What it will take for the cream of edtech to rise to the top.

I work for Brighteye Ventures – we’re the largest edtech-focused fund in Europe by assets under management and deal count. We see the vast majority of European edtech and learning tech companies that are raising venture investment.  We have interests in a range of sectors- as a rule of thumb, if it touches learning, we are interested! This means we have a good view of emerging trends, both in terms of product categories and geographic markets.

What it will take for the cream of edtech to rise to the top.

Venture capital (and investors in general, whether angels, private equity or others) plays a key role in accelerating the development of some of the most promising edtech and learning tech companies. Crudely, venture capital at Seed and Series A stages (where we operate) is intended to help companies make 18 months of progress in 6. Our funding and guidance support founders to grow their businesses, whether that’s via product development, marketing, building out the team, entering new markets or other priorities.

We are always interested in companies that are looking to operate in formal education- indeed, we already work with a number that do in the US, UK, and across Europe. But, we also know, as do most in the Global Edtech network, that selling into schools, colleges and universities is difficult, regardless of where you are in the world. That’s why retention is such an important indicator for us when considering new investments in companies focused on the state sector.

Most governments operate (intentionally or not) some kind of ‘innovation first, regulate later’ model across sectors- an example of this is the Open Banking legislation intended to regulate and foster innovation in fintech, placing more power in consumers’ hands. I suspect something similar will happen in education in due course. Settings need to be able to swap resources and products in and out to best match their requirements.

There are three main, inter-related reasons why it’s hard to sell into state education settings. These double as reasons I think a) accreditation and / or b) increased edtech budgets are inevitable:

1: Significant variation in organisation structures

Schools, colleges and universities are all quite different. Leaders’ attitudes, at the school, group or local government level all vary significantly and therefore, so do the personnel that oversee edtech (by role and seniority). Most universities have a Chief Innovation Officer or equivalent and schools tend to have a data and / or technology lead, as do colleges. Some of these roles have purchasing power for a single setting (i.e. a school or university department), while others may have oversight for an entire group (i.e. a whole university or number of schools). These people are busy and inundated by sales pitches. Desire to sell into larger groups is naturally shared by all aspiring edtech entrepreneurs. Settings are generally free to prioritise their spending decisions, hence variation in approaches to blended learning and therefore edtech spending. A company could be liaising with two neighbouring schools with totally different approaches and budgets.

2: Budgets are small so there is little room for error

Budgets are finite and independent schools aside, set by national funding formulae at the direction of politicians. An Education Policy Institute report found that less than a third (31%) of the additional costs facing UK schools as a result of the pandemic are covered by the government’s support fund. Even at a time when the UK treasury has loosened the purse strings to historic levels, schools are still (necessarily) spending more than they are receiving in central funding.

There is limited room for trial and error, given the scale of upfront investment required for hardware, software and courseware. The costs can be so substantial that schools need to save for and therefore prioritise edtech purchases over other possible spending, which naturally sometimes requires a choice between technology and personnel (hiring or development). There is limited space for ‘nice-to-have’ solutions in the state sector.

Settings can therefore be reliant on cheap or free resources rather than the ‘best’ or most impactful. Soon we will hopefully be able to assume devices are a given for all pupils, whether purchased by parents or carers or via schools. But how will students make the most of devices and how will educators deliver high quality lessons without access to affordable, quality learning products? The funding issue lies with governments, but they’ve got away with measly funding for edtech solutions because some parts of the education sector remain resistant to change. As we wrote in a recent report, smartboards cast a long shadow for many teachers, despite enormous progress being made by edtech companies.

The good news is that this information gap should be easy to address, particularly given the experience of the past year; maybe then, governments will direct budgets accordingly and support all schools to think long-term when it comes to digital.

3: Edtech is therefore ultra-competitive

The two aforementioned factors (opacity of school structures and tight budgets at the individual school level), exacerbate the competitive environment facing edtech companies. Differentiation is difficult to prove between companies operating in similar spaces- there remains a dearth of proven impact for most companies’ products, with only a select few having robustly evaluated and proven their impact (likely, in places, for budgetary reasons). This is problematic. Centres shouldn’t be forced to take leaps into the dark- you wouldn’t spend £15k on a car without knowing it works properly and without some kind of guarantee to make sure it delivers to the expected standard. A sleek deck isn’t proof that the product works and is worth the investment.

How is this affecting edtech companies?

For these reasons, many edtech companies have had more success in independent and international settings, where budgets are larger and accordingly, organisational structures are clearer. Competition remains significant, but companies are competing for larger budgets. Whether this broader adoption and implementation is positive depends on how it’s considered: it’s a positive if these settings prove what works and what other settings should prioritise, but it’s a negative if it blurs what’s effective and ineffective by supporting and making viable solutions that are not good enough to be widely adopted and prioritised in settings with tight budgets.

What’s materialising in the state sector is a rapid process of relatively unchecked natural selection, where measurement is not necessarily based on efficacy and instead on brand power, legacy systems, and effective sales teams. At present, we are ‘hoping’ that the best companies will develop successful, long-term relationships with settings and be compatible with complementary product types. But this cannot be known without data on proven impact. It isn’t all bad, of course, but the natural selection process in its current form will have high wastage: settings may purchase suboptimal solutions that will duplicate what other products already deliver.

How can we avoid waste and help the cream rise to the top?

A light-touch accreditation and verification would help, aligning with a set of either government or independently defined objectives. The process of accreditation should require proof of concept and proof of impact. There isn’t space or time for wasted resources. If ‘ed’ truly comes before ‘tech’ as many governments attest, this is a natural next step. Standards are overseen in most other areas of publicly funded education- technology solutions should not necessarily be immune.

This holds true not only in the UK but across Europe and most of the developed world. Some would view this kind of bureaucracy in a burgeoning sector as unnecessary interference- but I would argue that it’s necessary when budgets are so tight and the room for error is so small. Tight budgets and limited wiggle room, I believe, are reasons why governments in some of the most effective countries by education performance opt to produce centralised resources and platforms that can be accessed by all settings.

I’m looking forward to seeing the next iterations of various nations’ edtech strategies in the coming months as we begin the long journey to ‘normal operation’. With all of this in mind, governments have a decision to make: help edtech companies prove their impact and help settings choose solutions that work, or increase settings’ budgets and build in some wiggle room for trial and error. It would be great if they could do both- the sooner the cream rises to the top the better!

These are my views and do not necessarily represent Brighteye’s views.


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