Michael Moe's Keys to Scaling in Edtech

Michael Moe's Keys to Scaling in Edtech

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Edtech startups are a dime a dozen these days, and there’s no challenge quite like gaining a foothold in an increasingly crowded market. Some entrepreneurs prefer the traditional approach: focus on sales and build a product alongside slow and steady user growth. Others vouch for a new-school, millennial-inspired strategy: raise a bucket of money and distribute a free, targeted product that can hopefully ride the wave of virality. Some even try both approaches at the same time.

So what’s scaling in edtech--and how? That was the subject of an evening discussion in New York City on Dec. 3, bringing together industry veterans from the investment and startup community, co-hosted by GSV and Kaplan TechStars.

The vaunted “inflection point”

Investors tend to view education as a get-rich-slow, incremental-growth market. No longer, declared Michael Moe, the investor magnate, CEO and co-founder of GSV Capital, who described how “weapons of mass distribution” enabled by the Internet, mobile adoption and app stores are helping innovations reach their audience much more effectively. This erosion of distribution barriers has also bred expectations of being able to acquire new skills on-the-go, and at our own leisure.

Moe followed up with five major themes driving innovation in learning and investments in education startups today:

  • Return on Education: the impact technology can have on ultimately getting a job;
  • Knowledges of Currency: the need to continually replenish one’s own learning and skills;
  • Hollywood Meets Harvard: using engagement and entertainment to drive payment in content;
  • Mobile World: learning on-the-go and the simplicity of acquiring knowledge in smaller bits exactly when you need it; and
  • Big Data, which will continue to have profound impacts on the way we deliver and measure education.

Don Burton, Managing Director of the Kaplan Edtech Accelerator, explained how technology has created a “pull model” for education. “Pull” students, he believes, are more dedicated because they are highly motivated to learn. As opposed to sitting in class and accumulating seat time toward a degree, they actively put their own time and money toward personal betterment, usually through educational programs with direct payback and outcomes. He cited General Assembly and Codecademy as examples of companies that gained rapid scale by offering tangible skills development with a path toward employability.

The popularity of these new-age technology schools seemed “almost scary” to Moe, who attributed their success to the fact that their value is judged by the job market--and not by an traditional academic institution. He acknowledged, however, that there probably will be some bad actors that exploit the the demand for these alternative institutions.

Will this “freemium” thing really work?

That’s the $242 million question asked of the current kings of scale in K-12--Edmodo, ClassDojo and Remind--and the MOOC provider, Coursera. (That’s roughly the total amount of venture capital raised by the four.) Combined they boast tens of millions of users, but how this number translates to dollars is concerning not just to investors (and their limited partners), but to the learners and educators who are becoming reliant on these tools.

Moe doesn’t fret, having seen portfolio investments like Twitter and Dropbox strike it rich. (Both, as it turns out, are frequently used by educators.) He explained that a company like Dropbox has 200+ million users, but only a small percentage of them are actually paying customers. Yet these power users still yield a $10 billion company.

If you can create an engaging product with scale, Moe said, you can monetize at a substantive level. The key with a Remind or a ClassDojo (which he mentioned is his daughter’s favorite product as a teacher) is the value of, once again, the “pull.” Users actively register for and use the platforms for direct outcomes beneficial to their own everyday learning and teaching. Engagement and need beget usage, which will ultimately beget monetization.

On the conflict of interest

There are those who wholeheartedly believe that private capital--and financial gains--come at the expense of educational outcomes. However, Moe believed private capital can also walk hand-in-hand with innovation. For technology to drive the best results, he said, we need the best talent to be properly and specifically motivated on operational procedures.

Some of the best edtech tools don’t focus on the learning process directly; rather, they employ methods of efficiency that allow a real educator to better target their time and energy on best practices in teaching. Others are simply helping students fill in knowledge gaps unaddressed in their formal, structured learning experience.

For investors and entrepreneurs, Moe explained the need for an alignment of incentives with objectives, particularly as it pertains to strategic investment. That is, we must ensure that financial gains can be in line with educational outcomes, otherwise all of this work will never support the ultimate goal of any venture: sustainability. And if a product, tool, or platform cannot reach sustainability, then it is not worthy of adoption.

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