Companies form boost education tech in Baltimore

As students turn more to online courses and school systems look to mine reams of data to better measure student outcomes, Baltimore is set to become a larger hub for education technology companies.

“It’s a massive space that’s going through a lot of disruption now, which is why we like it,” said Robb Doub, a general partner at New Markets Venture Partners, a Howard County venture capital firm. He spoke in Baltimore on Friday at a conference organized by the Mid-Atlantic Venture Association.

The burgeoning sector is well known by Duub. Including StraighterLine, which offers online college courses; and Moodlerooms, an education software company that started at the Emerging Technology Center at Johns Hopkins Eastern, New Markets has invested in a host of Baltimore area ed tech companies. Blackboard scooped up Moodlerooms in 2012.

According to Doub, because established firms like Laureate and Sylvan will spawn smaller startups, the ed tech sector in Baltimore is going to keep growing. With the aim of starting new companies, serial entrepreneurs who launch a company and grow it to the point where it gets bought out will come back for round two or more.

“Like any industry, if you have some big winners, like Sylvan and Blackboard, that will create a lot of spinoffs,” he said. “Success breads success.”

Baltimore also is home to up-and-coming ed tech companies like Allovue, StraighterLine and Citelighter, in addition to established players like Laureate.

Four areas will lead to the growth in ed tech, according to Doub:

  • Companies that offer online courses, as students either take Web-based courses exclusively or use online classes to supplement learning in the classroom.
  • Companies that develop adaptive learning software that tailors the course to the way a particular student learns.
  • Analytics firms that develop software so school districts can crunch the numbers to identify students who are risk of failing before they drop out.
  • Cloud service companies that let K-12 schools and colleges and universities store curriculum and education data remotely.

While New Markets invests in ed tech companies, that is not the Fulton VC firm’s only investment focus. In media companies, financial services firms, businesses service providers and companies, it also has a stake in what is known as “software as a service,” or companies providing software solutions to businesses. Totaling $75 million, New Market has three investment funds. Often as part of a consortium of investors that invest a larger amount, it typically invests between $1 million and $3 million in a company. Companies with annual revenue of at least $1 million, usually between $3 million and $70 million, are its targets.

As Gary Haber of Baltimore Business Journal reports, prior to selecting two to five companies to invest in each year, Doub and his partners will scout as many as 1,000 deals. Before deciding to invest, he can follow a company for a year or two. Doub has a list of a couple of key criteria a company must meet before deciding whether to invest in it: “A strong management team” with the ability to get big, that goes after large markets and has a competitive advantage their rivals don’t.