The MoneyThink Blog

The EdTech Bubble?

March 12, 2014

Are we in an edtech bubble?  I’ve read countless articles floating this idea, their authors observing — eyebrows raised — the rapid flow of venture capital into the sector in the last five years.  On the one hand, I look at the number of well-funded learning management systems (or, as they are more fashionably termed now, “learning systems” or “learning experiences”) and content platforms out there and have to agree.  There is such an aggressively long tail in edtech that it’s hard to imagine that many of these LMS/content platforms will make it despite sizable venture capital investments in their success.  I see a lot of Kno stories in the works.  (Kno was something of a darling in the edtech space, purporting to disrupt the textbook industry.  They raised something like $100M and were bought just a year or two later for $15M.)  The waning star of the MOOC does not augur well, either — just a short year or two ago, Udacity, Coursera, EdX, etc. were generating a fierce and forceful amount of press, excitement, and, yes, anger, especially among the academic establishment.  In fact, the rage with which academia received the MOOC providers at the time suggested that we were sitting on the precipice of a very serious fracture in the topography of the education landscape.  And yet here we are just two years later, and the MOOCs feel much less central to the trajectory of higher education than anticipated.  We aren’t seeing flocks of students drop out of school to complete their education via these platforms.  (In fact, most stats suggest that MOOCs cater to the learning styles and lifestyles of individuals who have already earned degrees in higher ed.)

But the “aggressively long tail” may also be the saving grace of many of the relatively recent entrants to the edtech space.  In a sense, education technology has a necessarily long tail because it encompasses such a wild diversity of content, and form should follow function.  (And if it doesn’t, there is typically a big problem.)  This is why MOOCs in computer science and mathematics — a lot of the STEM topics — were a much more natural fit for a purely online modality.  Answers could be auto-graded; exercises could be auto-issued; etc.  When it comes to teaching the humanities and other more conversation-focused disciplines, things became fuzzier, less practical, less engaging.  I see a lot of smart edtech companies differentiating themselves along the lines of content, which suggests to me that perhaps there is no bubble after all, provided that these companies are agile enough to continue to pivot and develop in ways that will yield a positive ROI in the long run.  As the CEO of Knewton, Jose Ferreira, wrote:  “For a bubble to exist, money must pour into a sector beyond the reasonable ability of that sector to return positive value to investors. In other words, if all the edtech companies that have been funded over the last five years and those that will continue to be funded over the next few years, as an asset class, have a reasonable chance of producing positive return on investment — then we are not in a bubble.”  So, if the Udacities and EdXs continue to iterate into content areas where they gain deep traction (rather than tackling the entire higher ed system, writ large), I could see things panning out quite well.  For example, Udacity has been focusing on workforce development programming — a much more palatable content area from the university standpoint — and a new and deep niche to examine.  (A niche conveniently adjacent to big corporate funders as well.)  My absolute favorite edtech star, Duolingo, a foreign language learning tool, was sharp in hanging its hat on a specific content area and optimizing all widgets and tools to support the learning of that curricular track.  I see them continuing to excel in that content area, and I see other programs that learn quickly from the market and move into specific content arenas doing so as well.  In sum, the jury’s still out when it comes to the question of whether or not the edtech bubble exists.  I’d welcome thoughts on this!

This post was written by Stephanie Sauer

Leave a Reply

Your email address will not be published. Required fields are marked *

Share This Post

Sign up for our newsletter and stay up to date with the latest news and events from us at Moneythink.