The edtech market raked in more than $10 billion in venture capital investment globally in 2020, but for students, parents and teachers, the year was defined more by its scramble than its surge.
Nandini Talwar, a student and teacher’s assistant at Columbia University, wants to hold more efficient office hours so students don’t have to wait on a Zoom call. TraLiza King, a director at PWC and single mother, needs a Zoom alternative for her 4-year-old, who is too young to understand how to mute and unmute. Brian Kinglsey, chief academic officer at Charlotte-Mecklenburg Schools in North Carolina, is looking for ways to reengage remote students that don’t require socially distant home visits.
Naturally, any company that shifts overnight from being a tool to a necessity will have growing pains, and edtech as a sector is no exception. Startups with the long-term ambitions of solving education’s inequities had to come up with quick fixes that would serve millions of learners. A sector that was notoriously undercapitalized had to reach venture scale while adapting to the realities of a remote work landscape like never before. As schools seesawed between hybrid and remote, education technology companies had to be nimble as well. The ubiquity of remote learning surely brought a boom to new users, but may have in fact limited the sector’s ability to innovate in lieu of fast, easy scale.
For edtech in 2020, flexible and scrappy was a survival tactic that led to profits, growth and most of all, aha moments that technology was needed in the way we learn. Now, as we enter the rest of the decade, the sector will have to shake off its short-term-fix mentality to evolve from tunnel vision to wide-pan ambition.
The innovation that must grow
If nothing else is clear after a tumultuous remote learning experience, it’s that the world needs effective and accessible technology that allows education to scale with learning for all in mind. In fact, the comeback story and surges of massive open online course providers (MOOCS) shows how in-demand digital curricula truly are.
However, usage is not a replacement for effectiveness. In reality, most people don’t have the drive, motivation or comprehension capabilities to learn from a one-hour lecture — even if they technically show up.
The mad rush to track engagement is underway. In the past few months, Zovio launched Signalz, a tool that helps universities track student engagement and see who is most at risk for dropping out of courses. Piazza also launched a tool focused on college and high school student participation that allows instructors to send personalized messages and measure activity on their assignments. There’s also Rhithm, an app that allows educators to check in daily with students for emotional-learning insights, and Edsights, a chatbot for undergraduate students.
Still, instead of bringing the classroom experience online and trying to track the heck out of it, what if you completely upend it? The answer might begin with flashcards.
Quizlet, which started off as a flashcard app, has spent the past three years building out its artificial-intelligence-powered tutoring arm. CEO Matthew Glotzbach says the feature is now the most-used Quizlet offering, signaling how students want a more in-depth solution than flashcards.
The most recent example I saw of innovation was Sketchy, a startup that teaches medical concepts through illustrations. It allows students to skip notecards and textbooks and comprehend through animated videos; think of a countryside kingdom scene about coronavirus or a salmon dinner about salmonella.
While the technology itself isn’t from Mars, Sketchy’s strategy does what many edtech solutions don’t: learning theory. The company uses the memory-palace technique to help students replace textbooks with videos and actually retain information. Plus, after seven years as a bootstrapped company, Sketchy just raised $30 million dollars in venture capital. The round was led by TCG with involvement from Reach Capital.
Zach Sims, the founder of Codecademy, told me that the startups that will “win” the next wave are the ones that are “using interactivity and technology to create an educational experience you just couldn’t have in the classroom.”
To retain recent gains, edtech companies need to replicate Sketchy’s strategy: Replace outdated systems and methods with new, tech-powered solutions. No more of the endless bundling and unbundling of the school experience. As we evolve into a world of life-long learning and cohort-based learning platforms, founders will need to be especially innovative with the way they deliver content. Don’t simply put engaging content on a screen, but innovate on what that screen looks like, tracks and offers. Is it rooted in true learning principles, or is it just a repacked lecture?
In other words, if 2020 showed us how hard “Zoom school” really is, then 2021 should not be about creating more versions of Zoom schools. It should be about playing an entirely different universe.
The hurdle that remains
The biggest elephant in the room for edtech is the one that every human in the world can’t wait for: the end of the coronavirus pandemic. And with promising vaccine news, the light at the end of the tunnel certainly feels within reach for those who dare to dream.
When the world recovers, startups that have based their entire business around remote learning and remote work will likely see a drop in usage. The surge will slow, and everyone in edtech is wondering how to extract post-pandemic value.
This in mind, Ashley Bittner, co-founding partner of Firework Ventures, a new future of work fund, thinks that the next generation of edtech founders should continue to make moonshot bets, but be realistic about what will work for the decades ahead.
