Ed-Tech Vendors See Hurdles in the K-12 Marketplace
Like many education technology entrepreneurs trying to do business in the K-12 market, Gary Hensley was convinced he had a great product. And like many of his peers, he soon discovered the market wasn't as accommodating as he'd hoped.
Mr. Hensley, the developer of a dropout-prevention software program, spent two years trying to build a base of customers in schools and districts, which meant trying, often without success, to pin down which administrators made decisions about whether to buy products. He picked up business, though not enough to keep his company's resources from dwindling to almost nothing.
His experience mirrors those of many companies trying to do business in the nation's schools. For those vendors, particularly small- and medium-sized ones, establishing a foothold in the K-12 market requires stumbling through a complex financial, logistical, and bureaucratic landscape that some argue stifles the flow of new ed-tech products, and innovative ideas, into schools.
In some respects, the complex, methodical nature of the K-12 market is by design. District rules on spending and procurement are based on checks and balances meant to protect taxpayers and ensure that decisions are made transparently, with varying degrees of input from administrators and elected school boards. Where some see an arcane, tangled process, others see an appropriately cautious one.
For Mr. Hensley, one challenge was figuring out which district administrators had the authority to buy his product, called Intagrade. Then, he often had to go through a committee of school officials reviewing the proposed purchase, and follow-up with staff who were not included. Then he needed to convince them that the price—99 cents per student—was within their budgets.
In some cases, he tried to guide them to possible sources of funding. The district technology budget was one such source, though there were other options, such as federal School Improvement Grant funding.
"Our slogan was, 'It's cheaper than an iTunes song," Mr. Hensley recalled. But for any ed-tech company, getting "from idea to selling is a big step," he acknowledged.
Other ed-tech company officials describe similar obstacles selling to school districts. Among the most common complaints:
• It's a decentralized market. Businesses are often unsure who should be the target of their marketing pitches, because they can't always identify the ultimate decision maker. The superintendent? The chief technology officer or chief financial officer? Do principals and teachers have a say?
• The process is slow. Districts can take many months to make decisions about purchasing curriculum, software, and other products. Depending on the size of the project, they may put out requests for proposals. Smaller companies may not have the staff or resources to answer those solicitations.
• The buyers are not the end-users. In many cases, district administrators and school boards are making spending decisions about ed-tech products without knowing whether teachers and students will like the technology that gets chosen—and, in some instances, without having even sought feedback from educators.
• It's a risk-averse market. Districts face legal obligations to follow procurement rules and are under pressure from taxpayers to buy glitch-free products at the best prices. That can make them reluctant to buy educational technology from providers they don't know. "Nobody ever got fired for hiring IBM," is an oft-heard expression in sales, including K-12 sales.
Some of the problems ed-tech companies face in selling products to schools stem from how digital products function, and the process districts typically follow in evaluating them, observed Steven Hodas, the executive director of Innovate NYC Schools, an initiative within the 1.1 million-student New York City school system that seeks, among other goals, to more closely align ed-tech companies' products and services with schools' needs.
When a district buys textbooks, most of the people reviewing that purchase know those products and what the district needs. "They live in that space," Mr. Hodas said.
But with technology purchases, many more district officials are often involved, Mr. Hodas noted. Some of those officials may not understand the technology. Others may know the technology but not the educational or administrative needs associated with it, he said. Amid growing concerns about student-data privacy, district legal staff may also be involved. The result, Mr. Hodas said, is a longer list of district staff members who could potentially nix the project.
"That doesn't happen with textbooks," he said. "That doesn't happen with furniture."
Even well-established companies in the ed-tech space face similar barriers. Curriculum Associates, a company that has been in business for more than 40 years, sells online assessment and instructional materials. Those two products are meant to be integrated together, but in school districts, different administrators are often charged with overseeing those purchases, said Robert L. Waldron, the CEO of the North Billerica, Mass.-based company.
Mr. Waldron said he sympathizes with administrators responsible for researching potential ed-tech purchases while juggling myriad day-to-day duties. He said he tries to encourage school officials to prioritize their needs by asking themselves a simple question before they make a purchase from an ed-tech company: "What is it being hired to do?"
"By helping that conversation along," Mr. Waldron said, "they can make an informed and better decision."
The big price tags associated with school technology purchases, and the fear of making a costly mistake, also weigh heavily on district administrators, said Steven Pines, the executive director of the Education Industry Association, a Vienna, Va.-based membership organization that represents both mature companies and startups. He calls the fear of making a costly mistake "headline risk."
For that reason, administrators are less likely to choose ed-tech products from companies they don't know, Mr. Pines said. He notes that larger companies already have an advantage, in that they can deploy legions of sales staff to districts, in addition to being able to offer other services and tech support.
"They have the machine to work with clients in a fairly routinized way," he said.
Selling to Teachers
Increasingly, ed-tech companies, particularly young ones, try to get around those barriers by marketing their products directly to teachers, hoping word of the product will spread among educators, who can also persuade administrators to buy it across schools or districts, Mr. Pines said.
That approach will soon be tried by Eric Nelson, a social studies teacher in Forest Lake, Minn., and the creator of an educational game, "Fantasy Geopolitics."
Mr. Nelson, who teaches at North Lakes Academy Charter School, which serves about 370 students outside Minneapolis, became frustrated with his students' lack of interest in international affairs. So he set out to broaden their perspective on the world at large by appealing to the world they know. He designed a game modeled after fantasy football, in which students "draft" countries as if they were players, become "fans" of those nations, and receive points based on whether their countries end up in the news stream.
Currently, teachers can use "Fantasy Geopolitics" for free, and about 600 educators nationwide are doing so. But by next year, Mr. Nelson plans to try to monetize the game, either by charging for access or accepting donations. He's counting on his current teacher-users to spread the word.
Mr. Nelson, 28, faces other challenges, related to time and money. He's brought money into his business from a variety of sources, including the funding platform Kickstarter, but he's also been forced to dig into his own pocket, to the tune of about $5,000.
"The expansion plan, in the long run, is a little scary," Mr. Nelson conceded.
Even so, the market offers examples of entrepreneurs persevering and finding a place—even if the path is rocky and indirect.
Mr. Hensley's company managed to sign up about 30 districts and schools for its dropout-prevention software. But that wasn't enough to keep up with expenses, or build the company. In 2012, when he flew to an education conference in New York City to look for seed-funding, the company was "pretty close" to running out of money, he recalled.
Then came an unexpected turn: At the conference, he met a representative from the global education company Pearson, which was impressed enough with the product to eventually agree to buy it, in 2009, two years after Intagrade was launched.
With that money, Mr. Hensley has launched another company, Edbacker, an online fundraising effort that seeks to help educators, parents, parent-teacher associations, and others raise money for everything from classroom projects to building facilities. He says he's learned several lessons from his first ed-tech company, such as the need to listen more closely to customers and develop his product methodically.
In PTAs, he also believes he has a better-defined audience listening to his product pitches.
"I know exactly who I'm selling to," Mr. Hensley said, "and what their pain points are."
Vol. 33, Issue 35, Pages s11, 10Published in Print: June 11, 2014, as Vendors Struggle to Master the K-12 System