About the Project
This report was made possible through support from AT&T Aspire. Some of the sources cited are investors in EdSurge. These include: GSV Capital, NewSchools Venture Fund, Reach Capital and Catamount/Owl Ventures. Additionally, a single source was provided by AT&T among the 90+ interviews. EdSurge takes full responsibility for the reporting in this project.
EdSurge helps schools find, select and use the right technology to support all learners.
We’re building an edtech marketplace in US K12 and higher education supported by high quality resources and tools that enable the buyers, users and builders of edtech to make better decisions.
We focus on three core activities: Publishing content, creating community and building commerce tools.
About AT&T Aspire
AT&T is using the power of its network to build a better tomorrow. The company’s signature philanthropic initiative,drives innovation in education—through technology, social innovation and relationships—to ensure all students have the skills they need to succeed in school and beyond. Through Aspire, AT&T has passed the $250 million mark on its plan to invest $350 million in education between 2008-2017.
K12 Edtech Trends: Research Methodology
How do you pick just eight edtech trends? What’s in and what’s out?
EdSurge spent four months identifying, prioritizing and researching the most influential trends within K-12 edtech. It was paramount to EdSurge as an organization to incorporate diverse viewpoints across major K-12 education stakeholders from the companies building education technology, to teachers and administrators who use it, and the investors who fund it.
This research was divided into three key phases:
Leveraging the wealth of internal knowledge as well as our readership, EdSurge identified 20+ trends within K-12 education technology from the past 12-24 months. This included a poll in our newsletters back in December that helped let us know what was top of mind to you. Thanks readers!
Culling the list of more than 20 down to eight trends was challenging. EdSurge conducted interviews with a subset of edtech influencers including nonprofit leaders such as Karen Cator of Digital Promise, investors at the forefront of edtech such as Liz Arney of NewSchools Venture Fund and influential administrators such as Superintendent, Dallas Dance of Baltimore County Public Schools. In addition, we developed a detailed rubric based on: 1) the relevance of the trend within the past 12-24 months 2) the relevance of the trend to edtech, and 3) the relevance of the trend to the major audiences (teachers, administrators, entrepreneurs and investors) for the report. The interviews combined with secondary research allowed us debate internally about what was “In” and “Out” for 2016. Note: some key trends such as product efficacy and procurement missed the cut, not because they aren’t important, but because there wasn’t a meaningful shift in opinion by a mass of stakeholders within the past 12 months. That said, look out for EdSurge reporting on these trends in the coming months.
The EdSurge research and development team completed 90+ interviews and countless hours of secondary research. The interviews enabled us to incorporate diverse perspectives and address why the trends matter. A more detailed breakdown is as follows:
Thank you readers for your help! Please reach out to email@example.com if you are interested in being part of future research projects.
Chapter 1 of the State of Edtech Initiative—in both its paper and online incarnations—reflects four months worth of research, interviews and reflection by the EdSurge team. We are very thankful for all of the administrators, educators, companies, investors, and other education stakeholders who graciously shared their experiences with us.
A number of EdSurge staff put tremendous energy into creating this report. We are extremely thankful for the great team we have.
- Researchers: Michael Winters, Jess Zhao, Allison McLaughlin, Jen Helms, Doug Birch, Lucy Hood
- Project Leader: Seth Greenberg
- Director of R&D: Christina Quattrocchi
- Editor in Chief: Betsy Corcoran
- Creative Editor: Paty Gomes
- Engineers: Agustin Vilaseca, Brady Fukumoto
- Project Advisors: Tyler McNally and Howard Kao
- Designers and Graphic Support: Aaron Tate, Alice Barton, and Carolina Cavaleiro
- Social Media: Molly Levitt
- Fact Checking: Alice Myerhoff, Barbara Lawson
- Videography: Brent Butler, Nathan Coltrane
- Content Partners: Whiteboard Advisors
A special thank you to Whiteboard Advisors for supporting this project with additional insight into the policy perspectives that impact several of these trends. Look for this icon on the site to get the insiders' perspective.
