The ABC’s of EdTech: A is for Apple

UV Letter - Volume II, #8

What do the issues of capacity and affordability in higher education have in common? For one, they represent the serial priorities of the Obama Administration in higher education: first to generate an additional 8 million college graduates by 2020 so that the US can once again lead the world in postsecondary attainment; now an obsessive focus on tuition levels and college affordability.

But capacity and affordability also have this in common: Many smart people are betting on technology as the solution to both.

We are in the midst of an EdTech boom the likes of which has not been seen since the late 1990s. To wit:

  • Following its acquisition of Blackboard for $1.64 billion in October 2011, Providence Equity Partners, has declared it’s “early innings for new media’s impact on education” and that it is “especially bullish” on education deals.
  • Dot-com veteran Jason Calacanis announced a new project last year: the LAUNCH Conference to spotlight unannounced start-ups. The next LAUNCH event is focused on – you guessed it – EdTech. Says Calacanis: “Education is one of three verticals we believe is going to be radically disrupted over the next five years.”
  • Last week Benchmark Capital, one of the venture firms behind eBay and Twitter, announced its largest ever seed financing: $25 million to support the establishment of the first online Ivy League-caliber university. Called the Minerva Project, and led by former Snapfish CEO Ben Nelson, the objective is to create “the first elite American university to be launched in a century.”
  • EdSurge, a newsletter and Website focused on EdTech, launched in October 2011 with Betsy Corcoran, former Executive Editor for technology coverage at Forbes, at the helm. The latest issue reported on seven different financings of EdTech companies (in a section titled “Ka’Ching”) and spanned 15 pages of text copied into a Word document (we checked).


For those who survived the last boom and lived to tell the tale, enthusiasm for what technology can bring to education is invariably mixed with caution. For example, caution is required in distinguishing between two distinct types of opportunities in EdTech: (1) companies that sell technology to education providers; and (2) technology-enabled providers. The former is a dog’s breakfast in K-12, and not much better in higher education. In fact the aforementioned Blackboard is the only major new success of this kind in higher education from the dot-com era, or since. Distribution, not product, is the key barrier when you’re dealing with customers who may not be well organized to make a timely (or rational) purchase decision.

The latter – technology-enabled providers of education – is where nearly all of the value creation has occurred over the past decade. Owning the (technology-mediated) relationship with the student has proven to be a very successful model in higher education (see e.g., University of Phoenix Online, Bridgepoint Education, Grand Canyon, Capella, American Public University), and to a lesser extent in K- 12 (see e.g., K12). So EdTech enthusiasts will do well by staying focused on this category, rather than on a new application that could transform education, if only it is adopted by thousands of institutions.

Fortunately, there are many next generation technology-enabled providers aiming to transform higher education. So many, in fact, that it’s possible to evaluate their likely impact according to this handy matrix.

Degree-granting Non-degree
Elite Minerva
Mass UNow
University of the People
Code Academy

As we have stated previously in this Letter, the currency of higher education is degrees because degrees are the sine qua non of professional, white-collar, high-paying jobs. The difference between not having a degree and having a degree is hundreds of thousands of dollars in lifetime earnings. So degrees have and command value. And value is what drives growth. Non-degree offerings may be fun, cute and nostalgic (recalling our youthful days at school), but they have not commanded value in the past, and are unlikely to do so in a meaningful timeframe.

Within the degree-granting category, we believe the winners will be models that don’t simply use technology to faithfully replicate the traditional onground experience, but rather those that take advantage of technology to provide a better experience.

Think of Apple’s iPhone in contrast to prior phones. The goal of Steve Jobs and Jony Ives’ product design was not to ensure that the iPhone would be familiar to early Nokia smartphone or Blackberry users. The goal was to rethink what a smartphone could be, and to take advantage of current technology to do it better. The same thing could be said of the iPod or iPad.

As a result, we believe the winning next-generation degree providers – i.e., the winners from this EdTech boom – are unlikely to look like traditional universities. They will be accredited, they will grant degrees, and they will have faculty (of a sort). But they will be better in significant ways that don’t simply relate to convenience (anytime/anywhere) and affordability. First, they will produce outcomes consistently better than their analog antecedents. And to do this, degree programs need to be rethought and delivered differently. Second, like Apple’s successful products, they are likely to be more open in encouraging contributions from students, and perhaps non-students, in the form of content and apps. The winning degree providers will be those that engender an ecosystem of learning within their virtual campus walls.

At the same time, a university education is not a mobile device. Degrees are credentials that stay with graduates for life. And so the impetus to “Think Different” must be tempered by the realization that the institution cannot be so different that it is no longer recognizable as a university. The winners over the coming years will be the next-generation universities that are most successful in achieving this balance.

University Ventures (UV) is the premier investment firm focused exclusively on the global higher education sector. UV pursues a differentiated strategy of ‘innovation from within’. By partnering with top-tier universities and colleges, and then strategically directing private capital to develop programs of exceptional quality that address major economic and social needs, UV expects to set new standards for student outcomes and advance the development of the next generation of colleges and universities on a global scale.

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