Venture Capitalists See Technology as the Future of Education

If venture capitalists really have a nose for success, then improvements in education will come with a heaping helping of technology. A number of premier venture capital firms including Accel Partners, Spectrum Equity and Meritech Capital Partners have recently either invested initially or increased their investments in a number of tech startups operating in the education sector.

One such small business – which attracted more than $100 million in its latest funding round – is, which hosts training videos covering topics in business, tech and creative arts. How attractive is the company to its angels? According to, prior to investing, Accel "wooed" its executives for a full four years.

It appears that VCs believe that education tech has a thriving future as a sector, as the education system is in an ideal position to embrace and adopt tech on an unprecedented scale. This is true for primary and secondary ed, but especially higher education, where digital learning is viewed as a path to salvation from out-of-control tuition costs.

he soaring cost of higher education has made college only a dream for many high school grads, while those who borrow their way through risk landing in the poorhouse if they can't land a job. Student loan debt nationally exceeds auto loans and credit-card debt, according to Grading Student Loans, a scholarly blog published by the Federal Reserve Bank of New York.

Investors believe that this kind of fiscal reality has created a gap that online education startups are uniquely positioned to fill. And the main question among VCs is how to identify the most promising opportunities quickly in order to get in as close to the bottom floor as possible.

That was the thought behind Kleiner Perkins and New Enterprise's $16 million investment in Coursera last spring that allowed the online education platform not only to launch but to thrive.

Coursera now has more than 2.3 million people using its free classes in science, business, economics, the arts and law. The coursework is provided by almost three dozen universities, including Princeton, Stanford and Duke. For now, Coursera is focused on building as large a user base as possible and plans to figure out how to make money later.

"Elite education is too expensive, and it's available for too few," Kleiner Perkins partner John Doerr told The Wall Street Journal. "I'm not saying accredited institutions will go away, but having great content available for free in the U.S. can transform community college education… and in the developing world as well."

Still, these investments are not risk-free. The problem with a truly disruptive innovation is the unpredictability of its disruptive powers. For online education companies that means that their impact will be limited until they find a way to gain accreditation that would allow them to turn out graduates with degrees that employers can recognize and respect.

01 24, 2013
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