In honor of SXSWedu, which regrettably I am not attending, I thought it would be fun to put down a few thoughts about edtech, which I love - because, well, who wouldn’t? It’s one of the few trillion (with a ’t’) dollar markets (aside from healthcare and financial services?), it’s technology, it’s about education, and I’ve got a kid.
First, a ‘market’ look at the education sector. These numbers are wrong - as usual - but the orders of magnitude should be sorta right and illustrative….
A little while back I caught up with Troy Williams, the president of Macmillan New Ventures, which aims to reinvent Macmillan (one of the largest textbook and education companies in the world) from the inside. Troy was also one of the pioneers of the ebook and online library space and served on the board of the Boys and Girls Club of Greater Houston and as Vice Chair of the Education Foundation of Harris County. I.e., Troy knows the education space cold. If memory serves me, during our conversation I learned that in the 1990s, healthcare represented approximately 10-20% of the economy, but only 1-2% or so of (total) market capitalization (or at least in the single digits - and sorry, Troy, if I got these numbers wrong, but, again, the orders of magnitude are what’s important). Since then, the market representation of healthcare (one of those trillion with a ’t’ dollar industries) is more accurately representative of its composition of GDP.
Today, education represents around 10-20% of the economy (or some double digit percentage at least), but probably less than 1% of market capitalization. So it seems clear to me that the potential for education to represent a larger component of market cap is obvious - with room to grow by as much or more than an order of magnitude. Those types of opportunities are a bit harder to screw up as an investor, entrepreneur, etc.
Economics + Delivery System + Product
Comparing healthcare and education provides another useful point. With healthcare, it is clear that (1) there is a financial imperative for change; i.e., the current state of the healthcare system in the country is unsustainable from an economic point of view, and (2) there is a severe problem with the delivery of healthcare services, regardless of which side of the political spectrum you lean. That said, the actual healthcare products (e.g., medical procedures, medication, and other medical service) are effective. Maybe not as effective as we’d like, but they ‘work.’
I recently met Don Burton, managing director of the Techstars Kaplan EdTech Accelerator, who educated me on the contrast between these three factors as they relate to healthcare and education: (1) economics, (2) delivery methods, and (3) the product itself. Don previously worked at Goldman Sachs and McKinsey and ran business development at Disney before founding and running several successful education companies including Parent Partners (sold to the Washington Post), Global Education Network, Aha Learning Partners, eebee’s Adventures, and Learning Edge Labs. I.e., Don knows the education space cold.
As in healthcare, it is clear that there is an economic imperative to reform or completely replace our education system. And it should also be clear that the delivery mechanisms are not serving large portions of the population sufficiently. But: does the product work? Does the curriculum-based system for teaching children, young adults, and adults most effectively prepare the country’s population? Believers in progressive education would say no. That is, they would say the product is broken as well.
So therein lie the opportunities. A broken product, a broken delivery system, and an economic imperative to catalyze change in both. Let’s hope it works.
[Disclosure: I have a handful of relationships in the edtech space including but not limited to the following…. I am an advisor to Admittedly (through the Entrepreneurs Roundtable Accelerator), eduClipper, and Figure 1; and I am an investor in Chromatik.]