There is a lot of money tied up in educational technology. In 2012, $600 million was invested by venture firms into ed-tech startups. To put that in perspective, that is 400 percent more than what was invested in the same industry in 2002. It seems that a lot of faith is being placed in the technology that will soon arrive in K-12 and college classrooms and on campuses – but what is actually being created?

Not a whole lot, according to ed-tech industry insiders. Speaking to CNN, a senior financial advisor said that there are not many fresh ideas floating around ed-tech startups. He said:

“Do they have a product that’s actually a solution for someone’s needs, and will the decision makers recognize that it’s a problem? There are lots of gradebooks out there. Don’t tell me you’ve got the first digital gradebook, and also nobody is viewing that as a problem.”

To his point, it seems that most of the ed-tech “advancements” of the past decade have had more to do with utility than the actual learning process. Course management, online communication portals between educators and parents, and even continuing training for teachers have all seen some streamlining as a result of technology. Students can take courses online and that in and of itself is a major stride in individualized learning. Still, the concept of online learning is certainly not considered cutting edge anymore. What strides have been made in the actual process since it was first introduced?

For K-12, major course providers like K12 now offer more scheduled learning experiences where students are expected to be logged in to their courses at a certain time, and possibly even visible on a web cam, in order to get attendance credit. There are also many more course options than when online learning for K-12 students first emerged. K12 boasts 105 courses for high school students alone. But for $600 million – shouldn’t there be more?

Freemium models

Following the successful mobile gaming application business model, ed-tech companies are starting to offer free services with paid upcharges. Consider Candy Crush Saga way of doing business. Anyone with a smartphone, tablet or desktop Facebook access can download the game at no cost. As users progress through the addictive, sugar-laden levels, they are prompted to make small purchases (usually between 99 cents and $3) to gain access to higher levels, add more lives or buy level “boosters” to help their luck. But giving away a product for free? What sort of business sense does that make? In the case of Candy Crush, it has proven to be savvy indeed. The game’s owner King brought in $1.9 billion in revenue in 2013 and its initial public offering earlier this year was valued at $7 billion.

Ed-tech companies are taking notice. Online learning giant Coursera (with $85 million in venture financial support) is experimenting with free courses but a small fee for the certification at the end of the course. Udacity (backed by $20 million from investor Andreessen Horowitz) is looking into monetizing courses through sponsorship opportunities and programs that match employers with promising students. In both cases, the ed-tech companies are not asking for money upfront but instead getting students “hooked” on the offerings first. From a strictly knowledge standpoint, students are the beneficiaries because certificate or not, once learning has been attained it can’t be taken back. From a practical standpoint though, without proof of completed coursework, all the free education in the world won’t translate into better job opportunities or college admittance. So time will tell if the freemium approach to ed-tech offerings will prove as lucrative as other industries but it certainly has potential.

What would you like to see the $600 million in ed-tech investments create?

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