Avichal Gang, founder of PrepMe, drops some knowledge in a post about Education and Start-ups. I found the post articulated a lot of lessons I have learned over the past year researching and running an education start-up.
When you look at the education tech space, a lot of chatter is about cool features, how awesome the software is and why it improves learning outcomes/solves problems. You rarely see a start-up in the space that claims, "this is the same thing, but we do it cheaper," because the eventual buyers are schools, colleges - not consumers.
The sales process does not jive with the "normal" seed stage value prop/advise of get traction, then start charging. It's a weird nebulous market, you get people (students or teachers) using the product, maybe even charge a few, then spend years trying to sell it to 1,000's of massive segmented bureaucratic entities (schools, districts and colleges) with unmotivated buyers. In the places where people do pay out of pocket (textbooks, test prep, tutoring) - you do see that value proposition, but those are actually pretty segmented and hard to crack markets.
But here's the problem, according to Avichal:
Most entrepreneurs in education build the wrong type of business, because entrepreneurs think of education as a quality problem. The average person thinks of it as a cost problem.
The VC view: Almost always what they are really saying is “consumer, Internet, online education in the Western world is ready for disruption. Everyone is online now and everyone gets an education, so clearly there are massive businesses to be built.” They probably aren’t talking about education in Asia because the companies in that space are started on the ground in Asia. They most likely aren’t selling to schools, districts, the government, or universities. VCs usually don’t like to invest in businesses that sell to the government until those businesses are big (at which point it’s really a private equity deal, not a venture capital deal).
He really digs deep, but that top sentence says it all. Only 15% of students will buy a prep course for the SATs - even though everyone knows it really matters what college you go to for better job opportunities (in actual, real life, not "theoretical college does not matter" terms).
For every new feature, cool piece of software and educational product - you better be ready to answer the question: "how do I sell this and am I ready for that process to take years while I give it away for free and all the competition catches up - for both K-12 and Higher Education." If you have a consumer product you actually want to sell direct, be realistic about your market size and value prop, it's not everyone in the world.
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