Edtech and Silicon Valley

June 16, 2014 6:00 pm
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Christopher Nyren writes about “The EdTech Failings of Silicon Valley” in an EdReach piece. The article highlights “10 EdTech Startups that Silicon Valley Loved” during the 1997-2001 Internet Bubble: UPromise, Lightspan, Advantage Schools, Saba Software, QuinStreet, ApexLearning, SchoolPop, TrainingNet, Academic Systems, and Varsity Books. Most of those startups have not persisted, or delivered much return on investment. He then proceeds to identify four reasons why Silicon Valley (and “the highly correlated “Silicon Alley” of NYC”) have failed to generate “sustainable, scaled successes”:

  1.  “Ad Supported and B2C models rarely work in education and in the case of the K-12 markets (the primary market for investment in Silicon Valley today), they are largely forbidden by schools … or face limited paths to monetization… Far too often, Silicon Valley investors confuse their own household budgets/motivations with the actual mass addressable market.” Also, echoing an observation by Michael Crosno, “there has still yet to be a true B2C EDU success: successes have either sold to administrators or just sold textbooks. Today, Silicon Valley still has yet to find out how to break through entrenched publishers, intractable institutional delivered / contracted education and strained / disinterested consumers.”
  2. “Other Enterprise SaaS may outdraw Corporate Learning SaaS in Silicon Valley … nearly all of the recent Corporate Learning SaaS successes have been based outside of the Valley”;
  3. “Silicon Valley’s exclusive focus on shrink wrapped software product for its inherent scalability and margins (and greater exit multiples) ignores the value of services and customer funding to find and fit a solution to a real market problem”; and
  4. “Silicon Valley start-ups are ultimately just too expensive… [R]eturns [are impacted] by limited industry M&A capacity, with … sub-$50 million deals account[ing] for 80% of all activity … And with rising size thresholds in the public markets, EdTech has not been able to keep pace, effectively closing the IPO window.”

The “Unicorns” that did emerge from the 1997-2001 period (among them “Blackboard, Skillsoft, K12, Higher One, Wireless Generation, SchoolNet, Connections Academy, Archipelago”) were not “typical case studies on Silicon Valley venture capital”, taking “a median of 14 years to achieve scale” and frequently being bootstrapped along the way.

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This post was written by Syngli