Defining the education market

A few readers have confronted me on one of the blog’s themes recently. “The education market isn’t devoid of investors and money,” they remark. “Fortunes have been made in the education space. Look at test prep and private tutoring.”

They’re right. Plenty of companies have done very well selling services that will raise your SAT score by 300 points – or your money back. Connecting students with private tutors has also proved a lucrative enterprise, so much so that many web companies have emerged in recent years to lay a stake in the new digital version of this market by facilitating webcam exchanges.

But we’re not interested in these models for the same reason they’ve been successful in the past: they cater to only the wealthiest sliver of students in the world. Don’t get me wrong – we want the wealthiest private schools and students using Lingt. . . right along with every public and disadvantaged classroom that wants to use technology to improve the quality of education.

So when we write about the education market, we are using shorthand for a subset: schools. Charter, public, private, immersion, urban, overseas – we want to benefit as many students as possible, not just the ones who have the luxury of a wealthy background. It’s this challenge that scares investors and entrepreneurs from engaging schools. The bureaucracy and slow purchase cycles associated with selling to schools are intimidating, for sure, but the rewards to our education system that will come if more young ventures feel comfortable working for and with schools are too great to ignore.

Entrepreneurship in Education

Often when I’m describing Lingt to someone outside of the education or startup community, I receive a revealing reaction:

“So what does your company do, exactly?”

“We make foreign language learning software?”

“Oh, so you’re like Rosetta Stone?”

“Not really. We build online technology for classrooms – our core users are teachers.”

“Ahhhh. . . <pause>. . . so you’re like a nonprofit?”

I’m not vexed by the question at all – I just find the pervasive correlation of education products with charity to be an unfortunate one. People are reminded of volunteer programs and company-sponsored science fairs when they think education, not a competitive market on the bleeding edge of innovation. The thought of suite-and-tie corporations plotting how to make money off one of our society’s most cherished institutions is unsavory, for sure. But, that education is so noble and vital is, in fact, more reason to value a market that is driven by the same thing that has led to rapid innovations in other markets: money. Now, if you feel like our education blog has been dirtied after reading that word, let me wash it off for you:

First, and most obvious, the promise of real capital gain attracts top talent to the field. There’s a reason why so many MIT students go in wanting to build reactors or robots and come out working for Goldman Sachs. How the education market could become more saturated with financial promise is another discussion, but once it gets there, expect the pace of innovation in the field to multiply many times over.

Second, and especially in this economy, profit is associated with greed and pretentious bonuses. But any good company will make sure profits are effectively feeding future growth that will benefit the customer. I say this from a startup founder’s point-of-view; my mouth waters at the pace and scope with which we could build cool new technology if we had money in the bank.

Third, any successful company should give back to the community that has allowed them to succeed. While charity should not drive their business models, it should be an eventual component to existence in the education space. More money circulating means more money not just donated back to education pursuits, but put to work for social benefit by the same creative and talented minds that were able to grow a successful company. Lingt study-abroad scholarships, anyone?

Finally, the desire to make money in a particular market has an ironic effect: it tends to drive down prices. This is economics 101: competition driven by the promise of capital gain will lower the end price for schools. And in a twisted way, here is the charity of education capitalism: driving down costs so a school district’s dollar can go further in providing for students and teachers. And a tight school budget needs to go as far as possible.