Follow up on educational startups

Last week I wrote a guest post on TechCrunch UK questioning the lack of start-ups in the UK that are focused on Education. This article started a nice debate about what exactly the problems are and why both entrepreneurs and investors steer clear of solving the problems in education in the UK.

In addition to the comments on TechCrunch a link was also pointed to the article in a post on the forum - which started another debate.

In the article I point out that the UK education market is dominated by schools, universities and further education colleges but also that there are also segments in this market for informal education - workplace training, language learning etc.

Structural Problems

The discussion however focused very much on the schools market place and there was discussion around who the actual customer is (schools or local education authorities or central government). The confusion seems to have been created because a head teacher has control over their own budgets and makes the purchasing decision, but local and central government heavily influence these decisions. The picture is not as simple as that because in addition to the local and central government there are other quangos that also influence the decisions - BECTA being the largest.

Can anything be done about this “structural problem”? not easily, but if start-ups were given support and encouragement from the the influencers (BECTA, central and local government) then products and services would be more appealing to schools. This support does not have to come as funding - recognition and support of an idea with appropriate feedback would be good enough to help encourage funding from angel and VC sources.

Niches and content

Another point raised in the discussion was from Paul Sweeney:

There are existing billion dollar players (education publishers), and early successful niche players don’t tend to get bought out for high multiples.

The point about the existing players is true and in my opinion this is what makes the market place prime for disruption - as those existing players are not innovating. The second part talks of niche players and points out that they are not so attractive for venture capital because their value never increases enough to pay back at the levels that are needed.

So niches should be avoided - start-ups looking to help with very narrow areas of education may find problems when scaling especially when what they offer is mostly based on content. The Open University proclaimed that “Content is no longer king” when starting their OpenLearn initiative - and this is an astute move which will will have a large effect for university level education over the next ten years. How will open content affect publishers? Well that is the key question here.

Products and services that solve real problems in education that are neither niche or content focused - should receive funding (if they really do solve the problem and have a good business model behind them).

Why the focus on languages?

It seems the answer to this question is quite easy - start-ups avoid formal education because they don’t understand how purchasing works. So they turn to informal learning and look at the biggest consumer sector and realise that language teaching is not niche and that content for language learning is open. Also language teaching is global and means that companies do not have to focus on a UK only market.

This market is very crowded though for this reason - which brings its own problems when looking for funding - but this competition is certainly bringing innovation to the market (for example our own getawayphrases).

So many areas that are missing out

What is clear is that within education there are so many market sectors that are not getting any focus from start-ups whilst all the focus in on language learning and to some extent schools.

Hopefully the debate is starting to get people thinking - next I would like to talk to BECTA about how they can help.