EdTech investments have been booming in 2021. According to Q1 data, the industry raised over $4 billion in venture capital, with China, US, and India as market leaders. The surge of interest in this field can encourage startup founders to launch an education technology startup.
Before you decide to jump on the bandwagon, however, a concept and growth plan are vital. In this post, we will detail how to launch an EdTech startup and make sure your product or service is relevant to today's market needs.
5 Reasons to Start an EdTech Company
While traditional EdTech platforms target K12 and college education, the truth is, that there are many more niche areas that teams can explore and enrich with relevant projects.
In fact, education is one of the most versatile fields and is undergoing a massive shift towards digital transformation.
If you are questioning the profitability and relevance of an education product, here are five compelling reasons to find out more about how to start an EdTech startup.
- There’s still room for untapped opportunities. Digital transformation in education is a recent trend fueled by the pandemic, adoption of remote work, and long-distance communication. Thus, while the market is booming, it’s not yet saturated. According to AngelList, there are 24,000 global education startups on the market — a fairly modest number compared to finance or healthcare.
- Education has become personalized. As neuroscience and behavioral studies progress, we discover more differences in the way people process and integrate information. It has become apparent that factors like circadian cycles, personality types, and more should be taken into account when designing learning strategies. Traditional education misses the mark on personalization by confining students to standardized practices. Technology, on the other hand, has the tools to support personal learning, allowing students to process knowledge at their own pace.
- The Education market is growing at a rapid pace. Today, education is one of the largest global industries, with over 6% of the allocated GDP. By 2025, the market sector is expected to hold a value of over $7 trillion. The digital spend in education is growing unprecedentedly, as well — forecasters expect it to hit $404 billion by 2025
- EdTech is attractive to investors. The interest of VC funds in EdTech startups is peaking — while, in 2018, investments averaged $8 billion, they are now twice as high (hitting $16.1B in 2020). Estimates outline a bright future for education-niched companies — by 2025, there will be over 100 companies with market capitalization over $1 billion.
- EdTech will soon replace traditional education. Other than revolutionizing K12 and college education by integrating innovative technologies, over time, the trend of life-long learning will become more pronounced — big players across industries like Deloitte and PwC support and fund continuous development among employees.
The data clearly spells out a wide range of opportunities for the EdTech market. So, if you plan on launching an EdTech startup, now is the right time to do it.
How to start an edtech startup
EdTech startups are usually technically complex platforms that need to emphasize intuitive interfaces, accessibility and security. They also need to meet a high number of regulatory requirements in order to be eligible for use in K12 establishments.
To ensure you develop a product that creates a steady revenue stream, take a look at the step-by-step breakdown of how to create an EdTech startup.
Know your EdTech market
EdTech comes in many flavors. There are platforms that support or redefine traditional learning and education by streamlining classwork management, testing and other workflows; and tools that fuel remote e-learning and distance education.
When you start thinking about how to build an e-learning platform or EdTech startup, make sure you understand which niche the startup falls into and what type of target audience will find it appealing. Here are the reference questions that help startup founders find the right niche:
- What type of learners does the startup target (B2B, adults/K12/college students)?
- Is the platform aimed at general education or personalized?
- What aspect of education does the platform aim to improve?
- Does the platform need to be compliant with local laws?
Make sure your idea is viable
There’s a concept in startup development: “If something does not already exist, it is either innovative or useless.” Before you commit to EdTech startup development, make sure your concept is the former, not the latter. How should you go about testing viability? Here are a few easy-to-deploy methods.
Method #1. Do your own research
Start an EdTech company development by exploring the market. Identify whether similar startups to yours exist, whether they have succeeded or failed, and which hurdles they faced when scaling and acquiring users.
Of course, knowing whether a startup is a success or a failure takes training and experience. If you are not a seasoned investor or business developer, it’s a good idea to stick to a set of basic metrics, namely:
- Number of DAUs and MAUs.
- Recent EdTech investments.
- Public exposure (news, engagement on events, etc.)
- Social sentiment (use Reddit and other forums to gauge public opinion.)
Method #2. Ask around
Here are a few ways to test the validity of an EdTech startup idea without disclosing technicalities and allowing others to rip it off.
- Post a poll on social media. By conducting a basic survey on the problems the target audience is facing, you’ll get a better picture of the market and its potential.
- Run your education startup idea past a business consultant. There are plenty of consultancy-as-a-service companies — once you reach out to those, experienced critics will poke holes in your concept and will either help you tweak it or explain why it’s not viable to begin with.
Define the Unique Selling Proposition (USP)
A Unique Selling Proposition is a marketing strategy that helps define why your product is superior to the alternatives.
Here are the tools marketers use to come up with effective USPs:
- Keep it short. Your product might have dozens of benefits — in a USP, they should be condensed to one powerful statement. For example, Udemy markets itself as the biggest online education platform. Coursera, on the other hand, is promoted as an intermediary between learners and top education establishments.
- Make sure it’s relevant. A unique selling point will be considerably more effective if it directly addresses challenges and concerns that learners, teachers, and institution managers face every day.
- Keep it realistic. When coming up with a USP, make sure it is intrinsic to the platform. It’s tempting to choose benefits that “sound good” as a unique selling point even if, for technical or feasibility reasons, you cannot live up to the promise. In the long run, if the USP is not representative of the product, users will call the founding team out.
Choose a business model
Feasibility and sustainability are key components of a successful EdTech startup. The founding team should figure out how to convert free users into paid subscribers — otherwise, they will have a hard time attracting investors and supporting the product once it is released.
