4 characteristics of a good ed tech investment

By Meris Stansbury, Managing Editor, @eSN_Meris
September 10th, 2015

Thanks to savvy advice from technology investors, here’s why some innovations succeed, why some fail, and what the higher-ed market should expect in the near future.

invest-technology-educationForget MOOCS, say technology investors. What higher education institutions should invest in are personalized learning platforms that provide simple data on outcomes.

This was the main take-away from a panel hosted by the National Education Association (NEA) on investing in education.

According to investors, one of whom was once approached by a young Steve Jobs, investing in ed tech first means understanding its place in the overall market.

“The last major technology innovation that truly disrupted the higher education model was the lecture, and that happened in medieval times,” said Daniel Pianko, a partner at University Ventures. “Innovation in higher education moves slowly.”

“There’s only one company worth more than a billion dollars right now in education, and that’s Blackboard,” said Donn Davis, founder and partner of Revolution Growth. “Education is the second largest sector but it has the least innovation when it comes to the companies associated with it.”

However, after lamenting the up-until-now state of things, all investors part of the panel agreed that the market is about to change for education and its technology, due to two major reasons: the economy and global interest.

“Technology does two things,” explained Davis, “it makes things cheaper and it makes things better. And like no other time before, thanks to unsustainable high tuition rates and a lack of public faith in the power of traditional higher education, institutions will need to rely on innovative technology to make their ‘product’ cheaper and better.”

“Disruption only happens when others know it exists,” continued Pianko. “Because of the growing global interest in higher education, not only are incoming and current students demanding access to technologies on an incredible scale, but institutions need to become the best at what they offer to remain competitive—technology can help reach those goals.”

However, it’s not enough to provide technology, institutions need to know what they should invest in for success.

4 characteristics of a good investment

According to the panel’s investors, there are four characteristics of a good investment that ed-tech companies should consider–but these considerations can also apply to institutions:

1. It includes mass-market technology components: “A good question to ask is, ‘What innovations in other sectors are applied to this technology?’” noted Davis. “For example, does it include social media collaborative options, like Twitter and Facebook? It’s not about reinventing the wheel, but more applying other wheels to your wagon.” For institutions, take the example of an LMS: Does the LMS include tools and functionalities that allow for online collaboration within course units?

2. It should be independently tested: “Any good technology should be able to provide independent studies on its value and effectiveness,” emphasized Davis. “These outcomes should also be measured by the university; and the outcomes that should matter most are those for engagement and grades.” However, Pianko quickly noted that at the institution level it’s incredibly hard to test the effectiveness of a solution in even five years. The LMS example: Make sure the platform has been independently tested, and preferably piloted within multiple institutions, before purchasing.

3. It should have great branding and distribution: “Most of education’s best products never win,” said Pianko,” because it’s notoriously hard to get K-12, and in some respects higher ed, to take a risk on a new product due to resource and accountability pressures. However, if a company has partnered with another brand name, or is literally going from district-to-district and institution-to-institution, it has a shot. The solution should have a great distribution plan.” The LMS example: Has the company partnered with, or acquired, any other known education-oriented company?

4. It isn’t too innovative: Though this characteristic may seem ill-advised, investors agreed that if a solution is too outside-the-box, it often won’t succeed. “This isn’t because it’s a bad product,” explained Pianko, “it’s because if you stick your neck too high, you’re going to get shot at—by accreditors, by researchers, by skeptics. In the same vein, it’s also good to have a plan B in your business model when considering regulation.” The LMS example: It’s critical that the platform, at its core, is about providing the functionality of a good LMS, and doesn’t instead focus on functionalities that faculty and admin won’t actually use frequently in their day-to-day tasks.

The technology to invest in now

According to investors, MOOCs were an unfortunate mistake for many institutions, mainly because it was the only answer presidents and deans had to their board’s question of, “What is your digital strategy?”

“Presidents and deans were like deer in headlights, but they’re coming around,” said Pianko. “It’s important moving forward not to be short-sighted but to see the bigger picture of providing the best ‘product’ in higher education; and that means looking beyond just online learning to personalized learning and simple data.”

“It’s not about ‘how can I analyze Big Data to predict everything,’” said Davis, “but instead ‘what simple data can I use today (that may not be perfect yet) to improve outcomes?’ It’s the data that can tell you things like: how many times a student engaged with a professor and how often a student engaged with the material. This simple information can then measure an incredibly important outcome, such as a student’s likelihood of passing a course.”

“The data doesn’t have to be perfect,” he continued, “it just has to be good enough now and able to be improved upon later.”

Going a step further, Roger Novak, general partner of Novak Biddle, said that any personalized learning platform that has the ability to use Big Data to make predictions is a worthy investment.

“Big Data has the potential to predict pathways of successful people, but any data that can pinpoint a way to improve outcomes is useful.”

As for specific companies that Novak said could soon become “billion dollar-type platforms,” he mentioned:

  • 2U: An ed tech company that partners with universities to offer online degree programs. Read the eCampus News (eCN) article on 2U here.
  • EdCast: A personal learning network that aims to enhance the ability to collaborate and learn across educational materials, instructors, students and employers. Read the eCN article on EdCast here.
  • Fidelis: A tech startup company that developed the Learning Relationship Management (LRM) system that “does for learning what CRM did for sales.” Read the eCN article on the LRM here.

Add your opinion to the discussion.