Why Edtech Companies Don’t Make It

Edtech companies are being started at a staggering rate. Each promises to resolve an issue, transform education, be better than its competitors, and ultimately change the face of education. While these traits may be commendable, there is no doubt that edtech companies are struggling in a market that is over saturated with products and idea. According to TechCo, in 2016, 56% of education startups remained open after 4 years. There are a number of factors why edtech companies fail, and by looking at a handful of these, we can better understand why edtech is such a competitive market and why some of the most well-intentioned companies fail.

Misunderstanding the Education sector

The education sector is a complex marketplace. Not only does every school district have varied needs but edtech products need to appeal to parents, students, administrators and school boards. Many edtech companies do not understand who they need to get buy-in from, and so cannot find a way into the classroom. Another problem is that too often edtech creators do not understand the actual needs of teachers and students, but their perceived needs. They create products that are solving already solved problems and trying to reinvent the wheel.

Edtech creators should not be designing products for their own reasons but actively figure out what the problems of the modern classroom are and will be. Failure to do this leads to the creation of products that are useless.

Unoriginal products

With a marketplace bursting with “innovative” products, the death of many edtech companies is because their product is not unique enough to compete. This is not to suggest that entrepreneurs are not forward thinking but that their products are too similar to products that are succeeding or already have a strong user base. Investors are unlikely to invest in products that do not stand apart from their competitors and administrators will not be interested buying products that they essentially already own.

New edtech companies need to do their homework and ensure that their products do not mimic other products and that they offer something new. This is an essential factor if their products are to be a success.

The Wrong Business Models

Many edtech products have embraced the freemium pricing model as the norm. This is attractive to new consumers (who like to get things for free) but can be detrimental to edtech companies if those same consumers do not buy the upgrades and in turn, bring money into the company. New edtech companies need to best understand how to sell their product and how to build investor confidence. Not every product will benefit from a freemium model and creators need to understand what plans are available on the market. Without a deep understanding of pricing and the different edtech business models, new companies will never see a cent in profit.

Lack of patience

The growth of any new company is slow, and for edtech companies, there is very little hypergrowth. Most companies will only see growth after 5 to 10 years of commitment. This can be uninspiring and moral crushing for new companies who have followed the freemium model and may not see any profit for a while. Having patience and providing investors with data and user numbers is important in building long-term confidence and a solid relationship. Edtech entrepreneurs too often do not see the yield of their product, and so they lose hope, and the product comes to a quick death.

So, while edtech companies have the traditional problems that come with start-ups, there are very specific areas that lead to the failure. Edtech companies need to meet a real educational need, be unique and understand what business model works best for their growing company. It is also very important that edtech entrepreneurs understand that growth will be small at first and this should not dissuade entrepreneurs from working hard. Edtech is the future of education, and we need more exciting products that will change the way we learn.


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