“Anyone can pitch an idea about how we should do math curriculum,” she said. “But there’s a reason behind why we teach kids to do it this way. I don’t think there’s enough respect for the experience learning science behind products.”
Bittner thinks the onus is on investors to inject money into the right kinds of edtech startups.
“You don’t invest in biotech or healthcare casually,” said Bittner. “Edtech is not that far from those categories with the regulatory environment.”
Bittner’s point underscores the reality that investors have a huge controlling power regarding which edtech startups will be put on a successful trajectory. The question then becomes: Do the most ambitious edtech businesses of the future make sense as a venture capital investment?
Ideally, yes. Venture capital has the ability to allow companies to blitzscale, and in education, that scale can have a generational impact unlike many other categories. But, incentives matter.
Jomayra Herrera, an investor at Cowboy Ventures who backs the future of work and education businesses, says some businesses — such as a reskilling program for a population that needs significant support — doesn’t scale and nor should it. In other words, if the incentives are for a company to grow as fast as possible and as cheaply as possible, it might not make sense when it comes to something as emotional and raw as education.
“If it’s expensive to serve your population of students … and it takes a lot of time and it shouldn’t be rushed like a three-month or six-month or a nine-month process, you shouldn’t be venture backed,” she said. “And that’s totally fine.”
The type of edtech businesses that have historically made sense from a venture perspective are quite few and far between. Not every company is able to have an insane, outsized return. In venture, there needs to be opportunity for rapid scale, a huge market size and gross margins.
This is true for all sectors, but especially in education. Schools and higher education institutes have long sales cycles and difficult budgets (and while the pandemic has slightly shifted budgets, it’s unclear how long the flexibility will remain). Consumer businesses, meanwhile, can get viral-like growth.
It’s important to remember that while the pandemic has made it easier to get consumers, it has not yet erased the red tape that defines the United States education system. Since venture is a 10-year horizon, it makes sense that generalist firms and edtech firms are investing into consumer businesses that may have a more viral-like ability to win.
The danger here is that the current wave of venture capital is putting millions into startups that require consumers to buy hardware. This can create big companies and lost children, left behind by paid tech they can’t afford to access. A more equitable solution for students would be if startups worked with enterprises, which then can take the burden off of individuals and onto institutions.
A counterpoint is Guild Education, which balances three stakeholders: companies, employers and colleges. The for-profit company helps companies offer employee benefit programs that place their hires into college degrees for credentials at a subsidized rate. This sort of closed-loop system, that helps everyone scale at the same time, is one example of an equitable solution with venture potential.
The hope to be found
By this point, I hope you’ve seen how difficult it is for venture-backed edtech to completely shake off its short-term mindset, from both a coronavirus and profit-seeking perspective. I find hope in the fact that Sketchy, for example, didn’t have to raise money for seven years because it found a product-market fit to make something that people actually want, to quote Y Combinator.
My hope is two-fold. First, there has been record-breaking venture capital brought to a sector that’s been historically underinvested.
PitchBook data shows that edtech startups around the world have raised $10.76 billion in venture capital in 2020, compared to $4.7 billion in 2019. While reporting delays could shift this total, venture capital dollars have more than doubled in just one year. Edtech startups in the United States raised $1.78 billion in venture capital this year across 265 deals. The dollar value is up from 2019, which brought in $1.32 billion.
From both a global and domestic point of view, deal count has lessened even as dollar volume soars. It means fewer startups are raising, but those that can have been able to raise more money. This isn’t necessarily bad news, despite this reductive Wired take. I don’t think VCs are putting capital in the wrong edtech startups. I simply think that venture capital will create safety blankets for startups and allow them to risk profit in lieu of more ambition.
My second silver lining is that this year brought unavoidable, and often existential, aha moments to all of us. The digital divide still very much exists, leaving students to find WiFi in McDonald’s parking lots or coffee shops.
There have been promising strides made from the state level. Connecticut, for example, is giving every student their own computer and access to the internet. Dr. Quentin J. Lee, the principal of Childersburg High School, personally went to students’ homes to drop off hotspots. These stories aren’t just gestures of goodwill, they indicate a move to where a 1:1 student-to-laptop ratio is a necessity, not an option.
2020 was certainly a historical and iconic year for edtech. But, the best spotlights bring scrutiny that inspires others to do better.
Sketchy wants to replace boring textbooks with ‘Pixar-like’ videos
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