Education Tech Investments Surpassed $1 Billion In 2012
As venture capitalists pour money into educational technology companies, some wonder whether they are just building a new bubble.
On Jan. 15, Lynda.com announced a $103 million investment led by Accel Partners and Spectrum Equity.
The 17-year-old service, which offers online tutorials in Web design, photography and business, has trained more than two million people worldwide. The company plans to use the outside funding, its first, to support Lynda.com as it expands internationally.
"It will also add value to our membership with broadened content areas and accelerated scaling of our Web and video platform," said Eric Robison, CEO of Lynda.com, in a statement.
Two massive open online course (MOOC) companies, Coursera and Udacity, have each reportedly received around $23 in investments in the last 18 months.
While MOOCs have received the bulk of the attention in the past 36 months, "they're just one part of a continuum in online education," Kenneth C. Green, founding director of the Campus Computing Project, told InformationWeek in a phone call. The Campus Computing Project is the largest continuing study of the role of computing, e-learning and IT in American higher education.
MOOCs haven't been the sole target of venture capital. One of the largest investment recipients last year was Desire2Learn, maker of an online learning management system (LMS), which received $80 million in September.
"I've never seen so much interest in ed tech," company CEO John Baker told InformationWeek in a phone call.
Baker, who founded the Canadian company in 1999, has already found a use for some of the money. This week, Desire2Learn announced the acquisition of Degree Compass, a predictive analytics technology that helps students select the courses to take that will drive completion of their degree program, according to a press release. Desire2Learn said its Degree Compass product will be generally available in spring 2013. Financial terms of the acquisition were not disclosed.
Investments in education technology companies nationwide tripled in the last decade, ballooning to $429 million in 2011 from $146 million in 2002, according to the National Venture Capital Association.
Earlier this month, venture capital database CB Insights reported ed tech companies received a total of $1.1 billion in 2012 from venture capitalists, angel investors, corporations and private equity shops.
But the Campus Computing Project's Green noted this isn't the first time ed tech has caught the attention of enthusiastic investors; this also happened in the first dotcom boom in the late '90s. Green said some of these efforts survived, while others, including heralded efforts by Columbia University and Princeton University, failed.
Seemingly anxious to blunt worries that the current VC interest in education technology was another bubble, CB Insights headlined its report: "There is no ed tech bubble."
Audrey Watters, a journalist specializing in education topics, believes one of forces behind the VC investment in ed tech is the Common Core Standards, the U.S. education initiative to standardize curriculum across the states.
The CCS don't just specify math and language arts requirements, Watters wrote in a email to InformationWeek. "[They] also demand schools move towards computer-based assessment."
"Schools will have to make sure their educational content (textbooks, software, etc.) is aligned with these new standards -- and that's an opportunity, I think for ed tech companies to flag their apps, e-books, software and so on as compliant, in addition to helping schools move towards digital assessment tools."
Watters also disputed the characterization that investors were "breathless" about ed tech. "I think there's still a fair amount of uncertainty about whether or not any of these edu startups will actually be profitable," she wrote.
Watters is also concerned that a lot of VCs, "particularly those who do not have a lot of experience in enterprise ed tech," were basing their investment choices on consumer tech metrics, such as number of sign-ups.
Mike Feerick, CEO of MOOC Alison, agreed. "VCs don't understand what's happening, don't know where it's going," he told InformationWeek in a phone call. Ireland-headquartered Alison has served 1.5 million learners and 250,000 graduates worldwide since its 2007 founding.
Alison, which concentrates on introductory courses, is "cash-flow positive" and hasn't taken VC money to date, Feerick said, who was in New York this week attending two conferences on ed tech financing. "It's most my own funding, with two angel investors," he said.
Google in the Enterprise SurveyThere's no doubt Google has made headway into businesses: Just 28 percent discourage or ban use of its productivity products, and 69 percent cite Google Apps' good or excellent mobility. But progress could still stall: 59 percent of nonusers distrust the security of Google's cloud. Its data privacy is an open question, and 37 percent worry about integration.
CIOs Get Smart About BIIT’s tried for years to simplify business intelligence efforts. Have visual analysis tools and Hadoop and NoSQL databases helped? Respondents to our 2014 InformationWeek Analytics, Business Intelligence, and Information Management Survey have a mixed outlook.
Join InformationWeek’s Lorna Garey and Mike Healey, president of Yeoman Technology Group, an engineering and research firm focused on maximizing technology investments, to discuss the right way to go digital.