TechCrunch: “EdTech – 2017’s big, untapped and safe investor opportunity”

David Bainbridge, CEO of UK-based Knowledgemotion, wrote a post on Saturday in TechCrunch titled “Edtech is the next fintech” calling out the huge, untapped potential of EdTech. Thanks to Alan Levine for sharing this one. Spoiler alert:

But this is just the tip of the iceberg. The opportunities edtech promises the world’s largest content providers, the biggest educational institutions and any investor looking for a “sure thing” are almost endless. While it might be slightly late to the “digital-first” party, edtech is poised to be the biggest and possibly most profitable digitalized sector yet.

This is exciting! Not only could EdTech be the biggest market sector yet, it is also “also the safest bet for investors”. Oh my goodness, tell me more.

First of all “FinTech” is short-hand for financial companies that are changing the financial and banking industries. Think PayPal and Intuit for old-timers, or Square, or multiple payment processing companies letting other companies accept payments over the Internet. To get an idea of this market, consider global financing to fintech from 2010 – 2015.

Source: http://fortune.com/citigroup-fintech/

This gets to the TechCrunch article’s real setup, noting that investors might not keep investing in fintech at the same rates:

This presents a window of opportunity for investors trying to spot, catch and ride the wave of the next “fintech.”

Enter edtech — 2017’s big, untapped and safe investor opportunity.

Safe and huge? Let’s go.

There are a few caveats to consider first, however. Let’s call them quibbles.

Timing and Shape of Investment Waves

It turns out that if you read TechCrunch, you might have seen a 2015 article showing that edtech actually predates fintech in investment waves. There was one in 1999 – 2000 that quickly fizzled, and the currently one started in 2007 – well before the ramp up in fintech and much slower.

And unfortunately for those wanting to catch the upcoming wave, there are some strong signs that the wave has already crested. As CB Insights described in April EdTech, financing for the sector has started to slump and deals “have flatlined”.

Dollars vs. Knowledge

There is the additional detail that FinTech’s actual product is flow of dollars (or Yuan, Euros, Pounds, whatever) while EdTech’s actual product is flow of knowledge in people. If there are more efficient and useful business models to process money, individuals and companies can shift quickly and with no real change in the value of the dollar itself. If there are alternate ways to educate people, it takes a long, long time for the people to flow through a new system, and the nature of learning and knowledge gained might be completely different. Look at MOOCs, which promised new business models and new flows of people. In EdTech, there are often new models (consider coding bootcamps for a more recent example), but the typical response is not to completely replace schools or institutions, but rather for these schools to slowly (and painfully) adapt and pick up many of the same technologies and approaches.

And it is very easy to measure the results of FinTech – you can see how many dollars flow through different gateways or processing systems, and the value of the underlying unit does not change. But when student change how they are educated, it is very difficult to measure the results. How much did someone learn, and what is the efficacy of the new approach? Knowledge does not have precise definitions and assessments are nowhere close to perfect measurements. And even more, there are multiple interdependent variables that cannot be separated – course design, teaching quality, student demographics, etc, etc. As Michael described in the Chronicle after the SRI analysis of Gates Foundation-funded adaptive learning programs:

That said, the murkiness of the results are not only, or even mainly, due to the limitations of adaptive learning. This study is plagued by a fundamental and pervasive methodological problem in educational research — namely, that it is often either impossible or unethical to control variables in a way that gets empirically solid, reproducible results.

Anyone who has had at least one high-school science class will probably remember that the key to doing science is to control the variables. To measure the impact of a variable, one must make sure that the variable is the only relevant detail that changes in your experiment. In educational research, the biggest variables are often the students.

There are efforts such as competency-based education that do attempt to better define learning outcomes and shift students to new models, but there are efforts on the periphery. The point here is that students are not dollars and knowledge is not easily measurable.

The Organization for Economic Co-operation and Development (OECD) reported inconclusive results in their worldwide study last year of the results of technology usage in schools. As the OECD education director described:

But Mr Schleicher says the findings of the report should not be used as an “excuse” not to use technology, but as a spur to finding a more effective approach.

The challenge for “scaling” in EdTech is not fundamentally about new technology. It is about finding out effective teaching practices and professional development efforts that leverage EdTech. The scaling or diffusion of innovations by the nature of education will be long and complex – not at all fast and disruptive in the same way as online payment processing or similar FinTech innovations.

Other than that, Mrs. Lincoln, how was the play?

Other than the EdTech wave actually starting and peaking much earlier and much slower than FinTech, and other than the underlying product being on the opposite ends of the spectrum in term of complexity and ability to measure results, and other than the lack of massive scaling for new EdTech, the author is right that EdTech is an upcoming wave to spot and ride just like FinTech. Fine article.

OK, I take that back, even the play sucked. What this TechCrunch article describes is exactly what we don’t need in EdTech and really doesn’t work in EdTech. We don’t need investors looking for get-rich-quick schemes and unlimited profits from an over-simplified understanding of education, expecting quick results. There are plenty of examples of proper technology usage enhancing learning and enriching student lives. And there is a valuable role for careful investment to enable the development of EdTech. Technology does have enormous potential in education. But what we need is patient and knowledgeable capital – investors willing wait for good ideas to mature and be ready to spread without pushing companies to scale too early. We need investors who understand that the greatest opportunities in EdTech come when the technology enables new pedagogical approaches in the hands of caring and knowledgeable educators. Pure platform plays in EdTech are very rare at least in terms of providing real results. Education requires more of a services approach in combination with the technology. Working with educators, learning from them, applying different solutions in different contexts.

No, EdTech is not the next FinTech, and that is a good thing. Unlike the article.

Share Button
"TechCrunch: "EdTech - 2017’s big, untapped and safe investor opportunity"", 5 out of 5 based on 17 ratings.

Google+ Comments

About Phil Hill

Phil is a consultant and industry analyst covering the educational technology market primarily for higher education. He has written for e-Literate since Aug 2011. For a more complete biography, view his profile page.
This entry was posted in Big Picture, Business & Economics, Ed Tech and tagged , , , , . Bookmark the permalink.

One Response to TechCrunch: “EdTech – 2017’s big, untapped and safe investor opportunity”

  1. dkernohan says:

    Nice take down of an idiotic article (though I read the ‘Fintech’ boom as being blockchain/crypto related – thus explaining the current unheathy fascination with encrypted distributed ledgers in edtech).

Comments are closed.