less money spent in this sector and less risk being taken on in later stages? Are there any lessons out there for edtech companies to learn from?

Try Not to Blame Your Target Market

News Corp’s $371M writedown of Amplify, the educational software and tablet company, gives us . . . ample reason to pause. Amplify is discontinuing its tablet-making business while it sorts through alternatives for the curriculum and assessment side of the business. According to a letter written by CEO Joel Klein to Amplify’s staff, the company will continue to support existing tablet customers but will not be taking on any new ones.

Not surprisingly, Klein’s letter, published in full on BuzzFeed, emanated pride of company. “Amplify designed a compelling tablet for classroom education . . . No one put as much thought and know-how into how teachers can work in a one-to-one classroom . . . In my view, Amplify’s work has been so innovative and transformative that we’ve been ahead of the market . . . However, sales haven’t moved as fast as we initially hoped. Too many districts across the country struggle with basic issues like sufficient internet connectivity. And change management in many places has been more difficult than many had anticipated.”

Klein goes on to applaud News Corp and Rupert Murdoch for their boldness of vision and commitment to education, admitting “As positive as this relationship has been, Amplify and News Corp both believe it is time to explore new and exciting strategic opportunities, working with partners who share a deep understanding of what it takes to be successful in education.”

And that there is the kicker. What does it take to be successful in education?

Is It Really Possible That People Just Aren’t Ready?

Is it fair for someone in Klein’s position to say we just weren’t ready for the product’s greatness?

While Klein’s comments come off as oddly congratulatory considering the circumstance, it’s neither out of character for him nor that outrageous in the world of high tech, where many of you reading this today have experienced, as have I, being on one end or another of an M&A deal.

This is not to say I have no sympathy for the people at Amplify who have most probably put heart and soul into efforts to develop a superior product. What struck me, however, were Klein’s comments regarding the readiness of the market.

His comments that seem to echo, for one, Mary Meeker’s Internet Trends 2015report for KPCB, in which she notes that “The Internet has been extraordinary . . . But in many ways, it’s just beginning.” The report indicated that education has had one quarter of the total impact (estimated degree to which Internet has changed behavior or outcomes in selected sectors of the economy/society) that a sector such as consumer has, for example.

Catalano also points out that edtech “at least in terms of investment, is a little weird. But in that charming, awkward kindergartener kind of way, like someone who — with or without epic funding numbers — may still grow up to be a Bill Gates or Steve Jobs.”

What Does It Take to Be Successful in EdTech?

If Klein appears to have exhibited impatience with the people whose problems he was trying to solve, it wasn’t the first time for him. As Chancellor of New York’s vast public school system, he battled the long-entrenched unions as well as parents who opposed his many policies of change, which included establishing the Empowerment Zone, iZone, high stakes testing, merit pay, closing schools and opening charter schools, and more.

In his memoir “Lessons of Hope, Klein notes “We would inevitably try some things that wouldn’t work.” Alexander Nazaryan writing in Newsweek upon publication of the memoir, reflected “And yet failure was still preferable to inertia.”

When Klein says “. . . the forward-thinking districts that have implemented our curriculum in the classroom are proof positive that we are fundamentally changing the way teachers teach and students learn” you are left wondering about the nature of change and the means by which it can be obtained.

Amplify ran out of time. While revenues increased $21M over the previous year (earning $24M in revenues from April to June 2015 alone), it was too little too late. CFO Bedi Singh stated that the market for the digital curriculum was “disappointing and much slower to develop than we expected.”

Many of us are impatient and seek quicker solutions to what ails education. With the speed of software development may come false assumptions about the speed of adoption and acceptance to change. A tablet is not going to change K-12 education any more than an LMS will. Real disruption needs to come from a systemic change in how people perceive of learning overall and adopt curricular changes that reflect true 21st learning needs and goals.