As 2012 draws to a close, education companies have seen record investments. In the first five months of 2012, more dollars were invested in the education business than in all of 2011, which was a record year itself. The first five months of 2012 saw $500 million investment, compared to $429 million in 2011 (and $152 million in 2002). More than 50 new venture firms or funds have started in the last three years. So with all this investment flowing in to education, what exactly are investors looking for right now?
Here at Arc, we are seeing that investors are interested in two-channel companies that can sell both to consumers and institutions. Investors are also looking at companies with products that make the classroom experience more effective, through tools for students, tools for teachers and better one-on-one learning. With the teacher-student ratio shifting from 1 – 22 to 1 – 35 (50% increase), teachers need help. Furthermore, as schools move away from device purchases toward BYOD (Bring Your Own Device), money is being freed up for apps, tools and programs to make classroom life better.
We’re also seeing a trend of people investing in companies that have users and traffic, but have yet to really show what their business model is. (For instance, Edmodo has 6 million subscribers and zero income, but they’ve taken in $40 million in investment dollars.) These companies are modeling themselves after Facebook and LinkedIn, but whether that business model is viable in the education realm is still questionable. Sure, advertisers are willing to pay to have access to LinkedIn subscribers, but does that type of advertiser interest extend to education-centric models?