The Three Main Challenges of K12 EdTech Startups

I joined Lalilo as the first employee in April 2017 and have been working on all marketing and operations since.

For a quick bit of context, Lalilo is building a web-based app that uses A.I and speech recognition to differentiate reading instruction in Kindergarten-2nd grade classrooms. On the student side, students learn through exercises adapted to their individual level and read books out loud so that we can evaluate their progress and their areas of need. On the teacher side, teachers can access a thorough dashboard with data on each student and the ability to assign lessons to reinforce their classroom instruction.

K12 EdTech Challenge #1: Multiple End Users

You can understand the complexity of building software for a classroom by simply stepping into an actual classroom. If you spend a day in a classroom you will see:

• The students (of course)
• Their teacher (of course)
• Multiple parents coming in and out
• The principal, instructional coaches, or other administrators coming by to check in

Those four groups of individuals (students, teachers, parents, and administrators) all impact your product at some point. You cannot build a successful K12 product without considering the perspective of every single one of them. You need to have a part of your product that addresses their needs (even if it is only in your FAQ section) because they will all certainly explore and interact with your product at some point.

The reasons why it is so important to consider all four actors when building your product is because together they create a successful education loop. Students need teachers to become responsible citizens and develop academically. Teachers and parents work together to support children consistently across home and school environments (because parents also provide teachers with support); and teachers need to be both supported and challenged by their administration. This loop is crucial to students’ success in the “offline world”, so your product needs to reflect it somehow.

The challenge lies in the fact that all four players have different needs and constraints. To sum it up:

• Students need high-quality pedagogical content that is engaging and develops their social and academic skills. This takes development time and is therefore costly.
• Teachers need a resource their students love and that supports their development. They also want a program they can grasp quickly, that integrates easily with their teaching, and that is, ideally, free.
• Parents want a resource that clearly helps their child in a way they can see and that can be used at home on any kind of device.
• Administrators want a resource that is research-based, compliant with all privacy laws, and that integrates effectively with their school’s curriculum.

None of the needs described above are conflicting (apart from the fact that teachers and administrators love free resources, and that developing a quality educational program requires a lot of money). The complexity lies in the fact that all four groups need to be pleased in order for your product to be successful. We could even push this a little further to say that even if your paying user is just one of the three players (Teachers, Parents, or Administrators), chances that you have to please the two others in order to sell successfully are high.

In practice, the multiplicity of end users is really heavy on feature developments and prioritization, as well as on marketing efforts. And it does not make business model definition any easier!

K12 EdTech Challenge #2: Monetization

There will be another article dedicated to business models in K12, but let it be said here briefly that monetization is a hard nut to crack. Multiple business models exist (freemium, free trial, or sponsored) and none of them is a safe bet.

Very traditional actors of the industry, mainly publishers, managed to become successful in the 90’s thanks to a traditional salesforce model. But for younger innovative startups, the game is harder. Mostly because school budget lines and district budget lines are extremely hard to understand. Just like each student is different, no one school is the same. Heterogeneity is the key word here.

District size (small, medium, large), schools type (public, private and charter), school funding (Title I, Title II, Title III) are all going to impact the way teachers consume resources in the end.

K12 EdTech Challenge #3: impact matters more than profit.

I have not met a single EdTech entrepreneur or founding team member who does not truly care about the impact of their product. Because what we work on is used by children and impacts their development, we have to take to heart the quality of what we do.

An investor I once met told me, “You can most likely expect a 2x return on an Edtech investment, maybe a 5x… but a 10x seems extremely unlikely”. Yet, EdTech Venture Capitalist firms do exist. This, to me, is one of the most paradoxical aspects of the EdTech Industry: it is a billion dollar market attractive to many entrepreneurs and investors — but EdTech startups suffer from a bad reputation, especially in the K12 space. The one sentence I have heard the most during investor meetings is “K12 is a tough space”.

It is hard to constantly balance the temptation to only focus on monetization with being impact driven. On the one hand you have to crack the code of monetization — raise fast, grow fast, get the most market shares . And on the other hand, you want to show that you care for and support your users and truly want to make a difference.

This third challenge is the reason why I joined Lalilo in the first place :-) I strongly believe that Social Businesses can and will change the world. Bringing a business-like mindset to solve a societal problem enhances the chances to see it solved sustainably.

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All in all, EdTech is definitely the space to be in if you want to think about complex, human, and deeply interesting matters.