This report was made possible through support from AT&T Aspire. EdSurge takes full responsibility for the reporting in this project.
Funding: Research Methodology
To pull together this research, the EdSurge team conducted interviews and surveys with key investors, companies and experts in the edtech funding space, and analyzed troves of proprietary data.
What is the scope of this research?
This analysis looks at all investments in US-based technology companies (for-profit or non-profit) that improve education outcomes for K-12 learners from 2010-2015. There were many different companies that didn't clearly fit into these categories. To give a better understanding of how we made these decisions about individual companies, here are a few examples: Social Finance, a company that provides student loans and other services, is not included in our analysis because it is more a financial company than an education one. We included AltSchool because it uses (and develops) technology to help students learn. Additionally, Chegg is included because it creates several products aimed at the K-12 market, while General Assembly is not because it’s primarily focused on serving the professional skills market. Finally, though our analysis only considers US-based companies, we did explore international investors and buyers if they were involved in a deal with a US-based K-12 company.
To truly understand the flow of money through K-12 edtech, the EdSurge team interviewed investors, companies and industry experts. These perspectives enabled us to develop a fuller portrait of how the money flows and why it matters.
We conducted a short survey of two dozen key edtech investors—primarily from education focused venture capitalists and foundations. We reached out to a diverse set of over 50 different organizations that invest in K-12 edtech. The 12-question survey included a range of multiple choice, ratings and free response questions.
Interactive Valuation Calculator Methodology
Investments are predictions about the future: investors establish a value for a company today based on what they expect the value of the company to be in the future. The calculator was developed as a tool to help entrepreneurs understand how investors might approach evaluating how much a company is worth. Another important objective of this interactive tool is to serve as a credible source of information about the fundraising process. Thus, explainers were added to enrich the reader's experience.
The calculator is not meant to provide a definitive answer around how much an investor would really value a company. Figuring out how much a company is worth is a mix of art and science, with a much heavier tilt towards the art in the earlier stages of a company’s development. But there are heuristics—based on historical investment data and the economics of venture capital firms. These heuristics can be used as guideposts to estimate an investor’s expectations for the future value and revenue of a company. But, in real life, there is no single “calculator” used by investors or entrepreneurs to designate a price for a company.
You can learn more about how the calculator works in the Appendix which describes inputs (information provided by the reader), calculations (estimates that the tool makes based on inputs and assumptions) and, assumptions (numbers based on EdSurge expertise and research). All figures are in current dollars.
Thank you for your help! Please reach out to firstname.lastname@example.org if you are interested in being part of future research projects.
Chapter 2 of the State of Edtech Initiative reflects three months worth of research, interviews, surveys and data analysis by the EdSurge team. We are very thankful for the companies, investors and other industry experts who graciously shared their perspectives with us. A number of EdSurge staff put tremendous energy into creating this report. We are extremely thankful for the great team we have.
- Editor in Chief: Julie Petersen
- Creative Editor: Paty Gomes
- Data and Analysis Lead: Allison McLaughlin
- Engineer: Ceane Lamerez
- Project Leader: Jess Zhao
- Director of R&D: Christina Quattrocchi
- Project Advisors: Betsy Corcoran, Tyler McNally, Agustin Vilaseca, Seth Greenberg, Howard Kao, Shu Uesugi, Tony Wan
- Designer and Graphic Support: Aaron Tate, Meadow
- Social Media: Molly Levitt
- Fact Checking: Blake Montgomery, Alice Myerhoff
- Sound Editor: Mary Jo Madda
Julie Petersen, Editor in Chief for this project, consults to and previously served as Director of Communications at NewSchools Venture Fund. Additionally, some of the sources cited are investors in EdSurge. These include: NewSchools Venture Fund, Reach Capital, Owl Ventures, Learn Capital and GSV Capital. This report was also made possible through financial support from AT&T Aspire. EdSurge takes full responsibility for the reporting in this project.
Step 1: Sharing Information About the Company
The stage of investment and the size of an investment are the critical inputs to the calculator. Users can input these values directly. Alternatively, using the product type and stage of investment, the tool displays the median investment size based on historical data.
