It Takes an Incubator. But How Many?


It Takes an Incubator. But How Many?

Is the rise of edtech incubators reshaping the education landscape or starting a bubble?

By Tony Wan     Apr 12, 2013

It Takes an Incubator. But How Many?

This article is part of the guide: Education Technology 101: From Assessments to Zombies.

There is no question that education is an unusual industry: Nonprofit ventures compete with for-profits. (In fact, it’s frequently hard to tell them apart.) The “users” of products aren’t typically the folks who are the “buyers” of products. The marketplace is a jigsaw puzzle of districts, charters, and others, crisscrossed with bureaucracy and conflicting demands. And the entrepreneurs are, for the most part, young and untested in the ways of building businesses.

For those kinds of reasons, it made perfect sense when three experienced Internet businessmen started an education technology incubator, Imagine K12, in early 2011.

And since incubators are kind of geographic hot spots, it made sense that entrepreneurs on the East Coast should have one, too. And maybe in the middle of the country. And in the south. Then there were more. (Here’s our list of the current state of edtech incubators.)

So far in 2013, the U.S. alone has seen five new edtech incubators and accelerators. And whether by coincidence or design, all five decided to announce their arrival this February, making the month look like a weekly show of one-upmanship.

It’s a telling sign of the convergence of dynamic energies: a supply of talented and passionate entrepreneurs devoted to the space, renewed faith in the education market among investors, and a global belief in the potential for technology to better education. But is it too much?

February's Fab Five

Boston-based nonprofit LearnLaunch got the ball rolling on February 1 when it announced the LearnLaunchX accelerator program. LearnLaunch grew out of an existing organization, EdTechup, that had organized a regular series of local meetups and events around education entrepreneurship. The six to eight startups selected for LearnLaunchX will start school on April 1.

Socratic Labs, based in New York City, debuted its inaugural class a week later on February 7 (even though it quietly began operations in fall 2012). It will run two cohorts a year, with eight to 10 startups per cohort. The three founding directors--Heather Gilchrist, Rusty Grieff, and Farb Nivi--all hail from Grockit. Particularly notable is a program Gilchrist is spearheading called Edtech Passport: entrepreneurs involved with Socratic, LearnLaunch, 4.0 Schools (a “pre-incubator” in New Orleans), and others will have a “passport” to travel among the incubators that are part of the network and “enjoy the perks of a local network in regional hubs across the country.” This includes attending classes, using work spaces, and sharing access to each other’s networks of schools, investors, and other community resources and stakeholders. Socratic’s mantra: “Education is not a zero-sum game.”

On February 18, TechStars CEO and founder David Cohen, along with Kaplan CEO Andy Rosen, announced they were joining forces for the Kaplan EdTech Accelerator. The program boasts a flashy lineup of mentors, including Deborah Quazzo, founder of GSV Advisors, and CEOs from big-name edtech startups like Knewton and Dreambox Learning. The program, also based in NYC, will work with ten startups every year, beginning this June.

Two days after the Kaplan-TechStars announcement, Pearson launched its own incubator, Catalyst. It’s an incubator in the loosest sense: Ten startups with “products that complement or enhance a Pearson brand” will be partnered with those teams and work together. (This has raised eyebrows of the program as an “easy-bake oven” that takes piggyback technologies from others to promote existing Pearson products.)

That very same day, FurtherEd, which made its name in the online continuing education space for professionals, announced its very own edtech incubator in partnership with Progress Partners, a finance and M&A advisory firm. FurtherEd CEO Schnurman is still finalizing financial details of his program, but he plans to work with up to 10 small (2- to 3-person) teams in FurtherEd’s new downtown New York office.

The United States is not alone with the edu-bator craze. Other countries have caught the bug as well:

  • London recently welcomed the U.K.’s first edtech incubator, the “Edtech Incubator” (so much for a name). And there are rumors of another one on the way.
  • Israel is building an education technology oasis with MindCET, which offers two programs for startups. In its first year, the accelerator is currently working with 10 startups in different stages of development.
  • The Brazilian government is also getting in on the dance with Startup Brasil, which offers up to $100K to woo tech entrepreneurs, particularly those working on education, to set up shop in the country. There’s a bit of a competitive streak going on there, too: Startup Chile is on track to host 1,000 startups by 2014.

Making Sense of the Numbers

Too many? Are they fueling a bubble? “From the ecosystem perspective, more choice is better for all the participants involved, from kids and teachers to startups themselves,” says Alan Louie, a founding partner at Imagine K12 (who is stepping back from his day-to-day role). “Education is not a unified market by any means. There are a lot of cultural differences between regions, which means they each have different strengths and needs.”

Even so, that collection of incubators promise easily more than 100 edtech startups a year. How many of them will survive? NewSchools Venture Fund counted 34 seed financings in 2012. We’re keeping count, too. From there, a portion are likely to get snapped up in acquisitions: CB Insights counted 99 M&A edtech deals in 2011 and 2012. Traditional publishers like Pearson, McGraw-Hill, and Wiley & Sons have been among the top acquirers, with the top disclosed deal worth $650 million. Startups are getting into the action as well, as seen in Edmodo’s acquisition of Root-1 in March 2013 or Rosetta Stone’s recent purchase of Livemocha.

And that might be enough momentum to keep the incubators going. Our back-of-the-envelope calculation suggests that most incubators have about a $1 million-a-year burn rate. (Figure $400,000 for the 20 startups, a similar amount for managing partners, and the rest for rent, other services, and events.) Just a few deals should keep the incubators humming.

“We [the U.S] probably can’t support 20 of these things, but five is probably more reasonable,” quipped Louie.

But some final words of wisdom for those thinking about joining the incubator bandwagon: It’s more than just offering money, work space, and connections. “Most people don’t realize how much work they have to put in,” says Gilchrist. “Imagine managing eight startups, on top of your own.”

This article was originally posted in FastCompany.

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