Education startups: The bottom-up approach doesn’t work here

ON JANUARY 24, 2013

Plenty of wide-eyed, ambitious, and possibly naive startups have set out to “fix” or at the very least, improve, education. You can’t fault anyone for that — with US students lagging most of the world in subjects like math and science, the sector has much room for improvement.

The problem comes when those startups try to sell software and tools to schools. The schools want to innovate. It’s just not that simple. There’s a culture clash at play. New York’s Innovate NYC Schools program is trying to change that with the iZone, a 250-school subset of the district focused on experimentation and working with new technologies. Last week the program launched several initiatives to better connect startups with schools (see below).

The problems for startups are as such: Selling software to schools is a nearly impossible act for a startup of the nimble, lean, minimally viable product ilk. If you can get in front of the right person, the school district approval process is cumbersome. There are inflexible processes involving contracts, RFPs, lawyers, layers approvals, review cycles and compliances that weren’t set up for modern day computing. The sales cycle is long and arduous. School districts are often stuck working with massive companies that have the patience to sit through their six month procurement cycles and productions.

Beyond that, schools are wary to adopt brand-new, untested technologies, because they can’t afford to get burned. If they spend the resources to implement something, they really don’t want want the startup to abandon the strategy six months later and pivot to something different. When an edtech company pivots, or worse, its product is buggy, the ramifications are much broader than the experience of “Oh no, SnapChat is down.” Schools are aware that innovation doesn’t happen without risk. They’re willing to take some degree of innovation risk. But they can’t take execution risk. “We can’t pivot away from serving lunch to 300 kids a day,” says Steven Hodas, Executive Director of the Department of Educations’s Innovate NYC Schools program.

The result? Large entities that are only comfortable doing business with other large entities.

That’s why investors and education industry experts often tell edtech startups to sell to the teachers, not the school. Take a cue from the success of freemium, bottom-up software companies like Dropbox or Expensify, and let the usage trickle up, they say.

There’s a problem with that model, though. “People want it to be true because school districts are so hard to sell to,” Hodas says. Selling from the bottom up — getting teachers to use your software — and hoping they can eventually upsell the district on a premium product will not happen, he says. It only leads to startups, some with significant adoption, hitting dead ends once they run out of money after making free tools for a few years. The procurement cycle alone is long enough for a startup to run out of money.

That ultimately means many of the great technologies being built will never be implemented. Fortunately Hodas is not a government employee merely pointing out problems with no solution — he’s part of the iZone’s Innovate NYC Schools program, which partners schools with tech companies to help blend the disparate cultures between school and startup. New York has dedicated 250 of its 1700 schools to the “iZone.” Schools in the iZone are given more autonomy to experiment with new technologies. With 250 schools, the iZone is bigger than most school districts in the country. The idea is to give tech providers a better sense of how to sell and implement their solutions at scale.

The iZone schools last week kicked off the program. Startups that get involved with the project learn about the realities of working with large school systems early on, so they’re more prepared to meet their needs.

For some young entrepreneurs who have never had to deal with real world constraints, Hodas says, the needs of the schools can come as a rude awakening. “You want that freshness and enthusiasm and unwillingness to accept limitations, but at the same time, there are realities out there,” Hodas says. “Part of our job is to educate folks in a way that’s supportive and gives them a view of what’s necessary without scaring them away,” he says. “We say, ‘Here are some of the hoops you’ll have to jump through.’”

Beyond managing the expectations of startups, the program aims to right-size the procurement model for schools, helping them to figure out how to buy and implement good technology faster. There are success stories in edtech — Wireless Generation, a ten-year-old company offering reading assessment and professional development tools, exited to News Corp. in 2010 for $360 million. Edmodo, the social network for teachers and students, has seen widespread adoption and raised $40 million from Union Square Ventures, Learn Capital, Greylock, Benchmark, NEA and Glynn Capital Management. Schoology has also experienced traction selling its SaaS course management system into school districts.

The Innovate NYC Schools program links startups with schools through meetups and workshops attended by principals, educators, superintendents, as well as developers, project managers and data scientists (sign up here). The program is also building a database of educational products and services for decision makers in the schools to discuss, review and give feedback to various solutions they’ve tried. Lastly, there is an app challenge, where developers can submit their products for a chance to win $50,000 in cash prizes, $54,000 in Amazon Web Service Credits, and consideration for a pilot program in iZone schools.

If the iZone’s plans to link startups and schools are successful, more edtech companies will live to see — and sell — another day.