The groundwork may have been laid in the early 2000s, but the explosion in interest really began in 2009. While most of the country was reeling from “the Great Recession,” investors poured an additional $150 million into ed-tech startups than they had in 2008.

The recession exposed deep flaws in higher education, Richard Demillo, director of the 21st Century Universities at Georgia Tech, said last year.

“Everything from cost to price to the mission of universities kind of went under the microscope,” Demillo said. “Enter technology.”

Learning management systems, digital (and open-sourced) textbooks, learning analytics, digital badges — if there’s a component of education that can be altered or replaced by technology, someone is trying to do that. And the money is there to help them make it happen.

Perhaps, the most visible example of this ed-tech craze are massive open online courses, or MOOCs. Coursera has now raised more than $80 million in funding, and just last month, its smaller competitor Udemy announced that it had raised $32 million in its most recent funding round.

At this rate, there seems to be little that can stop the flood of money rushing into ed-tech startups, but some are wondering if it’s a bubble about to burst. That initial worry venture capitalists had about the pace of change in education is still a real issue, and that can translate to slow — or nonexistent — returns for investors.

Ethan Beard, the former director of business development at Facebook and member of the eTranscript startup Parchment’s board of directors, said many investors are smarter and more patient than that, however. We’re only in the beginning stages of ed-tech investment, he said.

“Investors don’t like it, but they aren’t surprised if most of their investments fail, especially early on,” Beard says. “You expect most of them to fail and you hope to make it up on a few really big winners.”

(Next page: Ed-tech’s big IPO stumble)


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