Venture Capital Interest in K-12 is Misleading and Misguided

An article in last week's Education Week caught me by surprise.   The article was touting the "major flow of venture capital" into K-12.  It is a good thing that funds are flowing into K-12 - it states that funds have risen from $88 million in 2008 to $327 million in 2011, a compounded growth rate of nearly 24% - a very healthy clip.    However, what I would have liked to see is how much of the investments were made in "content creation" versus "content delivery."  This is a very important distinction which I will briefly discuss below.

When you look at some of the companies cited in the article, you will notice the following:

1. MasteryConnect - ed tech - content delivery
2. BetterLesson - ed tech - content delivery (teacher-centric, not student centric)
3. Grockit - content delivery (social networking)
4. Edmodo - content delivery (social networking)

While I have the utmost respect for NewSchools Venture Fund, they have made no secret at their heavy focus on content delivery, or technology-enabled products that aid the delivery of education content, but not the content creation itself.    That space, I should add, is still heavily dominated by the textbook publishers.  According to a recent article, the three largest textbook publishers:   McGraw-Hill, Pearson and Harcourt, capture about 85 percent of the core textbook market for K-12!  That's basically an oligopoly, any way you look at it.   And yes, digital is becoming an increasingly large part of the market, but is still essentially closed out to small, under funded education startups who want to reinvent how content is created, and taught, to K-12 students.   So the question is:   are we seeing a "market bubble" in this surge in venture capital investment?

I tend to agree with the comments posed by Kim Smith, co-founder and CEO of Bellweather Education Partners, who said in the Ed Week article: Often, the decisions that are being made about buying things aren't rational," she said. "In education, because there's so much disagreement about what quality looks like and how you can measure it, you can be successful in one place but not necessarily successful in another."

The education system is still highly dysfunctional and does not resemble a true "innovation ecosystem" in any way, shape or form. "It is still a heavily regulated market, according to Ms. Smith,  particularly on such as matters as what schools can spend money on and how they spend it."  Again, we are seeing investment in a market that is highly dysfunctional and currently driven largely by politics and public policy.  In fact, one comment on the Ed Week article stated, and I quote:

"My second issue is with calling public education a marketplace. Public education is not a marketplace. It is a service provided by the state to enhance and enrich society."

That statement sounds pretty much like socialism to me, and the commenter apparently didn't realize that it is a marketplace, In marketing, the term market refers to the group of consumers or organizations that is interested in the product, has the resources to purchase the product, and is permitted by law and other regulations to acquire the product.  I think that the textbook publishers would call this a market.  The problem is, it's a market that is irrational and dysfunctional.   Although the education incubator Startl has struggled to truly "shock the system," they have an interesting white paper on the Future of Learning that talks about the need for investment in content creation.

My hope is that we can get our public policy folks to dismantle the current education system and foster an innovation ecosystem that will allow content creation to gain its rightful share of investment dollars.

So be weary,everyone, of this "major flow" of venture capital into K-12, because it's only to result in more "cramming," using  the term of disruptive innovation think tank Innosight Institute.   At this point in time, the dollars mean absolutely nothing, in this writer's opinion.