A Crisis in Education is a Ter rible Thing to Waste

There are four major themes shaping and disrupting the education industry as we know it today, which we believe create compelling investment opportunities:

1. Disappearing Classroom Walls
The classroom has traditionally been a broadcast-like experience confined to a physical space and time.  Teachers lecture, and students listen and learn (hopefully). Homework is assigned, and class is dismissed. This dated traditional model is being transformed by online and mobile platforms. Schools today are adopting “always-on” virtual classrooms that facilitate interactive learning anywhere, anytime.  Campuses are rapidly deploying wireless infrastructure to support laptops, tablets, and smartphones, enabling teachers and students to bring their own devices to class.  Instructors can host their content online, poll students on their laptops in class to see if they understand key concepts, and adapt their lessons in real-time based on student feedback. Teachers can connect on social learning sites like Edmodo, which reaches nearly 15 million users globally, and exchange K-12 content and curriculum. Students can collaborate any time, day or night, just by touching an app on their phones, and discussion forums can be joined by anyone with an Internet connection. The virtual classroom has transformed how teachers and students engage, both within and beyond physical classroom walls, and has invigorated schools to rethink the way they teach.

2. Democratizing Educational Content
The textbook industry has been traditionally dominated by a handful of major publishers, concentrating control over the distribution of educational content to schools. The emergence of tablets and smartphones, coupled with free distribution channels such as YouTube and iTunes, has created an open marketplace for educational content of unprecedented scale. Schools today can create their own content at low cost, or source content from thousands of publishers offering both free and paid libraries of interactive educational material. As one example, the non-profit Khan Academy today offers over 3,000 free classes and has grown to six million monthly visitors in just four years. EverFi has delivered financial literacy and substance abuse courses for free to more than 4 million students, one of a growing number of companies that are creating quality content online in partnership with corporations and foundations.  Education apps represent the second-largest category in Apple’s app store, with over 70,000 active applications from thousands of publishers. Parents and students now subscribe to education services such as BenchPrep to access hundreds of standardized test prep courses for just $20 per month. This democratization of content enables schools and students to choose the best product, from the best publisher, at the best price, forcing traditional publishers, non-profits, and aspiring entrepreneurs to compete on a more level playing field.

3. Learning from Big Data Analytics
Amazon.com, a pioneer in “Big Data” analytics, can recommend the best products for each customer in real-time based on prior behavior, and can even predict when you will abandon your shopping cart. Using similar technology, schools can improve student outcomes based on personalized learning pathways and can aid struggling students well before it is too late to act.  Using platforms such as Desire2Learn, administrators can aggregate learning analytics at the school district, state, or even national level, enabling best practices and insights to be shared among stakeholders. The State of Tennessee recently demonstrated the power of Desire2Learn’s statewide predictive analytics, lowering their annual dropout rate by 25% across 45 university campuses by looking at historical student data and identifying opportunities for faculty and administrators to intervene.  This is one of the most promising frontiers in education technology, only recently made possible by shifts to more competency-based (or outcomes-based) education (CBE / OBE), standardized curricula (e.g., Common Core) and analytic technologies such as Hadoop.

4. Transforming Local Campuses to Global Institutions
Though the U.S. today is the largest market for education globally, it is far from the fastest growing.  China, India and Brazil are rapidly increasing their investment in education and have national aspirations and mandates to catch up with the developed world. China already graduates more college students with math, science and engineering degrees than the U.S., and Chinese citizens spend 3.5 times more of their disposable income on education than Americans on a percentage basis. The U.S., particularly in higher education, is home to the most respected learning institutions on the planet, and the emerging markets have seemingly insatiable demand to access it. More than one million students have registered for free for online classes through Coursera, which partners with more than 30 leading institutions like Stanford, Penn, and Michigan. Today the vast majority of those students are from outside the United States, forcing schools to rethink the boundaries of their campuses. Technology has made distance learning effective and economically feasible, and schools must embrace a global student market if they are to thrive in tomorrow’s education economy.