The influence of innovative technology on education can’t be underestimated. So, EdTech startups are now the main tool of this transformation process. As the CEO of TeachMeCash — the company working in this industry — I’d like to share with you the secrets of opening a company on this market. Dive deeper into the details of the ‘backstage’…
Establishing an EdTech Company
Businesspeople satisfy some of the most important audience’s demands while starting an EdTech company:
- Availability — online education is cheaper and more competitive. So, it will be easier to attract additional funding. This will allow a company to focus on filling the courses and improving the service for students rather on the material issues.
- Differentiation — online education is as much as possible focused on every particular student and their burning educational needs. For example, there are short courses in certain specialized fields.
- Marketing subtlety — online education can reach previously unattainable consumer groups. In the context of globalization, it is now easy to find lecturers and students in specialized fields.
- Variety of training forms — online education allows you to experiment with forms of knowledge representation and expressions of students.
What? Where? When?
It’s a great idea to start with a simpler product since the first version of a successful product is never final. Therefore, it is more appropriate to choose the development of the product, rather than its perfection, and to enter the market with a simple product as early as possible. After the finished product appears in the market, plans can be adjusted, and the idea of a perfect product can change according to the customers’ needs.
Knowing the market and having determined the product, it will be possible to establish clear short-term and long-term goals of the future company and develop a solid business model for it.
The Main Business Models of EdTech-Companies
All the diversity of EdTech organisms can be rigorously classified according to the following models:
- Institutional — buyers are mainly institutions — educational institutions, corporations, etc.;
- Custom — buyers are mainly users — teachers, students, parents;
- Freemium-institutional — free for users, paid for institutions;
- Freemium-custom — free and paid offers for individual users.
These are not ONLY available models, still, they are most popular among entrepreneurs.
As for me, I have chosen a unique business model which is described in the TeachMeCash product presentation. If you want to learn more, go to the Referral Program and Career Program section, click on the ‘Get it to e-mail button’, and receive an email with the TeachMeCash presentations including the one about our product containing our business model.
At Whose Expense?
As a rule, communication with potential investors prompts entrepreneurs to work more thoroughly on the business plan and to study market demand more deeply. However, if investors see potential profits in the project you are proposing, they will definitely take the opportunity to earn.
It is possible to collect money for the project by means of crowdfunding. It is not necessary to look for one big investor to start the work faster, you can attract small one-time infusions.
However, investors usually choose the few: each year, top 10 deals are typically about half of the total annual funding. Over the past few years, there has been a tendency for about 15% of companies to attract 75% of investments. However, this is also true for other industries.
Testing, Feedback, and Advertising
To sell the product, you have to prove that it works and show exactly how it works. This is another argument in favor of starting your project as soon as possible and in the simplest form. After all, your negotiations with investors will not be about ephemeral things but about the already working mechanism. In any case, your product will have to be tested, and the results of the tests should be shown to the interested parties.
- Testing ALWAYS makes errors visible. After that, it is worth getting started with beta, giving free access to the product to any number of real users. You will also find something worth fixing at this stage.
- And even after a full launch of your EdTech project, collect clear feedback. Every review, no matter if it’s positive or negative, should be appreciated. Continue encouraging users to communicate, as they are the best in promoting a new brand.
- Advertising of your EdTech project should make 7–8% of gross income. This is a fundamental need of every project and without it, a great product can remain unnoticed for a long time.
Who Owns the Rights?
Creating an EdTech company should start from the outset in the legal field by answering important questions on ownership, responsibility, and privacy:
- Who owns the rights to created content?
- Will the contents be protected when accessed?
- Is there some copyright infringement?
- Who is responsible for the reliability of the information provided?
- What is the legal procedure for issuing a certificate or a diploma?
- What are the guarantees for users and risks for the founders?
- How to protect users from images and contents of unwanted nature?
- Who will be responsible if the platform is used by criminals or terrorists?
- How to make money in case of dissatisfaction with the quality of services? How can these funds not be returned?
- What privacy requirements should be met?
- What liability will the company bear if somebody’s feelings are affected?
It is also important to ensure the legal aspects of implementing the chosen monetization method. Moreover, you need to understand that education is becoming international, and almost all educational startups are focused on the global market. This adds a lot of international legal aspects to consider.
The Bottom Line
EdTech companies need some more time to establish than other businesses. For example, it is believed that starting a significant EdTech company in the US can take 7–10 years — a time horizon which may be good for most traditional venture capital investors. However, this should not stop entrepreneurs, as EdTech is the future which accelerates education itself. As an entrepreneur, I have chosen this niche, as I see its prospects and great opportunities it opens to us.