Reasons Why EdTech Startups Fail


Reasons Why EdTech Startups Fail

Every startup has their fair share of struggles and edtech startups are no different.

Due to the nature of this industry even big shot companies like Udemy with over $100 million in funding, are still figuring things out as they grow. They are well known to the public and are considered the industry frontiers, and yet they are still struggling to become profitable.

Mentioned below are the common mistakes that can be the reason for your edtech startup’s failure.

Read below to AVOID them!

1. Knowledge of The Education Market

Lack of knowledge of the market is the biggest reason for any entrepreneur to fail. However, edupreneurs fail due to this reason as the market is still in the growing stage and can be a little tricky to understand. It is important that you understand at least to major sides of this industry in order to succeed in the educational technology domain. The major three stakeholders when we speak of education technology are:

1.a Students (Parents and families)

Your product has to benefit students. These are the people who are the ultimately getting the benefit of your solution. So think of them in the core value of your product.

1.b Teachers (Admin & Staff)

They will be practicing with your product so if you can’t understand their perspective or can’t have them behind your product, you are already in trouble.

1.c The Decision Makers Of The Schools/ Policy Makers (Bureaucrats & Elected Officials)

Well these are the people who have a say in the sale of your product. What can and cannot be done in the school system is in the hands of these people and they are the ones behind policy formulation. The major control and power over deciding upon any such decision is with them.

As an edtech entrepreneur, it is essential that you have a complete understanding of these 3 segments that will determine the success of your product in many ways. However, 2 can also work fine!   

2. Lack of Patience, Expectations of Hyper Growth from the Start

This industry demands a lot of patience and over that expecting hyper growth is making a fool of yourself. Education moves at a glacial speed. Everyone involved in your company needs to understand that. A similar post by Philip Cutler mentions that give yourself at least 4 years before doubting your work.

Below is an excerpt from the post that mentions your journey of 4 initial years.

- The first year of your business represents the honeymoon phase. Things are always great because your friends and family will love to talk about the fact someone they know is trying to make a difference in the lives of children. Any data you have from this year is useless.

- The second year is the most difficult. This is the year when that ecosystem that was created in year one is so important. It is also the year most EdTech companies are executed. Don't expect to see growth numbers like you did the first 12 months - that will have fizzled. You'll be lucky if you can just maintain the same revenue and users. This shouldn't scare you though - this is the most important year in the history of your business. This will be the first time people truly buy into your product.

- The third year you start to make an impact. People have just begun to buy into your product or service now you need to have these people champion you. There is even a chance you might make some money *hooray*!

- The fourth year is the explosion. If you survive this long - you will have outlasted hundreds of companies that have come and go. Trust me, this is the year when your company will start to actually get traction. This will also be the time when your company is worth something. Personally I think involving VC's before this point is careless. Unless they have a very profound understanding that they should not expect to see great number until then - you are likely introducing venom to your business.

3. Users v/s Paying Customers

There can be a situation when you have a lot of users on board but we are aware that users don’t keep you going but paying customers does. Discussing the same TechInAsia states that, “There are many who never even reach a point where they can say they have 10,000 users or 15,000 users. So this point is not valid for them. Every edtech startup hits a peak, after which their growth starts plateauing, and they continue the search of getting more people.

Figure out more innovative ways of reaching out, but don’t give stuff for free just to acquire more users. Users are not going to keep you afloat, paying customers are. Don’t bank on the idea that you will have 20 million people on your platform and you will start leveraging the fact that you have data. Very, very few edtech startups even come close to having 2 million users, let alone 20 million. You cannot leverage data.”

**Pro tip: “You can survive by building a sustainable business model with a value proposition that makes your user look better, smarter, or whatever makes him/her happy.

 

I suggest you read this post that talks about 5 education startups that failed with reasons to why as to get a better understanding of the things that you need to do/don’t do.   

Also, you might find this free report on The B2B and B2C Battle in EdTech Globally of use.

We are aware that there are a lot of challenges in the edtech market but we can’t deny that it is also one of the fastest growing areas with ample opportunities. Make sure you mention your opinion in the comment section below. 

About the Author
Author: Priyanka Gupta
Priyanka is a blogger by profession and has an increasing interest to write about the edtech space. While writing she keeps in mind the educators to come up with right resources and ideas which might be relevant for them in relation to effective use of technology in their profession and institutions/classrooms.
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