There are several popular business models in EdTech:
- Freemium attracts prospective users to the platform by letting them use the product for free. In order to access advanced features or additional website content, users will be required to subscribe.
- Institutional (or top-down) models require users to get in touch with local governments and sell EdTech products through their endorsements. On the one hand, this gives business owners a steady revenue flow (unlike freemium platforms where user acquisition is the key challenge). On the other hand, the founding team cannot rely on the institutional approach until they have a robust network of relevant relationships.
- Bottom-up — this model uses schools as a way to foster product adoption. The founding team can onboard educational institutions as free users and get revenue from individual families that may (but shouldn’t be forced to) choose to use the platform to fuel their kids’ learning.
- Sponsored — a revenue model that keeps the product free for users but uses in-app ads to incentivize sponsors. In some cases, business owners can connect with corporations willing to sponsor the maintenance of EdTech startups as a part of their corporate social responsibility (CSR) initiatives.
For more information about monetization models within modern digital platforms, take a look at our article here.
Build a team
Statistically, you wouldn’t be wrong to be worried about an incompetent team sinking your startup — 23% of startup founders link the failure of their projects to not having the right team to back them up.
Here are a few tips for building powerful teams for nascent EdTech Startups:
- Analyze your strengths and weaknesses. As the primary team member, you should be aware of what your strengths and shortcomings are. Break your abilities down into soft and hard skills and discover where you fall short.
- If you are an ideator, hire action-takers. It’s a common strategy for founders to hire teammates similar to themselves; however, you are actually set for a higher probability of success if you do the opposite — hire grounded, results-oriented employees if you are a visionary. This way, you can be confident that the world will see your creativity as a bug-free, reliable tech product that meets the intricacies of government regulations.
- Enforce work-life balance and don’t reprimand those who want it. The startup environment is hectic, so make sure to set boundaries for your team. Having everyone work 24/7 may be 'productive,' but, over time, your most valuable teammates will burn out.
Develop an MVP
A Minimum Viable Product (MVP) is a preferred tool for many EdTech startup founders when it comes to testing engagement and gauging investor interest. An MVP is a stripped-down version of the product that helps validate the idea and gather user feedback.
Let’s go over the best practices for building an MVP for EdTech company:
- Include only vital features (e.g. search tab, sign up, payment gateway) in the MVP to cut development costs.
- Set a budget and a timeline to make sure you are not crossing the feasibility threshold.
- Focus on security — since the MVP will rely on user data, make sure you are processing and storing sensitive information in a compliant way.
- Connect with MVP testers and build long-term relationships via newsletters and social media.
Read also: How to Build an MVP for an Online Marketplace
EdTech startups have a wider range of funding options than e-commerce or other industries with no immediate public value. Here are a few ideas that startup founders can use to fund development and product maintenance:
- Crowdfunding — a lot of educational projects and materials were successfully backed by contributors on Kickstarter or Indiegogo.
- Build connections with investors who understand the market and educate those who don’t. Make leveraging connections with VC firms that fund EdTech projects (Emerge Education, Owl Ventures, and others) while simultaneously publishing blog posts and white papers that introduce new investors to the market and encourage them to get on board by investing in your startup.
- Grants and government-backed programs. Local governments and NGOs are big on funding innovative education startups. Also, platforms like the EdTech Innovation Fund are an excellent starting point to get funding.
5 Reasons Why Education Startups Fail
The EdTech market is on track for success; however, that doesn’t mean that all who have learned how to start an education startup company are entitled to a bright future by default. In fact, a large share of EdTech companies fail: some go down quietly, others share their experiences publicly with the goal of helping other startup teams.
Tech startup founders can gather feedback from entrepreneurs who didn’t succeed and analyze the market to determine which misses made others fail. Here’s our take on the top reasons why EdTech companies don’t make it.
- Poor market research. This comes in many shapes — underestimating the power and market share of influential competitors, not staying up to date with government regulations, or failing to gauge demand for the future platform.
- Lack of understanding of the educational system. This is a two-fold problem: on the one hand, teams don’t know how to interact with teachers and students and struggle to engage with them personally. On the other hand, they lack the bigger picture view, and don’t know which regulatory bodies are in charge of education, which certifications professionals need to have to become qualified teachers, or the legislations that regulate data security and legitimacy in EdTech products.
- Running out of cash. By underestimating the complexity of Edtech startup infrastructure, business owners can unexpectedly fall short when it comes to budget. On the one hand, this can be fixed by precisely estimating time and financial expenditures, and, on the other, to look for cost reduction strategies.
- The wrong development team. A lot of people believe that a high-performance project is optional in EdTech, when, in fact, it is a must-have and should be backed with an experienced software development team. Education institutions actually don’t have time to deal with steep learning curves, support founding teams through debugging, or manage security shortcomings — they are efficiency-oriented and will use the product only for as long as it helps meet their needs.
- Getting outmatched. To ensure you don’t miss out on a competitor that has acquired most of your prospective users, do your research in the beginning stages of your EdTech company development.
EdTech is a booming sector, which is both fulfilling in terms of public goods and lucrative to ambitious startup founders. Developing an EdTech startup helps business owners leverage high investor interest and connect with policy-makers.
The EdTech startup development process does have unique challenges, though: the need to deal with regulatory constraints, technical complexities, and ethical dilemmas.
To solve these concerns, planning and strategizing are crucial. EdTech companies need a skilled tech team to help back innovative ideas with scalable infrastructures.
At WTT Solutions, we assist founders in building EdTech startups. Our team has years of experience in designing custom products for schools and universities, as well as learning-as-a-service platforms. To discuss your idea with the team, contact us through the form in the top right corner of this page!