Edtech startups find demand from an unlikely customer: Public schools

School district technology budgets are tight. But Kami CEO and founder Hengjie Wang wanted to make his company’s digital classroom product a go-to tool anyway.

He landed on trying to disrupt the printers.

Wang found that school districts spend an average of $150,000 every year on printed materials. Kami helps teachers digitize worksheets so students can digitally annotate them. Doing the math, Wang says Kami can save districts an estimated $80,000 by getting rid of the need to print handouts every day.

“Districts are apprehensive on paying for tools unless you can also save them money at the same time,” Wang said. With this tactic, the number of school districts using Kami doubled between March and July, going from from 9,987 districts to 17,915 districts. Sales for the startup, which was founded in 2013, grew over 2,000%. Today, Kami is a cash-flow positive business that sells to schools and parents.

When it comes to wide-scale and equitable adoption for edtech startups, success can often hinge on landing contracts that extend to an entire school network. However, budget cuts and red tape have often limited a company’s ability to grow. During the pandemic, consumer edtech startups such as live tutoring or question and answer services have soared now that more kids are learning from home.

However, a second surge in edtech might be upon us. As schools seek to reopen with a hybrid learning solution, Kami and other startups are finding opportunity in one of the hardest institutions to sell to: K-12 school districts.

Maxeme Tuchman, founder of Caribu, works on technology that allows kids to video call elders and collaboratively play games, read stories or color. She says she’s long-term bearish about the prospects of engaging school districts directly.

“District contracts are the slowest way to die as a startup,” she said. “The process is broken, nepotistic, bureaucratic and paperwork-heavy.”

However, Tuchman noted that these unprecedented times might give schools a bigger appetite for risk that could reduce cumbersome paperwork.

Case in point? Schools have approached Caribu to purchase distance-learning software. The interest was so unexpected that the startup, which has until this point only sold to parents, built a B2B sales team over the summer and just hired its first sales associate who is focused on selling to businesses instead of solely consumers.

Ellevation Education sells a suite of resources to educators that teach English. The startup offers a variety of programs from a variety of learning styles, from asynchronous online learning to offline instruction like learning pods.

Instead of pulling from a tech budget, Ellevation can ask schools to allocate funds through Title III, a federal budget item dedicated to instruction from English learners.

From an investor perspective, bullishness on B2B spending differs. Of course, the pandemic will eventually end. After-school programs will resume. And teachers with an affinity for paper worksheets might go back to their roots.

Shauntel Garvey of Reach Capital, an edtech-focused fund, says that half their portfolio is B2B businesses. She noted how the bottoms-up perspective, similar to Dropbox, is less likely to churn and doesn’t require a ton of marketing costs, unlike B2C pitches.

Some of the highest-valued edtech startups in the world approach selling from a direct-to-consumer model, noting that parents have more flexible and hungry purchasing power than stricken school districts.

Bradley Tusk, founding partner of Tusk Ventures, often invests in startups that face regulatory and legal hurdles. Still, Tusk said he remains bearish on edtech, saying it’s harder to navigate than government politics.

“The challenge is that the smallest school district in the country is just as bureaucratic and political as the biggest,” he said.