Where's the Money, Jack?

Where's the Money, Jack?


The UK has a long history of innovations in computing and education, from the brilliant minds of Charles Babbage and Ada Lovelace to Alan Turing, the Colossus computer, and Sir Ken Robinson. And it’s also got quite a track record when it comes to building an international brand, lest you forget that London is the corporate home of Pearson, the world’s largest education company.

Education is big business here. The UK government’s spending on education is expected to top £97bn (about $155 billion) in 2013. In addition to this, you can safely add the large sums that parents and private institutions will fork over for software, hardware, and tutoring services.

Yet, despite spending billions on educational technology in the last decade, the UK--and England specifically--is currently a very tough place for edtech start ups.

Sure, London may be an international financial hub but there’s a painful lack of funding for early-stage startups to take their ideas the next step. Institutional, early-stage investments funds and angels simply don’t see education as a very exciting sector. I’ve met innumerable local investors over the years who pay lip service and say they’re “very interested in education,” but most are extremely risk-averse (even more so than US investors).

Why are investors here so wary? Here’s a short history lesson that many seem to have forgotten.

Between 2002 and 2008, the English government gave schools £510m (approx. $800m) of eLearning credits to buy software from local vendors. Unfortunately, in 2006, the government also gave BBC a £150m budget for BBC Jam, an ambitious online project to provide free software and games covering about 50% of the UK curricula. BBC Jam’s content was supposed to be “similar to but different from” what the private sector provided. But the education software industry found otherwise, and filed many claims that the BBC’s online education service was “damaging the interests of industry competitors.” Some pointed an accusatory finger at the government for giving the BBC the green light even though there were already companies providing similar services. Before it was shut down in 2007, BBC Jam had spent half of its budget (£75m) on content that for legal reasons can never be released. This repercussions of this massive fiasco has bred a climate where investors have become wary of investing in local edtech startups for fear of further government missteps.

But just because the money pool dried up doesn’t mean that ideas did, too. The emergence of tech incubator programs that provide a little seed funding, like Springboard, Oxygen and Wayra, have helped grow some good ideas into fruition. However, their generalist, across-the-board approach to mentoring is more geared to consumer tech products. Those in education require unique market insights and connections to teachers and schools--things that US edtech incubators like Imagine K12, are much better equipped to provide.

There are plenty of interesting upstarts that ought to catch the eye of investors on both sides of the pond. I’ve invested in one--Night Zookeeper. Here are others that have managed to scrape together enough funds over the past couple of years to begin to grow (based on my research):

  • MangaHigh /Blue Duck Education (curricula-aligned maths games and data): £1.4m from Pearson’s Innovation fund managed by  Learn Capital (previously Revolution Learning) and £700k from ProFounders Capital (2010/11 combined loss £2.6m);
  • MindShapes (games/apps): £5.5m from angels and institutional convertible notes. Just announced £3.2m pre-revenue loss;
  • Whizz (supplementary maths): £1.3m from private investors;
  • Twig (high-end video): Six-figure sum from private Scottish media company DC Thomson;
  • Flooved (semantic, social and content service): £400k angel funding;
  • Zondle (games/apps): £200k angel investment. 2013 SXSW LAUNCHedu finalist;
  • Oddizzi (geography/cross curricula site): angel investment;
  • VidioWiki (helping researchers fulfill public engagement funding remit): £50k angel investment and Springboard alumni;
  • Teachable (UK version of Teachers Pay Teachers): angel investors.

There’s also what I call a “diaspora” of companies whose founders were from the UK but have since moved abroad:

  • Academize: Collaborative video learning platform incubated at AngelPad in San Francisco
  • MediaCore: Online video platform built on tech from Damien Tanner’s PandaStream. Based in British Columbia. £1m from angel investors. SXSW Launchedu Finalist
  • Tiny Ears (K6 reading app): Incubated for six months at Start-Up Chile.

Talent diasporas aren’t unique to the UK nor education, but it’s a shame that a nation rooted in technology and education must watch some of its best and brightest take their talents elsewhere.

Look, no one’s ever promised that being an entrepreneur--especially in edtech--was going to be easy. But with a more supportive environment for nurturing education startups and renewed confidence from investors, we can turn our treasure trove of innovative ideas into a reality.

But enough with the words. Next week I’ll be organizing a Startup Weekend EDU in London (Jan. 25-27), a much-needed weekend convergence of entrepreneurs, teachers, and investors. And I’ve got plans to launch a much-needed edtech incubator, based in the UK and Australia, along the lines of of Imagine K12. The difference? Teams will be physically based (live and work) in schools, with 24/7 access to teachers, students, and the institution’s wider networks. The focus will be on helping them work directly on developing and testing their minimum viable product (or prototype) with their end users. I’ll be announcing more later this year, so keep posted!

Richard Taylor was a director of several Australian start-ups (tech and non-tech) then lived in San Francisco with his wife during the dotcom boom. He later worked for the education department in London, set up a business intelligence publication, and an online education games business. In the last couple of years he has done many consultancy projects, been a business mentor, public speaker, angel investor, and judge of startup competitions.

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