- Input: Round of Investment. Options available are Seed, Series A, Series B, Series C and Series D, the most common fundraising rounds.
- Input: Product Type. The four product categories follow EdSurge’s Product Index categories.
- Input: Amount raised Directly input by the reader or can be the median investment size for similar products and investment stages (see next line).
- Calculation: Median size of investment Automatically calculated based on the historical median investments associated with the round of investment and product type from 2010 to 2015. Median investment size is calculated using EdSurge's historical investment database.
Step 2: Estimating Valuation Based on Investment Size and Stage
While valuations are not always disclosed when a company raises a round, a valuation can be roughly approximated using the investment size, stage, and historical transaction data.
Calculation: Determining valuation after fundraising. Based on the stage of investment (Seed, Series A, etc.), the tool provides the median percentage of equity that companies have given up by that stage. The tool then divides the investment size by this median equity.
- Formula: Valuation after fundraising = Investment size divided by median equity given up by stage.
- Assumption: Ownership by stage of investment. Using historical transaction data from Pitchbook , EdSurge estimated the percentage of a company owned by all investors after each round. For example, after raising Seed, the median percentage owned by investors is 21%. Note, this model does not take into account potential future rounds of funding.
Step 3: Estimating Revenue and Valuation Required in Year 7
Venture capital firms raise money from endowments, pension funds and mutual funds, among others. These firms commit to pay back that money (and hopefully much more) within a certain period of time. That period of time is generally between five and ten or more years—our calculator assumes that time period is 7 years. The calculator connects a few of these assumptions to estimate the annual revenue a company would need in the future to justify the price investors pay.
Calculation: Determining the company’s valuation in 7 years. Investors make money when a company is sold to another firm or to the general public via an IPO. Because most startups fail and investors lose that money, they need the companies that do succeed to be worth many times more money than when they made the investment. If the investor’s share of the company is worth five times the amount they invested, the investment has a “return multiple” of 5x.
- Formula: Valuation after fundraising in current year * return multiple
- Assumptions: The tool uses a fixed return multiple of 3.4x based on historical data for edtech companies
Calculation: Determining annual revenue in year 7. One method investors use to value a company is to calculate it as a function of the company’s revenue. Generally speaking, companies with more revenue are more valuable. The value of the company divided by its revenue is called the “revenue multiple.” The calculator uses this method in reverse: estimating the revenue required to justify a valuation based on the median historical revenue multiple for edtech companies.
- Formula: Valuation in year 7 divided by historical revenue multiple.
- Assumptions: Expected revenue multiple of 5x, a number based on historical data for edtech companies.
Calculation: Determining equity for investors and employees. Using the amount of the company owned by investors (calculated in Step 1), the tool shows how the ownership of a company is divided between investors and employees. Based on the value of the company, the tool estimates the dollars that would go to each group if the company is sold.
- Formula: Investor stake = Investment size * Revenue multiple; Employees stake = Company valuation in year 7 - Investor stake
- Assumptions: Expected revenue multiple of 5x, a number based on investors' estimations and EdSurge secondary research
Step 4: Company information in year 7
The fourth step requests information about the primary users of the product (students, schools or school districts) and the price they would need to pay in order to generate that annual revenue in year 7 (calculated in Step 3).
Step 5: Estimating Users and Pricing Needed to Meet Revenue Estimate
Finally, the calculator enables someone to model the number of customers and the average price per customer required to reach the annual revenue target identified in step 3. Based on the total number of districts, schools and students in the US, the calculator estimates the percentage of the market that would need to buy the product.
Calculation: Estimating users needed. This is calculated by taking the annual revenue in year 7 and dividing it by the average paid per user per year (an input).
- Formula: Annual revenue divided by price paid per user per year
Calculation: Market penetration. This is calculated by taking the users needed and dividing by the total market size (defined in terms of school districts, schools or students). For example, if a reader indicates that they sell to schools, the calculator will take the number of schools needed and divide by the total number of schools (150,000)
- Formula: Users needed divided by total market size.
- Assumptions: Number of students, schools and school districts. Based on 2013 National Center for Education Statics
Calculation: Price and Market Penetration Curve. The curve illustrates the possible market penetration and average price combinations that will result in the annual revenue needed in year 7. Because the reader also inputs their intended price, the calculator is also able to render their company’s position relative to the curve.
- Formula: Revenue in year 7 / market penetration * total market size.
The EdSurge team interviewed dozens of teachers, administrators, professors and company executives throughout the course of this project. Their perspectives helped to inform follow-up research on the development of edtech products through published surveys, books, journal articles and policy papers.
We also used our own proprietary database of education technology products to inform our research and create the graphs that highlight the different topics covered by math and English Language Arts products.
To create the case studies, we used an online survey to invite educators to submit stories about their use of education technology tools. We also reached out to teachers on Twitter and on our Facebook teacher community. We aim to reflect a diversity of perspectives, experience and geography through these profiles.
Among the 12 teachers whose stories we profiled in this chapter, we have educators from 12 different U.S. states; who are from and serve students from different ethnicities and social-economic levels; who have from nine to 32 years of classroom experience, and who teach kindergarten, elementary, middle, high school and also educators who are now working in the administrative level.
Please reach out to email@example.com if you are interested in being part of future research projects or have any questions.
"State of Edtech: How Tools Evolve" reflects four months worth of research, interviews, surveys and data analysis by the EdSurge team. We are very thankful to the educators and industry experts who graciously shared their perspectives with us, particularly Larry Cuban and Ruben Puentedura. A number of EdSurge staff put tremendous energy into creating this report. We are extremely thankful for the great team we have.
- Senior Editor: Tony Wan
- Engineer: Ceane Lamerez
- UX Designer: Lise Chapman
- Fact Checking: Elsie Simpliciano, Antoinette Siu
- Project Advisors: Betsy Corcoran, Tyler McNally, Christina Quattrocchi, Agustin Vilaseca, Howard Kao
- Contributors: Jess Zhao, Kit Tollerson
The EdSurge team interviewed dozens of teachers, administrators and students for this part of our report. Their perspectives helped to inform follow-up research on each of the schools and districts. We also turned to many sources for data, including state departments of education, the National Center for Education Statistics and other sites.
To identify the schools we profiled, we searched through existing EdSurge articles, read profiles on other websites, and asked for recommendations through email, at edtech conferences and in our Facebook K-12 educator community. We aimed to reflect a diversity of perspectives, experience and geography through these profiles, and so we selected schools from: 1) rural, suburban and urban communities; 2) district public, charter and private school communities; and 3) the west coast, midwest, south, and east coast.
Among the more than 30 administrators and teachers we interviewed, there are educators from 11 U.S. states, serving students from many ethnicities and socioeconomic levels. These educators have between two to 41 years of classroom experience, ranging from kindergarten through high school as well as serving as administrators.
Please reach out to firstname.lastname@example.org to share comments and ask questions, or if you are interested in being part of future research projects. If you have a story that you’d like to contribute about an innovative school model, fill out this form here.
“State of Edtech: How Schools Are Changing” reflects four months of research, interviews, surveys and data analysis by the EdSurge team. We are very thankful to the educators and industry experts who graciously shared their perspectives with us. We also deeply appreciate the support of the EdSurge staff, many of whom put tremendous energy into creating this report.
- Senior Editor: Mary Jo Madda
- Engineer: Ceane Lamerez
- UX Designer: Lise Chapman
- Graphics: Marisa Kaplan, Richard Nattoo
- Writers: Mary Jo Madda, Amanda Ronan, Antoinette Siu, Elsie Simpliciano
- Fact Checking: Marisa Kaplan, Mary Jo Madda
- Copy Editing: Talia Goldman
- Executive Editors: Betsy Corcoran, Mary Jo Madda
- Project Advisors: Howard Kao, Tyler McNally, Christina Quattrocchi, Agustin Vilaseca